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Gr
ow & Deliver
strategy on
track
Our commitment to
future gener
ations:
People
. Planet.
Paint.
Science-based
sustainability
targets driving
innovation
Pushing
boundaries with
Paint the Future
20
21
REPOR
T
People. Planet. Paint.
Ever
ything we do starts with
People. Planet. Paint.
T
ransforming our world
We’r
e in a unique position to show how passionately we care about society
, the world we live in
and making new discoveries. By using our pioneering spirit and centuries of paints and coatings
expertise, we can deliver the sustainable and innovative solutions that our customers, communities
– and the planet – are incr
easingly relying on.
That’
s why everything we do starts with People. Planet. Paint. It’
s all about making a differ
ence,
both big and small. So the things our products can do may surprise you, whether they’r
e applied
to boats, buildings, cars, planes, phones, walls or wood.
And we never stand still. Because there ar
e industries to reinvent, environments to car
e for and
horizons to expand. As global pioneers, it’
s in our nature to keep learning, keep discovering and
keep innovating.
1
AkzoNobel Report 2021
A commitment to the future
AkzoNobel has a long and proud heritage. A history of making things happen.
We’r
e always evolving, embracing new ideas. Y
et some things never change. Like being an
employer of choice. A responsible global citizen. A pioneer
. They’re the foundations of what
we stand for – with People. Planet. Paint. as our beating heart.
People. Planet. Paint. is also our commitment to future generations. A pr
omise that we’ll keep
innovating to address key global issues. If we can, we’ll find a way
.
We have the courage and the belief. That’
s why we’ve set ourselves science-based sustainability
targets. It’
s about making a genuine and lasting difference and r
emaining at the forefront of
our industry
.
People
W
e care about people and communities, a passion that's reflected in
our commitment to safety
, integrity and sustainability
.
Planet
We challenge ourselves and our partners every day to be better
global citizens and protect the futur
e of our planet.
Paint
We keep pushing boundaries to develop pioneering paint solutions
that make a world of differ
ence.
www
.akzonobel.com
2
AkzoNobel Report 2021
Adjusted EBITDA
€1,436 mln
T
arget: €2 billion in 2023
Adjusted EBITDA development
in € millions
Financial summary
€9,587
mln r
evenue
€1,118
mln operating income
€1,092
mln adjusted operating income
€4.48
earnings per share
32,800
employees
2021 RESUL
TS A
T A GLANCE
North America
12%
EMEA
50%
South America
8%
Sustainable solutions
39%
Ambition 2030: >50%
Sustainable solutions development
in % of revenue
Revenue by destination
2021
2020
2019
1,442
1,341
1,436
2030 ambition
2021
39
>50
3
South Asia Pacific
12%
Return on sales (ROS)
11.4%
T
arget: Deliver an average annual 50 basis points
increase over the period 2021-2023
Return on sales development
in %
Return on investment (ROI)
16.0%
Return on investment development
in
%
Case study videos
This Report 2021 includes case
studies that highlight some of our
activities during the year
. The videos
are not covered by any pr
ocedures
performed by the independent
auditor and are not considered part
of the management report.
Alternative performance
measures (APM)
AkzoNobel uses APM adjustments
to the IFRS measures to provide
supplementary information on the
reporting of the underlying develop-
ments of the business. APM include,
but are not limited to, adjusted
operating income, (adjusted) EBITDA,
adjusted earnings per share, ROS
and ROI. A reconciliation of the alter
-
native performance measures to
the most directly comparable IFRS
measures can be found in Note
4 of the Consolidated financial
statements.
CONTENTS
About AkzoNobel
Inside cover
2021 results at a glance
2
CEO statement
4
How we created value
6
Strategy and operations
12
Sustainability statements
29
Leadership and governance
55
Financial information
90
Glossary 150
Index 152
Appendix 153
Case studies:
V
oyage of discovery
10
Bringing light to the darkness
19
Building more r
esilience
46
Circular vision becoming a r
eality
54
Art Foundation’
s 25
th
anniversary
79
AkzoNobel Report 2021
North Asia
18%
2021
2020
2019
10.7
12.9
11.4
2021
2020
2019
14.1
16.1
16.0
4
CEO statement
|
AkzoNobel Report 2021
2021 was another
challenging year
.
While 2020 was marked
by sudden shifts in
demand across our
paints and coatings
market segments,
2021
was affected in a very
different way
.
This time, the ongoing impact of
COVID-19 – combined with several
extreme weather events early in the year
– caused significant disruption across
our supply chains. The overall availability
and movement of raw materials was
a real challenge for the whole paints
and coatings industry
. This resulted
in significant shortages of key raw
materials, which is still ongoing, and
an unprecedented cost incr
ease com-
pared with 2020.
So 2021 was a real str
ess test for
the operational resilience and can-do
attitude we’ve been fostering over the
last few years. We found ourselves
climbing an unexpectedly high mountain
as the business environment became
increasingly dif
ficult. However
, our
teams had the summit in sight, and
while they were somewhat tir
ed, I’m
happy to report they’r
e also in good
spirits, as we’re in an excellent
position to accelerate along the other
side of the slope.
Although we were dealing with incoming
supply chain disruption and inflation,
demand for our paints and coatings
remained str
ong. The vast majority of our
markets continued to rebound well and
we were able to expand our position in
significant target markets. I’m very proud
of how our teams demonstrated their
new-found resilience. Our commer
cial
teams responded quickly with pricing
initiatives to compensate for the huge
“The reinvention of AkzoNobel
as a focused paints and coatings
company
,
which started in 2017,
is c
learly on track to make us the
reference in our industr
y
.
”
5
AkzoNobel Report 2021
|
CEO statement
CEO ST
A
TEMENT
raw material cost inflation. Meanwhile,
our procur
ement, R&D and supply chain
colleagues worked hard to continue
serving customers in the face of the
severe supply chain disruption.
As a result, despite these massive
headwinds, we were able to safeguar
d
our profitability and stay on track for
defending or strengthening our market
positions – our Grow & Deliver strategy
has remained on course.
A notable example of our “Grow”
mindset was our Powder Coatings
business, which delivered another str
ong
year of double-digit revenue gr
owth.
There wer
e some exciting developments
around electric vehicles, low temperatur
e
and UV
-curing for powder on wood
and the increasing tr
end of moving from
liquid to powder
, for example in the US
architectural market.
We also achieved multiple pr
oof points
of growth acr
oss our Decorative Paints
businesses. For example, in North
Asia, we added the availability of Dulux
to another 11,200 stores, deliver
ed
double-digit growth in the pr
emium
market segment and improved our
profitability
. In addition, we announced
the acquisition of Colombia-based paints
and coatings company Grupo Orbis,
which will further expand our long-term
leadership position in South and Central
America.
From a “Deliver” perspective, we
continued to improve our operational
efficiency and ef
fectiveness. Much of this
work has involved streamlining end-to-
end processes, r
educing unproductive
product portfolio complexity and
simplifying how we run the company in
general. For example, almost 95% of
the company now operates on just four
major ERP systems.
The reinvention of AkzoNobel as a
focused paints and coatings company
,
which started in 2017, is clearly on track
to make us the refer
ence in our industry
.
We’ve kept a sharp focus on the
business fundamentals, including cost
discipline and cash generation.
Another key focus area is sustainability
,
which has been a core value for many
years. So it was with a great sense
of pride that we were one of the first
recipients of the inaugural T
erra Carta
Seal – the only paints and coatings
company to receive the honor
. It’
s
recognition of the positive action we’r
e
taking, driven largely by the fact that
sustainability is embedded in our
culture and fundamental to the way we
operate. In 2021, we also committed
to science-based sustainability targets,
signaling our intention to take stronger
action to tackle climate change. We’r
e
excited that this commitment will be an
enormous innovation driver for what we
do throughout our entir
e value chain with
our customers and suppliers over the
next few years.
Given our passion for making a genuine
differ
ence to customers, communities
and the environment, we took a logical
step in elevating People. Plant. Paint.
to give it a much wider and deeper
meaning for the company
. So rather
than only focusing on how we talk
about sustainability
, People. Planet.
Paint. is now at the heart of everything
we do. We’ve put solving globally
relevant challenges at our very cor
e,
but recognize that we can’
t do it alone.
So it’
s great to see how our teams
are leading the way in collaborative
innovation. Our Paint the Future
innovation ecosystem is going from
strength to str
ength, with a highly
successful regional event staged in
China in the first half of 2021, while
our second global startup challenge
bootcamp and finals event is set
for 2022.
That collaborative spirit also featured
prominently in several other highlights
during the year
. This included the results
of the resear
ch phase of Operation Night
W
atch being announced (a partnership
with the Rijksmuseum in Amsterdam,
the Netherlands). Meanwhile, our work
with the Advanced Research Center
Chemical Building Blocks Consortium
(ARC CBBC) in the Netherlands – which
strives to bridge bio-based sciences to
competitively create paints and coatings
building blocks – continues to excite
and delight as we strive to remain a
frontrunner in innovation. The work
we’re doing with Nobel Prize winner
Ben Feringa is particularly promising.
Of course, none of this would have
happened without the 32,800
AkzoNobel employees around the world,
who responded magnificently to the
extreme challenges we faced in 2021.
They held everything together inside our
company and made sure that we stayed
close to our customers, to help them
get through their own tough times. And
it was great to achieve mor
e progress
in organizational health, with our score
improving once again (the participation
rate reached an all-time high), suggest-
ing that engagement is strong within the
company and that we’re in gr
eat shape
for 2022.
So a heartfelt thank you to the whole
organization. For myself and the whole
Executive Committee, it’
s a real privilege
– and fun – to be part of this journey as
we advance further towards becoming
the frontrunner in our industry
.
Thierry V
anlancker
CEO and Chair of the Board of Management
and Executive Committee
6
AkzoNobel Report 2021
Financial overview
Pricing up 7%. Revenue was 12%
higher
, and 14% higher in constant
currencies. V
olumes were 7% higher
,
mainly due to the impact of the recovery
from COVID-19 on end market demand.
Operating income was up 16% at
€1,118 million (2020: €963 million).
Significant price increases and volume
increases contributed to of
fset raw
material cost inflation and supply
constraints. Operating income further
includes net positive identified items of
€26 million, mainly related to gains fr
om
the Brazil ICMS case and UK pensions
past service credit (see Note 4 in the
Consolidated financial statements for
By delivering more value to our
customers,
shareholders,
em-
ployees and society in general,
we can better accelerate profit-
ability while positioning ourselves
for growth.
Summary of financial outcomes*
in € millions
2020
2021
∆%
Revenue
8,530
9,587
12%
EBITDA*
1,324
1,469
11%
Adjusted EBITDA*
1,442
1,436
–
Operating income
963
1,118
16%
Identified items*
(136)
26
Adjusted operating income*
1,099
1,092
(1%)
OPI margin*
11.3
11.7
ROS*
12.9
11.4
Average invested capital*
6,834
6,829
ROI (%)*
16.1
16.0
Capital expenditures
258
288
Net debt
1,034
2,340
Leverage ratio (net debt/EBITDA)*
0.8
1.6
Number of employees
32,200
32,800
Net cash from operating activities
1,220
605
Net income attributable to shareholders
630
829
Weighted average number of shares (in millions)
191.4
185.0
Earnings per share from total operations (in €)
3.29
4.48
Adjusted earnings per share from continuing
operations (in €)*
3.88
4.07
*
Alternative performance measures: Please refer to reconciliation to the most dir
ectly comparable IFRS measure in Note 4
of the Consolidated financial statements.
A
North Asia
18
B
South Asia Pacific
12
C
EMEA
50
D
North America
12
E
South America
8
Revenue by destination
in %
A
B
C
D
E
Capital expenditures 2021:
total €288 million
A
Decorative Paints
108
B
Performance Coatings
147
C
Corporate and other
33
A
B
C
Capital expenditures are expected to be ar
ound
€300 million per year for the period 2022-23.
Based on full-year 2021.
HOW WE CREA
TED V
ALUE
2021
2020
2019
5,603
3,979
5,549
3,670
4,957
3,558
Revenue from thir
d parties
in € millions
Decorative Paints
Performance Coatings
2021
2020
2019
230
262
238
Innovation investment
resear
ch and development expenses
in € millions
Research and development expenses expected to remain
similar as % of revenue for the period 2022-23.
2025
ambition
2021
2020
2019
Organizational health score
(OHI)
72
≥75
61
69
point increase since 2019.
Now within three points of our
ambition of top quartile.
11
2025
ambition
2021
2020
2019
Female executives
in %
22
≥
30
18
21
%
point incr
ease versus 2019.
Programs
in place to further
boost
senior female leadership
pipeline.
4
2021
ambition
2021
2020
2019
T
otal reportable injury rate
(TRR)
0.21
≤0.21
0.24
0.23
delivering on our 2021
ambition.
0.21
7
AkzoNobel Report 2021
HOW WE CREA
TED V
ALUE
more details). OPI margin impr
oved to 11.7% (2020:
11.3%). Adjusted operating income was 1% lower at
€1,092 million (2020: €1,099 million). ROS at 11.4%
(2020: 12.9%).
Business revenue
• Decorative Paints pricing up 6%. Revenue up 12%
and 13% higher in constant currencies. V
olumes up
6%, mainly due to higher end market demand
• Performance Coatings pricing up 8%. Revenue was
13% higher and 15% higher in constant currencies.
V
olumes were 8% higher
, mainly due to end market
demand recovery in all markets
Acquisitions
In March 2021, the acquisition of Titan Paints in Spain
was completed, strenghtening our paints business
and footprint in Spain. In June 2021, the intended
acquisition of Colombia-based paints and coatings
company Grupo Orbis was announced. The deal is
expected to be completed in the first quarter of 2022.
Cost of sales
Raw material and other variable costs increased
€769 million, adjusted for the impact of volume
changes, compared with 2020. The incr
ease was
mainly driven by raw material inflation, which is
expected to gradually ease by mid-2022.
Operating income and adjusted
operating income
Operating income was up 16% at €1,118 million
(2020: €963 million). Significant price increases and
volume increases contributed to of
fset raw material
cost inflation and supply constraints. Operating
income further includes net positive identified items of
€26 million, mainly related to gains fr
om the Brazil
ICMS case and UK pensions past service credit (r
efer
to Note 4 in the Consolidated financial statements
for further details), partly offset by transformation
initiatives (2020: €136 million negative identified items,
mainly relating to transformation initiatives). OPI margin
improved to 11.7% (2020: 11.3%). Adjusted operating
income was 1% lower at €1,092 million (2020:
€1,099 million). ROS at 11.4% (2020: 12.9%).
• Decorative Paints performance improved, mainly
due to strong demand acr
oss all regions and one-off
gains, with volumes up 6% compared with full-year
2020. OPI margin was up at 16.1% (2020: 15.5%).
Adjusted operating income higher at €598 million
(2020: €573 million) and ROS at 15.0% (2020:
16.1%)
• Performance Coatings operating income decreased,
mainly due to higher raw material prices. OPI margin
at 11.6% (2020: 13.4%). Adjusted operating income
at €648 million (2020: €700 million). ROS at 11.6%
(2020: 14.1%)
• Other activities improved €81 million to €172 million
negative (2020: €253 million negative), mainly
resulting fr
om lower negative identified items
Net financing income and expenses
Net financing expenses decreased by €30 million,
mainly due to one-off inter
est income from the
Brazil ICMS case (see Note 4 in the Consolidated
financial statements).
PEOPLE
Numbers include AkzoNobel employees and
temporary workers.
For more details about our "People" performance,
see the Sustainability statements.
2025
ambition
2021
2020
2019
Carbon reduction own operations
in %
21
≥25
16
19
%
carbon reduction in own
operations, closing in on our
interim target for 2025.
21
2025
ambition
2021
2020
2019
Renewable electricity
(own operations) in %
45
≥50
37
40
%
renewable electricity
achieved in Europe
by early 2022.
1
00
2030
ambition
2021
2020
2019
Circular waste
in %
59
100
55
58
%
of our obsolete waste is
alr
eady reused.
59
8
AkzoNobel Report 2021
Income tax
The effective tax rate was 22.3% (2020: 26.2%). The
decrease compar
ed with the previous year is mainly
related to the impact fr
om the Brazil ICMS and UK ACT
cases (refer to Note 4 in the Consolidated financial
statements), in combination with a net re-r
ecognition
of deferred tax assets. All of these wer
e booked as an
identified item. Excluding identified items, the effective
tax rate in 2021 was 24.9% (2020: 25.6%).
Dividend
The dividend policy remains unchanged and is to pay
a stable to rising dividend. In 2021, an interim 2021
dividend of €0.44 per common share (2020: €0.43)
was paid. A final 2021 dividend of €1.54 (2020: €1.52)
per share is pr
oposed, which would equal a total 2021
dividend of €1.98 (2020: €1.95).
Share buyback
On October 21, 2020, a €300 million share buyback
program was announced, which was completed in
2021. On February 16, 2021, a €1 billion share buyback
program was announced, which was completed in
January 2022. This program started in April 2021. As
at December 31, 2021, a total of 8.6 million shares had
been acquired under this pr
ogram, of which 5.9 million
were cancelled.
Cash flows and net debt
Net cash from operating activities in 2021 r
esulted in an
inflow of €605 million (2020: inflow of €1,220 million).
This decrease in inflow was mainly driven by an outflow
in relation to changes in working capital, changes in
other provisions and income tax paid, partially of
fset by
higher profit for the year
.
At December 31, 2021, net debt was €2,340 million
versus €1,034 million at year
-end 2020. The increase
in net debt was mainly due to share buybacks
(€1,135 million), dividend paid (€391 million) and
capital expenditures (€288 million), of
fset by net cash
generated from operating activities (€605 million).
The net debt/EBITDA leverage ratio at December 31,
2021, was 1.6 (December 31, 2020: 0.8).
PLANET
HOW WE CREA
TED V
ALUE
Dividend
in €
2019
2020
2021
1.90
1.95
1.98
1
Earnings per share total operations
in €
2019
2020
2021
2.53
3.29
4.48
1
Proposed
Adjusted earnings per share from
continuing operations
in €
2019
2020
2021
3.10
3.88
4.07
For more details about our "Planet" performance,
see the Sustainability statements.
2030
ambition
2021
Sustainable solutions
in % of revenue
39
>50
%
of our revenue comes fr
om
sustainable solutions.
39
9
AkzoNobel Report 2021
Invested capital
Invested capital at December 31, 2021, totaled
€7.1 billion, up €0.7 billion from year
-end 2020. This
increase was mainly caused by higher operating working
capital (trade) and investments in non-current assets.
Sustainability progr
ess
We’ve now set all our sustainability ambitions for 2025
and 2030 and are alr
eady making strong progr
ess
towards achieving them. This pr
ogress is highlighted in
the People. Planet. Paint. charts in this section.
Employees
In 2021, the number of employees increased by 2%
to 32,800 people (year
-end 2020: 32,200 people).
Acquisitions in 2021 added around 400 people.
COVID-19
The ongoing pandemic situation was closely monitored
in 2021 and appropriate measur
es were taken to
continue serving customers and control spend, while at
the same time keeping the organization intact and able
to respond quickly to changes in end market demand.
AkzoNobel has a strong balance sheet and solid
cash position. At December 31, 2021, cash and cash
equivalents were €1.2 billion and financial leverage
(net debt/EBITDA) was 1.6. AkzoNobel is committed
to retain a str
ong investment grade credit rating.
In 2021 and 2020, a detailed assessment was
performed of potential valuation adjustments to the
overall asset base, either due to the direct impact of
COVID-19 or due to its impact on future pr
ofitability
,
which did not lead to significant valuation adjustments.
Goodwill and intangible asset impairment tests in
both years have been performed based on adjusted
forecasts. Recoverability of deferr
ed tax assets has
also been reassessed based on these adjusted
forecasts. Furthermor
e, an assessment was performed
with regar
d to the allowance for impairment of trade
receivables, also taking into account potential additional
risk associated with COVID-19.
The impact of the pandemic on the Consolidated
financial statements has been considered for each of
the relevant notes, and additional disclosur
es have been
provided in case COVID-19 had a material impact on
a specific section. Refer to the Consolidated financial
statements for further details.
In our 2021 and 2020 figures, all COVID-19 r
elated
impacts have been treated as normal operations; none
of these impacts has been included in identified items.
Employee benefit costs in 2020 included €33 million
compensation related to government support measures
for COVID-19. For 2021, this number is not material.
Outlook
AkzoNobel targets to grow at or above its r
elevant
markets, in line with its Grow & Deliver strategy
. T
rends
differ per r
egion and segment, while raw material
cost inflation and supply constraints are expected
to gradually ease by mid-2022. Plans are in place to
deliver the €2 billion adjusted EBITDA target for 2023,
and an average annual 50 basis points increase in
return on sales over the period 2021-2023. AkzoNobel
targets a leverage ratio of 1-2 times net debt/EBITDA
and commits to retain a str
ong investment grade
credit rating.
P
AINT
The ongoing pandemic
situation was c
losely
monitored in 2021 and
appropriate measures were
taken to continue ser
ving
our customers and
control spend.
For more details about our "Paint" performance,
see the Sustainability statements.
CASE STUDY
10
It sounds like something out of a f
antastical
Jules V
erne novel,
but the Polar P
od –
a manned oceanographic platform which
will drift around Antarctica – is about to
become ver
y real.
V
oyage of
discover
y
11
It’
s the brainchild of French explorer and
environmentalist Jean-Louis Etienne,
who will lead a pioneering scientific
expedition to study the Antarctic
Circumpolar Curr
ent, which has a major
influence on the Earth’
s climate.
AkzoNobel has been brought on boar
d
as exclusive paints and coatings partner
and will support the 1,000-ton platform
for the next five years, from construction
through to the completion of its thr
ee-
year mission, which is expected to start
in December 2023.
Standing 100 meters high, the Polar
Pod won’t be motorized, so it will be
zero emission, silently driven by the
circumpolar curr
ent – like an ocean-
going satellite – as it gradually makes its
way around the Antar
ctic continent.
It will be supported by a dedicated
offshor
e supply vessel, Perseverance
(pictured below), which will be pr
otected
by our products. Permanently assigned
to the mission, it will leave the nearest
port to join the platform on its drift
course as it crosses the Indian, Pacific
and Atlantic Oceans.
“Partnering with the Polar Pod
expedition is a great way for us to help
advance scientific knowledge of the
pivotal role the Southern Ocean plays
on the Earth’
s climate and marine
biodiversity
,” explains AkzoNobel CEO,
Thierry V
anlancker
. “We’r
e looking
forward to supporting the team and
raising awareness of the pr
ogram as the
mission begins to gather momentum.”
Adds Jean-Michel Gauthier
, Director of
the company’
s Marine and Protective
Coatings business: “As an industry
leader in sustainability and a global
market leader in marine and yacht
coatings, lowering our environmental
impact on the planet is a key aspect of
our strategy
.”
Operating in an area that sailors r
efer
to as the Furious Fifties, the Polar Pod
will gather data and carry out long-
term observations that will be trans-
mitted to resear
chers, oceanographers,
climatologists and biologists at
43 scientific institutions in 12 countries.
Studies will include: air/ocean exchange
measurements, in particular r
elated
to carbon; wave dynamics; plankton
collection and evaluation of the impact
of acidification; acoustic inventory of
marine fauna; validation at sea of satellite
measurements and aerial observation of
marine life.
Continues V
anlancker: “This is a really
exciting partnership and a fantastic
example of how we’re pr
epared to go
to the ends of the Earth to help our
customers and discover pioneering ways
to become even more sustainable.”
“
The P
olar P
od is a fantastic
example of how we’re prepared
to go to the ends of the Earth to
help our customers.
”
watch video
96 m
100 m
Big Ben
Polar P
od
Statue of Liberty
93 m
Rob Birza
| Floating Circles VIII, 2018 |
egg tempera on canvas | 130 × 100 cm |
Collection AkzoNobel Art Foundation
STRA
TEGY AND
OPERA
TIONS
An overview of our strategy
, approach to
innovation and the performance of our Paints
and Coatings businesses during the year
.
Strategy 13
Innovation 15
Decorative Paints*
16
Our Decorative Paints activities are r
eported in
three r
egions: Asia; Europe, Middle East and
Africa; South America.
Performance Coatings*
20
Our Performance Coatings activities are
organized into four main businesses:
Automotive and Specialty Coatings, Industrial
Coatings, Marine and Protective Coatings,
Powder Coatings.
*
The 2019 figures are r
estated to represent revenue fr
om third parties
instead of group revenue.
For more details on key 2021 figures, see the pr
evious How we
created value pages and the segment information in Note 3 of the
Consolidated financial statements.
13
AkzoNobel Report 2021
|
Strategy and operations
OUR STRA
TEGY
AkzoNobel is a truly global, high-
performing paints and coatings company
with a proud heritage which can be
traced back to 1792. Our world class
portfolio of established brands is trusted
by customers around the world and
we continue to be guided by a strong
set of core values – safety
, integrity and
sustainability
. In fact, our People. Planet.
Paint. approach to sustainable business
has now become the overarching
mantra for everything we do.
Our Grow & Deliver strategy balances
growth with further pr
ofitability improve-
ment, building on the strong foundation
we now have in place. Ultimately
, our
goal is to be the frontrunner – both in
terms of size and performance – among
leading players in the industry
.
Our fundamentals remain the same:
passion for paint, precise pr
ocesses,
powerful performance, proud people;
while key behaviors guide our ways of
working: be customer focused, execute
with discipline, deliver on commitments,
take ownership.
Growth drivers
We’r
e well placed in the approximately
€140
billion paints and coatings industry
.
Our balanced geographic presence and
strong portfolio of brands – with leading
positions in most market segments
– offers multiple opportunities for gr
owth.
We have a significant pr
esence in the
higher
-growth South Asia Pacific r
egion,
where we generate ar
ound 12% of total
revenue. W
e’re the leader in the fast-
growing and sustainable powder coatings
market, which currently accounts for
14% of our revenue. Other market
segments and regions also of
fer exciting
growth opportunities, such as packaging
coatings – being driven by a shift away
from single use plastics to metal cans
– along with aerospace coatings, yacht
coatings and our Decorative Paints
business in South America.
Strategic mandates – per market seg
-
ment and region – ar
e used to provide
clear direction for each of our busi-
nesses, including relative priorities for
growth and pr
ofitability improvement.
Market segments and regions r
epre-
senting around one thir
d of our total
revenue have clear gr
owth mandates.
For example, we’re gr
owing our
Decorative Paints business in China by
leveraging our premium Dulux brand to
serve customers in a greater number
of cities with more innovative and
sustainable solutions.
With stakeholders increasingly
demanding more sustainable solutions,
we’re well placed to capitalize on
this trend by leveraging our widely
recognized leadership position when
it comes to sustainability
. Sustainable
solutions already account for 39%
of revenue and we have a target to
increase this to mor
e than 50% by 2030.
We’r
e creating a more ef
ficient company
while lowering our carbon footprint and
THE NEXT PHASE OF OUR TRANSFORMA
TION
*
AkzoNobel uses Alternative Performance Measures
(APM) adjustments to the IFRS measures to provide
supplementary information on the reporting of the
underlying developments of the business. APM include,
but are not limited to, adjusted operating income,
(adjusted) EBITDA, adjusted earnings per share, ROS
and ROI. A reconciliation of the alternative performance
measures to the most directly comparable IFRS
measures can be found in Note 4 of the Consolidated
financial statements.
Gr
ow
&
Deliver
Passion for paint
Be customer
focused
Precise pr
ocesses
Execute with
discipline
Powerful performance
Deliver on
commitments
Proud people
T
ake ownership
◊
ROS is calculated as adjusted operating income
(operating income excluding identified items) as a
percentage of revenue fr
om third parties.
Ambitions for 2021-2023
*
Revenue growth at least
in line with our relevant
markets
ROS
◊
(return on sales)
improvement of an
average 50 basis points
per year
Adjusted EBITDA of
€2 billion for 2023
Strategy and operations
|
AkzoNobel Report 2021
14
OUR STRA
TEGY
It’
s not just the livery of this China
Southern Airlines “Y
outh Zhuhai” themed
Boeing 737-800 that’
s breathtaking. So
is the lightning fast speed it took to paint
it. With only 14 days and 34 new colors
to develop, our color lab in India and
Aerospace Coatings production team in
DongGuan, China, rose to the challenge.
* Profit = adjusted EBITDA
are pr
oud to have set science-based
carbon reduction targets for our full value
chain – a truly fact-based approach.
Innovation is therefor
e fundamental to
our success (see page 15). For us, this
means going beyond when it comes to
providing customers with pr
oducts and
services, as well as understanding and
anticipating their changing needs and
expectations. Revenue from new pr
oduct
introductions was ar
ound 20% during
the past five years. Our industry-leading
Paint the Future collaborative innovation
ecosystem is just one example of how
our pioneering spirit is helping us to
continue pushing boundaries.
We have a str
ong balance sheet
and clear capital allocation priorities,
providing a solid platform for adding
to organic growth – in a disciplined
way – with targeted acquisitions, which
are both value-cr
eating and aligned
with our strategic mandates. In 2021,
we completed the acquisition of Titan
decorative paints in Spain, while New
Nautical Coatings was added to our
presence in yacht coatings, and we
announced the acquisition of Grupo
Orbis, to expand our presence in
South America.
Delivering performance
improvement
T
o help drive our Grow & Deliver
strategy
, we’re evolving our operating
model, moving from functional
excellence in silos to driving cross-
functional collaboration, with an
emphasis on end-to-end processes and
becoming even more customer focused.
Strong margin management is particu-
larly important when facing significant
raw material cost inflation. We’r
e building
on our experiences from 2017-2018,
with faster and even more r
obust pricing
initiatives for 2021-2022 and setting
ourselves up to deal with future cycles.
We’r
e building product management
capabilities, which are necessary to
deliver the products our customers
desire and win in the market – at
the most competitive cost, with less
complexity and increased collaboration
with our suppliers.
Creating a world class supply chain
requir
es more efficiency and ef
fective-
ness – built on strong planning
processes – in or
der to meet customer
needs with superior service levels.
Meanwhile, our manufacturing network
will be optimized via three supply
models: simple and efficient, managed
complexity
, agile and adaptive.
We’r
e also continuing with several
initiatives, for example integrating our
systems and applications, designed
to deliver seamless business services
that are ef
fective and cost competitive,
allowing for greater focus on what
matters most.
Deliver results
+ 1.5% higher margin vs 2020
Manage our margins
Simplify our product range
Fine-tune make and deliver
€2 bln
profit*
by
2023
Grow revenue
Faster than relevant markets
Make our processes and systems work for our customers and us
Grow
Deliver
Grow with our market
Outgrow selected market segments
Provide innovative solutions
15
AkzoNobel Report 2021
|
Strategy and operations
INNOV
A
TION
Stepping up our
collaborative innovation
“
Collaborative
innovation
will play a
major role
in helping
us to meet
our own sus-
tainability
ambitions –
and those
of our cus-
tomers.
”
Klaas Kruithof,
Chief T
echnology
Officer
Our innovation portfolio is powered by four main
drivers: productivity
,
asset protection,
surface
enhancement and environmental protection.
They
consistently guide us on our journey to making
a sustainable and long-lasting difference to our
customers and the planet.
In early 2020, we made a commitment to reduce the
carbon footprint of our own operations by 50% by
2030. This year
, we extended that ambition to include
our entire value chain (see page 40). However
, this will
only be possible if we innovate and collaborate with
our value chain partners. The good news is that several
initiatives are alr
eady underway
.
Maintaining the momentum
Building on the success of our industry-first Paint the
Future startup challenge, we maintained the momentum
by staging a fully virtual challenge event attended by
90 suppliers, which resulted in ar
ound 100 possible
solutions being submitted.
Meanwhile, our regional startup challenge in China
yielded 210 submissions and reached an audience of
more than 178 million. Four winning teams enter
ed the
accelerator program. W
e also launched a second global
startup challenge, which attracted 245 submissions.
Unfortunately
, due to the pandemic, we had to post-
pone the bootcamp and finals event planned for
November 2021 until early 2022.
Our ambition is to emulate the success of the first
global challenge in 2019, which has since resulted in
exciting go-to-market developments for two of the
winning companies: we’ve partnered with Qlayers
following a series of commercial successes for their
robotic paint application, and we successfully r
eached
the pilot phase for a new pre-deco filler based on
Alucha’
s circular raw material (see case study in the
Sustainability statements).
Collaboration was also a prime objective for founding
the ARC Chemical Building Block Consortium, which
was set up in 2016 together with various partners,
including a number of Dutch universities. We’r
e seeing
some very interesting leads starting to emerge, such
as a new photochemistry-based technology for
producing novel (coatings) polymers. This r
esearch was
published in Science magazine – the peer
-reviewed
academic journal of the American Association for the
Advancement of Science – with Nobel Prize laureate
Ben Feringa (pictured below) as co-author
.
Our partnership with the Rijksmuseum in Amsterdam,
the Netherlands, on Operation Night W
atch also
continued. One of our main projects has focused on
unlocking the secrets behind Rembrandt’
s famous
impasto technique – the way he was able to apply paint
to give an almost 3D effect. Using the most modern
analytical and digital techniques, we’ve been able to
design paint formulations that mimic those used by the
17
th
century master
.
Product and service innovation in 2021
Let’
s take a quick look at some of the innovations we
launched during the year
. We pioneer
ed a new “T
inder
-
style” digital tool for finding your ideal decorative paint
color match. By swiping a range of interior colors and
designs, the intelligent software pr
ovides customers
with a perfect palette of their favorite shades.
We also br
ought several products to market with anti-
viral properties; developed advanced technologies to
protect the motors, battery systems and storage units
used in electric vehicles; and introduced chr
ome-free
primers to the coil market in China.
Another notable launch was the Intertrac HullCare
sustainable hull management package from our Marine
and Protective Coatings business, which you can r
ead
about in more detail on page 24.
DECORA
TIVE P
AINTS
ASIA
Strategy and operations
|
AkzoNobel Report 2021
16
2021 SUMMARY
We continued to drive balanced
profitable r
evenue growth in North Asia,
where we achieved str
ong double-
digit growth in the pr
emium market
segment, in addition to our overall
product gr
owth. This was mainly driven
by robust innovation in sustainable
products and services and geographic
expansion, which added the availability
of Dulux to another 11,200 stores in
96 cities. Double-digit growth was also
achieved in South East and South Asia –
helping to offset the ongoing COVID-19
challenges – mainly driven by: programs
to onboard new stor
es and painters
(more than 5,000 stor
es were added);
the use of digital services to enhance
customer experience; and the launch
of innovative products with sustainable
benefits for our consumers.
2021 HIGHLIGHT
We successfully launched the r
egional
China Paint the Future event (pictur
ed
below). A total of 210 submissions were
received, with 17 entrants taking part
in the two-day accelerator event. Four
winners were invited to collaborate with
the company on sustainable business
opportunities: Mech-Mind, an AI+3D
vision robotic solutions pr
ovider; Corpt,
a recyclable packaging solutions
provider; Ginet, an inorganic non-metal
powder solutions provider; and
Archifiction, a digital 3D spatial platform
creator for immersive virtual r
eality
.
O
THER KEY DEVELOPMENTS
• Dulux launched its first-ever asthma
and allergy-friendly paint, with dual
certification from the International
Allergy Standard Ltd. and the Chinese
paint industry expertise group
• Installed a total of around
8,000 solar panels at our Shanghai
and Guangzhou sites in China
• Won the Chinese paint industry’
s
first-ever Green Pr
oduct and Green
Building Material certification
• Our Dulux Professional range was
used at the new Universal Studios
theme park in Beijing
• Supplied products for Hong Kong
International Airport’
s Sky City project
• Continued to support customers,
painters, employees and their families
in the South East and South Asia
region during the COVID-19 crisis.
This included distributing digital tablets
to over 300 under
-privileged children
and offering access to specialist
doctors through tele-medicine in India
• Launched the Dulux Promise guaran-
tee program in India, Indonesia,
Malaysia, Pakistan and Vietnam
• Introduced India’
s first United States
Department of Agriculture (USDA)
certified bio-based paint. Dulux Better
Living Air Clean Biobased contains
26% bio-based content
• Sadolin premium woodcare pr
oducts
were launched in India and Vietnam
“Despite
significant
headwinds,
we delivered
double-digit
growth
through an
engaged
team,
reliable
supply and
the launch
of new
products and
ser
vices.
”
Oscar Wezenbeek,
Director of Decorative
Paints South East and
South Asia
“I’m proud of
our resilience
in driving
profitable
growth,
while build-
ing our
capability
and capacity
to support
our strategy
,
despite
the major
raw material
impact.
”
Mark Kwok, Director
of Decorative Paints
North Asia
Revenue
in € millions
2021
2020
2019
916
1,084
1,073
Key brands
A
B
C
Decorative Paints revenue
by destination
in %
A
EMEA 61
B
Asia Pacific
27
C
South America
12
DECORA
TIVE P
AINTS
EMEA
17
AkzoNobel Report 2021
|
Strategy and operations
2021 SUMMARY
We deliver
ed a very strong set of results,
despite the extremely turbulent business
environment. The first six months wer
e
dominated by the impact of COVID-19
in Europe, with high demand for DIY
(do-it-yourself) paint. This was followed
by substantial raw material shortages
and price increases, which we counter
ed
with our own strong pricing actions in
the second half of the year
. This enabled
us to continue our brand and customer
support, and maintain our investments in
innovation and sustainability
.
2021 HIGHLIGHT
In March, we completed the acquisition
of 100% of the shares of Industrias Titan
S.A.U. (Titan Paints), strengthening our
paints business and footprint in Spain to
become one of the market refer
ences in
the region. The transaction included thr
ee
production facilities and seven logistics
and service centers for decorative
paints, including one of the most modern
manufacturing plants for water
-based
paints in Europe, located near Bar
celona.
The business shares our commitment to
sustainable product innovation, with much
of its portfolio having received r
ecogni-
tion for environmental performance.
“2021 was a
year when
the agility
of our team
was really
tested.
Eventually
,
we delivered
a ver
y strong
set of results
under ver
y
turbulent
and rapidly
changing
conditions.
”
Jan-Piet van Kesteren,
Director of Decorative
Paints Europe, Middle
East and Africa
O
THER KEY DEVELOPMENTS
• Dulux launched its new Heritage and Simply Refresh paint
ranges in the UK. The Heritage collection was inspired by
classic shades from the history of British ar
chitecture and
design, while Simply Refresh is a one-coat range which makes
decorating as easy and as fast as possible
• Flexa EasyCare was launched in the Netherlands. The washable
interior paint range is tough, durable and keeps walls stain-free
for longer
• Our Dulux brand celebrated its 90
th
anniversary
, having been
first introduced in the UK back in 1931
• We teamed up with one of the world’
s most colorful sporting
events by becoming Official Supplier to the 2021 T
our de
France (pictured). It was an opportunity to engage with new
and existing audiences and customers, with both organizations
sharing proud and exciting histories
• Reached the pilot phase for a new circular exterior filler through
a partnership with Dutch company Alucha, one of the winners of
our inaugural Paint the Future startup challenge (see case study
in the Sustainability statements)
• Our Dulux Professional range was rolled out in Poland, wher
e
Dulux is already a leading brand in the consumer segment
• Expanded our direct retailer channel in T
urkey – which has
grown 50% in the last two years – by adding mor
e small-scale
retail stor
es
• Set up a direct-to-consumer home delivery service in France
and the Netherlands by introducing new “click and paint”
fulfillment centers
Revenue
in € millions
2021
2020
2019
2,246
2,129
2,429
Key brands
DECORA
TIVE P
AINTS
SOUTH AMERICA
Strategy and operations
|
AkzoNobel Report 2021
18
2021 SUMMARY
We achieved a very str
ong performance,
despite the pandemic and exchange
rate volatility
, as we continued to make
progr
ess towards the company’
s Grow &
Deliver strategy
. Results were driven by
growth in the pr
emium market segment,
innovation, strong commer
cial initiatives
– including an improved shopping
experience – and investment in branding
campaigns. Consumers continued to
invest in home renovation thr
ough DIY
(do-it-yourself) solutions and professional
painter services.
2021 HIGHLIGHT
We r
eached an agreement to acquire
Colombia-based paints and coatings
company Grupo Orbis. Completion
is subject to regulatory appr
ovals
and is expected in the first quarter of
2022. Present in ten countries in South
America, Central America and the
Antilles, Grupo Orbis has consolidated
revenue of ar
ound €260 million.
The transaction includes the Pintuco
paints and coatings business, Andercol
and Poliquim (resins) and Mundial
(distribution and services). It will expand
our long-term position across South
America by establishing us as
a frontrunner in the Andean r
egion and
in Central America, where several
countries are high on the global gr
owth
rankings for the next decade.
O
THER KEY DEVELOPMENTS
• Our premium interior wall paints
continued to grow market shar
e, with
Coral Decora leading our growth
in Brazil. We also expanded it as
a “Design” range in Argentina and
Uruguay
. Albalatex and Incalex Design
offer thr
ee expert finishes and four
special effects to give a multi-sensory
experience
• Commercial initiatives continued to
stimulate growth. In Brazil, category
management drove shopping
experience improvement in 1,000
stores. In Argentina, our Decorative
Paints-owned franchise chain opened
its 200
th
store
• In Brazil, consumer and painter brand
prefer
ence growth for AkzoNobel
reached the highest levels since
measurement started
• The Centenario Stadium in Uruguay
,
which hosted the first-ever FIF
A
World Cup in 1930, was r
enovated
with the help of our Inca brand. We
supplied 12,000 liters of paint, which
was used on surfaces throughout the
historic venue, including the exterior
,
the stands, the changing rooms, the
tunnel and the interior warm-up areas
• In Uruguay
, our Inca brand supported
the Solís Theater in Montevideo in its
drive to promote diversity by donating
paint for a colorful rainbow artwork
which was installed outside the venue
“W
e’ll conti-
nue to build
on our strong
foundations,
with the
acquisition
of Grupo
Orbis further
expanding
our long-
term position
in South
and Central
America.
”
Daniel Campos, Director
of Decorative Paints
South America
Revenue
in € millions
This is the iconic Obelisk in
Buenos Aires, Argentina, which
was built to mark the fourth
centenary of the city’
s first foun-
dation. The historic monument
celebrated its 85
th
anniversary
in 2021 and was renovated to
mark the occasion. Our Alba
brand was heavily involved in the
project, which was organized
by CEPRARA (the Chamber of
Related Painters and Restorations
of the Argentine Republic) and the
city government.
Key brands
2021
2020
2019
396
457
477
watch video
CASE STUDY
The power of paint and partner
-
ships helped bring energy and
optimism back to a US city which
was rocked by an explosion on
Christmas Day 2020.
Let’
s Color Nashville – part of our
AkzoNobel Cares pr
ogram – brought
together businesses, organizations, artists
and volunteers to help transform some
of the many boarded up buildings that
still bear the scars of the terrible event.
We partner
ed with customers Hoover
Paint Stores and LKQ Corporation –
along with Nashville’
s Civic Design
Center
, Swipe Right Art and the
Community Foundation of Middle
of T
ennessee – to replace the plain
plywood boards with mor
e artistic
window panels and bring some
much-needed color back to the Second
Avenue neighborhood.
“Let’
s Color Nashville is a critical project
for our downtown businesses to heal
and unite,” said Gary Gaston, CEO of
the Civic Design Center
. “We’r
e excited
to join with AkzoNobel in returning the
positive inspiration that boosts the
downtown community spirit.”
Added Ashley Bergeron, who curated the
artists and artworks: “Art absolutely heals.
There’
s no question. I think art is the
number one communicator that people
can understand in a simple way
. This is
our small gift back to the community
, so
when the building owners come back to
salvage what they can salvage, they’re
walking by beauty instead of a reminder
of the mess and the trouble.”
AkzoNobel supplied around 1,800 liters
of wood primer paint from its site in
High Point, North Carolina, which
was used as the basecoat for boards
temporarily covering 30 commercial
windows. T
eams of volunteers then
created vibrant artwork to help brighten
up the blighted downtown area.
Said AkzoNobel volunteer
, Jauckque
Buford: “Let’
s Color Nashville defines
what it means to be a member of
this community and the power of paint
is a way for us to demonstrate our
unity and love for each other
. That’
s
who we are.”
Although the windows will eventually
be repair
ed and the artistic panels will
come down, they won’t be thr
own away
.
They’ll be gifted to the local community
.
19
Bringing light to
the darkness
PERFORMANCE COA
TINGS
AUTOMOTIVE AND SPECIAL
TY COA
TINGS
Strategy and operations
|
AkzoNobel Report 2021
20
2021 SUMMARY
It was a strong year for many of our
activities, despite having to face a series
of external challenges. Our Consumer
Electronics and Film businesses both
had a recor
d year
, while there was
an impressive r
ecovery in Aerospace
Coatings and we increased prices
across all our market segments. Our
teams showed great r
esilience as we
pushed ahead with the company’
s Grow
& Deliver strategy
, once again proving
that teamwork can overcome many
hurdles. W
e’re well prepar
ed to keep
that momentum going.
2021 HIGHLIGHT
We intr
oduced innovative film technology
that allows automotive manufacturers
to hide radar sensors behind decorative
metallic parts. The radar
-transparent
bright film – perfected by working
together with our customers – means
vehicle makers no longer have to worry
about hiding sensors behind solid metal,
which can block the signals of safety
features such as anti-collision warnings.
Demand exceeded expectations and
we’ve already been specified as a global
supplier of emblems by one of the
world’
s biggest car brands – with lots of
potential to grow this particular market.
O
THER KEY DEVELOPMENTS
• Signed partnership deals to supply
refinish pr
oducts to a number of
leading car manufacturers, including
Daimler
, Nissan and T
oyota in China;
and Citroën and MG in India
• Sikkens Autosurfacer UV and
Autoclear Pro Xpr
ess were awarded
Best Innovation prizes in the
Automotive Aftermarket category at
the World Auto Forum
• Our Carbeat digital production
management application expanded its
presence significantly
• Launched ColorSurfaces edition 17,
our annual color trend collection
designed to spark the imagination
of customers in the automotive,
aerospace and consumer electr
onics
markets
• Secured an exclusive agreement
with French insurance company
ASSERCAR to become a
recommended supplier for their
vehicle repair network thr
ough our
Sikkens and Lesonal brands
• Automotive market demand for film
on metal was high, while consumer
electronics companies continued
to see the value of decorative and
eco-friendly film offerings
• Dell awarded its first-ever W
aterborne
Paint Development Partner award to
our Consumer Electronics business. It
acknowledges our crucial role in Dell’
s
transformation from solvent-based to
water
-based coatings technology
• Smartphone manufacturer Samsung
approved our solution for the A32,
A52 and A72 in its Galaxy series
• Aerospace Coatings continued to
work with Dutch students on a project
to develop an airplane powered by
liquid hydrogen
• Secured an agreement with Airbus,
which also covers products fr
om our
recently acquir
ed Mapaero range
The bright film tech-
nology we’ve developed
allows better and more
consistent transmission
of signals that ultimately
help people to drive
more safely
.
A
B
C
Revenue by destination
in %
Revenue
in € millions
2021
2020
2019
1,127
1,318
1,231
Key brands
A
EMEA 43
B
Americas 28
C
Asia Pacific
29
21
AkzoNobel Report 2021
|
Strategy and operations
Adding color to the skies
Our Aerospace Coatings business showcased its unique expertise by supplying
high-performance products for a series of unique liveries thr
oughout the year
.
Alaska Airlines wanted to create a livery to embody its values and symbolize its
commitment to education and advancing racial equity
. The design – inspired by
Alaska Airline employees and the United Negro College Fund (UNCF) – featur
es
profiles of the next generation of leaders: the childr
en, grandchildren and
mentees of the airline’
s employees.
Meanwhile, Southwest Airlines in the US wanted to celebrate its 50
th
anniversary
by creating a very special livery named Fr
eedom One. It was developed as a
tribute to all of Southwest’
s employees, as well as honoring veterans and
all those currently serving in the US Armed For
ces. We provided our HS2111
chrome-fr
ee primer and Aerodur 3001/3002 basecoat/clearcoat system.
And in China, a bespoke livery was created to inspir
e the creativity of the aviation
industry’
s future talent in the region. W
e donated products and expertise to
the “Soaring with your dream” pr
ogram as part of a long-standing partnership
with Boeing. The aircraft, which is housed at the Boeing 737 Completion Center
in Zhoushan, is used for training students in the art of painting liveries and
one-off designs.
“Despite
the extreme
external
environment,
impacted by
raw material
shortages
and
covid
-19,
we delivered
a solid
performance,
thanks to the
agility and
hard work of
our teams.
”
Patrick Bourguignon,
Director of Automotive
and Specialty Coatings
PERFORMANCE COA
TINGS
INDUSTRIAL COA
TINGS
Strategy and operations
|
AkzoNobel Report 2021
22
2021 SUMMARY
A massive – and successful – task
across our global markets was ensuring
our customers’ production lines kept
running while resolving huge challenges
with raw materials, freight and
shipping. Our customers experienced
high demand due to an initial post-
COVID-19 surge, notably in commercial
construction and home refurbishment.
The continued trend towar
ds endlessly
recyclable aluminum cans also played
its part in the upturn. A major feature
of the year was the rise in the cost of
raw materials and the corrective price
actions requir
ed to ensure we could
continue to provide excellent service and
value. Product, service and technology
breakthr
oughs continued at pace,
as did our investment in supply and
manufacturing infrastructure.
2021 HIGHLIGHT
We intr
oduced a new range of
chromate-fr
ee primers to help Chinese
steel companies comply with regulatory
changes restricting the use of chr
ome
pigments commonly found in tradi-
tional high-performance primers. Our
COIL
TEC CF primer range will provide
greater r
eassurance and continuity
for steel companies in China and across
“Strong
revenue
and volume
growth
across all
our market
segments,
allied with
e
xtraordinar
y
supply
challenges,
meant we
had to fully
focus on
keeping
customers’
lines running,
while recove-
ring raw
material cost
surges.
”
Simon Parker
,
Director of Industrial
Coatings
Revenue
in € millions
2021
2020
2019
1,634
1,707
1,893
Key brands
Revenue by destination
in %
A
B
C
A
EMEA 43
B
Americas 31
C
Asia Pacific
26
23
AkzoNobel Report 2021
|
Strategy and operations
Asia, while maintaining the highest levels
of product performance. The new range
is the latest in a long line of sustainable
solutions and environmentally focused
innovations from AkzoNobel developed
for the building products industry
.
O
THER KEY DEVELOPMENTS
• Introduced a full portfolio of products
for the ends of beverage cans in Asia,
which quickly helped us win more
business. The portfolio includes our
industry-leading Vitalac 820 beverage
can ends external technology
, and
our newly launched beverage ends
internal technology to capture more of
the Asian metal packaging market
• Converted AkzoNobel’
s 2022 Color
of the Y
ear
, Bright Skies, into a color
palette that brings current color tr
ends
to our wood coatings customers
• Our GripPro Heat A020/H020
adhesive for manufacturers of
laminated structural beams was
launched to reduce workplace and
final product formaldehyde emissions,
while maintaining seasonal
productivity
• Launched scratch and stain resistant
technology for luxury vinyl tiles, which
increases ef
ficiency and productivity
for flooring manufacturers, while
maintaining the desired appearance
• Introduced a new e-commerce
platform for our distribution
businesses to enhance the customer
experience and provide 24/7 access
to online ordering, tracking and all
relevant information
• New digital tools for our TRINAR coil
coating products wer
e introduced,
which are designed to make them
more accessible to ar
chitects and
specifiers
• Several landmark buildings are being
constructed using our products,
including One Chicago T
ower in the
US, Merdeka 118 in Malaysia and
the T
oranomon-Azabudai Project
in Japan
• Enhanced our social media platforms
to strengthen brand pr
esence and
drive engagement with partners,
customers and end-users around
the world
High Point upgrade signals growth intent
A €50 million investment in our North American Wood Coatings site in High Point, North Car
olina,
was completed in 2021.
The extensive upgrade included installing state-of-the-art production technology
, along with building
a new raw materials warehouse, r
esearch lab and technical application center
. As well as making
production mor
e flexible and efficient, it will further strengthen our market position and enable us to
better serve our wood coatings customers and partners in the region.
“This investment clearly signals our intentions,” said AkzoNobel CEO, Thierry V
anlancker
.
“We’r
e looking to accelerate our growth in the region and High Point has a vital r
ole to play as
we continue to build and expand market positions across our wood coatings portfolio.”
Known as the “Home Furnishings Capital of the World”, High Point has been home to AkzoNobel’
s
US wood coatings activities since 1955. Covering 37 acres, it pr
oduces a wide range of products
to serve the furniture, flooring and building products market segments, as well as the company’
s
Chemcraft distributors.
PERFORMANCE COA
TINGS
MARINE AND PROTECTIVE COA
TINGS
Strategy and operations
|
AkzoNobel Report 2021
24
2021 SUMMARY
It was a year of transition for our markets
following the COVID-19 outbreak in
2020. While some countries started
to re-open, it was at dif
ferent speeds
around the world. Many economies
continued to experience various stages
of containment, which was reflected in
the activity across our main marine and
protective markets. Or
ders for new ships
improved compar
ed with the previous
year
, albeit from the bottom of the cycle,
while the recr
eational boating market
continued to be buoyant. This gives us
confidence in the fundamentals of our
yacht market. 2020 was a low in terms
of oil and gas investment, and although
this improved by comparison in 2021,
the revival in oil and gas was temper
ed
by a gradual demand side recovery and
improving commodity prices.
Although global supply chain disruptions
brought dif
ferent challenges to those
we experienced in 2020, demand for
our high quality products, services and
people expertise remained positive. Our
teams worked quickly and effectively to
remain pr
oactive and support continuity
on our customers’ projects. W
e
continued to work closely with industry
partners to find new ways of delivering
product and service innovations, which
provided both financial and sustainability
improvements for our customers, as well
as the wider industry
.
2021 HIGHLIGHT
We continued to find new ways to
support customers and the marine
industry’
s net zero ambition with the
introduction of the most sustainable hull
management package yet – Intertrac
HullCare. By combining our high-
performance coatings with industry-
leading cleaning technology
, customers
can extend dry docking cycles to
ten-year intervals, as well as saving
up to 34,000 tons in emissions and as
much as €4.6 million in fuel per vessel
(depending on the vessel size and type).
Our Y
acht Coatings business partnered with the Water Revolution Foundation to work together on
neutralizing the footprint of the yacht industry while preserving the world’
s oceans. The business will
share its expert knowledge and insight to help create a mor
e sustainable yacht industry
. The code of
conduct is made up of ten commitments that will make a real differ
ence in reducing the environmental
footprint of the superyacht industry and restoring the world’
s oceans. Photography: Bilgin Y
achts.
“I’m proud of
our teams,
who excelled
in supporting
customers
and naviga-
ting global
supply chain
disruptions,
while con-
tinuing to
develop
sustainable
innovations,
contributing
to the
industr
y’
s
net zero
ambition.
”
Jean-Michel Gauthier
,
Director of Marine and
Protective Coatings
Revenue
in € millions
2021
2020
2019
1,068
1,290
1,164
Key brands
A
B
C
Revenue by destination
in %
A
EMEA 34
B
Americas 22
C
Asia Pacific
44
25
AkzoNobel Report 2021
|
Strategy and operations
Podium finish for ocean racing team
V
aluable data about the health of our seas was collected by the
AkzoNobel Ocean Racing team as it grabbed a well-deserved podium
finish in The Ocean Race Europe.
Specialized sampling equipment was installed on board the team’
s
VO65 – one of just three boats to carry the instruments – as part of a
project supported by the United Nations Decade of Ocean Sciences
for Sustainable Development.
Powered by our International brand, the AkzoNobel boat was one of
seven VO65s that sailed from Lorient in France to Genoa in Italy
,
with stops in Cascais, Portugal, and Alicante, Spain, along the way
.
Our products wer
e used on all areas of the vessel.
O
THER KEY DEVELOPMENTS
• Celebrated the 140
th
anniversary of
our International brand
• Introduced Interzone 954GF
, which
is designed to boost steel asset
protection for high impact and high
abrasion areas in challenging mining
and energy generation projects
(including wind)
• Partnered with 2020 Paint the Future
winners Qlayers to enable robotic
application for tank exteriors using our
International coatings (pictured above)
• Reduced surface preparation costs
and boosted productivity for our fir
e
protection customers in Australia and
New Zealand with the qualification of
Interchar 3120 for application over
black steel
• Responded to customer demand by
introducing Intergar
d 9700, a range of
high durability
, solvent-free uni-primers
• Launched Intergard 5150L
WT for
navy vessels, which saves up to 25%
in weight compared with alternative
deck coatings. Also introduced
Intershield 6GV
, which uses low-solar
-
absorption technology to help reduce
heat loads on steel surfaces and save
energy
• Our Y
acht business completed the
integration of New Nautical Coatings,
which was acquired at the end
of 2020. Also launched our new
“That feeling” campaign
PERFORMANCE COA
TINGS
POWDER COA
TINGS
Strategy and operations
|
AkzoNobel Report 2021
26
2021 SUMMARY
We made a str
ong start to the year
, with
demand recovering rapidly ar
ound the
world as markets bounced back from
the impact of COVID-19. During the
second half of 2021, we experienced
significant supply chain disruption and
increasing raw material costs. However
,
growth in ar
chitectural and industrial
markets was very strong, while demand
in automotive was impacted by chip
shortages. We focused str
ongly on
maintaining our service levels to
customers, while defending margins
in our value chain.
Despite the turbulent conditions, we
outperformed our markets significantly –
both in terms of volume and price – and
made major progr
ess on the company’
s
Grow & Deliver strategy
. We also laid
out an accelerated growth path and
successfully continued our multi-year
Capex expansion program to support
our customers and the market. Through
it all, we maintained our resilience and
paid extra attention to taking care of our
people as the pandemic continued to
have an impact.
2021 HIGHLIGHT
Our new Interpon W range of innovative
powder on wood coatings achieved its
first commercial successes. Designed for
heat-sensitive substrates (both indoors
and outdoors), it’
s a smart system
which enables a variety of materials
to be coated in a durable, sustainable
and more ef
ficient manner
. Dedicated
commercial teams have been trained to
provide superior service to customers
making the change to powder on wood.
They’re supported by a new R&D
lab focused on low cure powder
coatings, which was opened at our
Como site in Italy
.
“W
e respon-
ded and
adapted to
the external
challenges,
once again
demonstra-
ting our
ability to
significantly
outgrow
our markets.
I’m ver
y
proud of
what our
teams have
achieved.
”
Daniela Vlad, Director of
Powder Coatings
Our Interpon W powder
coatings and liquid
primers are an ideal
solution for coating
heat-sensitive sub-
strates in a durable,
efficient and more
sustainable process
for both indoor and
outdoor use.
Revenue
in € millions
2021
2020
2019
1,128
1,229
1,315
Revenue by destination
in %
A
B
C
A
EMEA 47
B
Americas 19
C
Asia Pacific
34
Key brands
27
AkzoNobel Report 2021
|
Strategy and operations
Driving the current to power the futur
e
As global demand for electric vehicles – and e-mobility in general –
continues to accelerate, we’ve developed advanced technologies to
help power the industry into the future.
Manufacturers of electric vehicles and components want world class
solutions to help protect motors, battery systems and electrical
storage units. We now of
fer a dedicated powder coatings portfolio,
alongside a team of technical specialists to provide expert assistance.
And we’re har
dly newcomers to the automotive market. Our powder
coatings are alr
eady used on car bodies, interiors and alloy wheels.
The emergence and rapid growth of e-mobility now pr
esents new op-
por
tunities for us to help batteries last longer and vehicles drive further
.
Thanks to our renowned Resicoat brand, we have mor
e than 50 years
of experience in offering tried, tested and pr
oven performance for a
wide range of electrical insulation and high temperature solutions. So
we have all the experience and expertise necessary to support the
innovators of the next generation technologies that will be used in the
world’
s most advanced electric vehicles.
One of London’
s oldest areas now houses a new residential development
which has gone way beyond common methods of reusing and recycling.
The buildings of the Silk District in Whitechapel are mainly constructed
from brick and reconstituted stone. Our Interpon D Stone Ef
fect powder
coatings were applied to the exteriors to imitate the look of Portland stone,
limestone and brickwork – helping to preserve the natural materials.
O
THER KEY DEVELOPMENTS
• Introduced Interpon Cr
, which gives a bright
metallic chrome ef
fect
• Interpon D2015 Précis Ultra Matt was
launched. It delivers an ultra matt finish in a
range of colors, bringing a glint of brilliance and
luminescence to architectural surfaces
• Began supplying Resicoat products for the
landmark Pearl River Delta water diversion
project in China, which will supply clean and
safe potable water to more than 50 million
people
• Significantly increased our digital media
presence thr
ough targeted campaigns, helping
to further grow r
evenues
• Inspired architects with a sophisticated take
on AkzoNobel’
s 2022 Color of the Y
ear
, Bright
Skies, with a shade called Baku. It’
s part of the
upcoming 2022-2025 Futura Collection
• Completed the capacity expansion at Chungli in
T
aiwan and will relocate activities from Linkou
• Strong uptake of our Interpon Low E product
range (lower energy curing), based on
increasing energy prices and gr
owing demand
for sustainable solutions from customers
• Successfully converted a number of new
customers to powder coatings technology
,
based on environmental (low VOCs, no waste)
and process ef
ficiency benefits
HIGHLIGHT
Strategy and operations
|
AkzoNobel Report 2021
28
W
e got all revved up in September when
McLaren F1 driver
, Lando Norris, visited our
Sassenheim site in the Netherlands ahead
of the Dutch Grand Prix.
He arrived in style – in a McLaren r
oad car – with the
flying visit providing an opportunity for him to see some
of the work we do as McLaren Racing’
s official paints
and coatings partner
.
It was also a rare chance for those who work at the
location to meet Lando in person and hear him talk
about what it’
s like to drive a car that features the colors
they create.
As well as hosting a Q&A session, the British driver
was given a brief tour
, which included a visit to the site’
s
Automotive T
raining Center
.
T
o help make the visit extra special, a replica McLaren
F1 car was put on display at the facility for several days
so everyone could enjoy taking a closer took.
• In early 2022, we extended and expanded our
long-standing partnership with McLaren Racing.
As well as exploring new possibilities in the areas of
technological innovation and product development,
the multi-year agreement also includes becoming
a sustainability partner to McLaren Racing. This will
enable us to incorporate our People. Planet. Paint.
approach as we strive to play an active r
ole in their
sustainability journey
.
F1 star drives
us crazy!
Photography: David Lichtneker
.
SUST
AINABILITY
ST
A
TEMENTS
This section explains our sustainability
performance in more detail. It explains our
ambitions, outlines our approach to cr
eating
shared value and shows our performance on
key environmental and social indicators.
Our approach to sustainable business
30
PEOPLE
32
Employees 32
Health and safety
35
AkzoNobel Cares
37
Human rights
38
PLANET
41
Carbon emissions in own operations
41
W
aste and water management
42
Responsible procur
ement
44
P
AINT
47
Sustainable solutions
47
Carbon emissions in our value chain
48
Recycled content in packaging
49
Managing sustainability
50
Sustainability performance summary
52
For additional information, visit:
akzonobel.com/en/about-us/sustainability-
The indicators that fall within the scope of
limited assurance of the external auditor are
marked with the following symbol:
See page 144 for the Assurance report of the
external auditor
, which includes details on
scoping and outcomes.
29
Sebastiaan Bremer
| Large Schoener Goetterfunken III B |
‘In the universal time machine’ (In der grossen Weltenuhr) |
acrylic paint, 2010, ink on C-print | 126 x 128 cm | Collection
AkzoNobel Art Foundation
Sustainability statements
|
AkzoNobel Report 2021
30
SUST
AINABILITY
In September
, our commitment to
setting science-based sustainability
targets was officially validated by
the Science Based T
argets initiative
(SBTi). We’re the first paints and
coatings company to have targets
approved.
A major new sustainability award was
presented to AkzoNobel by His Royal
Highness the Prince of W
ales at
the COP26 summit held in Glasgow
,
Scotland.
Our ambition to transition to 100%
renewable electricity by 2030 is
progr
essing well, with our operations
in Europe having fully switched over
by January 2022.
T
owards the end of the year
, we
formalized our partnership with the
Responsible Mica Initiative, having
been one of the founders when it
was launched in 2017.
We launched an exciting new initiative
in 2021 with the introduction of
our NextGen Sustainability Council.
p
age
40
SBT
i appro
val for
carbon reduction
target
p
age
48
Roy
al recognition
for our sustainability
leadership
p
age
41
100% renewable
electricity in Europe
in 2022
p
age
39
Membership of
Responsible Mica
Initiative formalized
p
age
34
Dawn of a new
generation
PEOPLE
We car
e about people and communities,
a passion that’
s reflected in our commitment to
safety
, integrity and sustainability
.
PLANET
We challenge ourselves and our partners
every day to be better global citizens and protect
the future of our planet.
P
AINT
We keep pushing boundaries to develop
pioneering paint solutions that make a world of
differ
ence.
2021 sustainability
highlights
Our approach to
sustainable business
Sustainability is part of our DNA. It’
s a daily
priority for all our employees and is integrated into
everything we do.
Our holistic, dynamic approach ensur
es that we
continue to make progr
ess as the sustainability
leader in our industry
. T
o help us maintain and
build on that position, we’re always innovating;
always advancing and delivering fact-based results.
Collaboration is also essential if we’re to achieve
our ambitions, so we engage and proactively team
up with stakeholders to identify opportunities and
create shar
ed value.
Our approach to sustainable business is an integral
part of our commitment to People. Planet. Paint.
And it’
s about much more than doing business
sustainably
. People. Planet. Paint. touches
everything we do. It’
s a promise that we’ll keep
innovating to address key global issues.
Here’
s how each element of People. Planet. Paint.
is designed to contribute in its own way:
31
AkzoNobel Report 2021
|
Sustainability statements
PEOPLE
PLANET
P
AINT
T
op quartile
in organizational
health score by 2025
>
30%
female executives
by 2025
Moving towards
zer
o waste
by 2030
>
50%
revenue
from sustainable
solutions by 2030
Progr
ess by end of 2021
• 72 in organizational health score
(vs 75 top quartile)
• 22% female executives
• 13,862 community members trained
• 352 AkzoNobel Cares projects
• 35,000 community members
trained 2020-2025
• 1,000 AkzoNobel Cares projects
2020-2025
• 100% renewable electricity by 2030
• 30% energy reduction by 2030*
• 100% of water intensive sites
reusing water
• 50% recycled content to be used in
its plastic packaging by Deco Europe
by 2025
Progr
ess by end of 2021
• 21% carbon reduction in our own
operations*
• 59% circular waste
• 45% renewable electricity use
• 1% energy reduction*
• 30% of water intensive sites
reusing water
Progr
ess by end of 2021
• 39% of revenue from sustainable
solutions
Our ambitions
Sustainability key drivers
The sustainability benefits we bring to
our own operations and our customers
are gr
ouped into six drivers.
United Nations SDGs
Our approach to sustainability is designed to con-
tribute to the global agenda repr
esented by the UN
Sustainable Development Goals. We continue to focus
on those SDGs where we can have the biggest impact.
People and
communities
Health and
well-being
Less
waste
Reduce,
reuse
and renew
Longer
-lasting
performance
Reduced carbon
and energy
50%
less carbon
emissions in the full
value chain by 2030*
*
V
ersus 2018
baseline.
Sustainability statements
|
AkzoNobel Report 2021
32
PEOPLE
W
e care about
people and
communities,
a passion
that’
s reflected
in our commit-
ment to safety
,
integrity and
sustainability
.
People. Planet. Paint. also enables
us to make the most of our unique
position. We’r
e ideally placed to use
our pioneering spirit and centuries of
paints and coatings expertise to make
a real dif
ference. We can deliver the
sustainable and innovative solutions that
our customers, communities – and the
planet – are incr
easingly relying on. We
have the courage and the belief. That’
s
why we’ve set ourselves science-based
carbon reduction targets, in line with
the 1.5˚C pathway laid out by the Paris
Agreement. So ther
e’
s a deeper
, wider
meaning to People. Planet. Paint.
It’
s at the center of what we stand for
as a company
.
We’ve maintained our sustainability
leadership in the paints and coatings
industry
, based on the recognition we
received fr
om various exter
nal ESG
rating agencies during the course of
2021 (see latest ratings below). Our
position is further strengthened by our
sustainability ambitions, which underline
our commitment to being a truly
sustainable company
.
Looking after our people is an integral
part of being sustainable. Focusing on
organizational health and fostering an
inclusive environment ar
e key when it
comes to growing our employees as fast
as we grow our business.
Among our ambitions is for 30% of our
company’
s executives to be female.
We also want to be top quartile in our
organizational health score (OHI).
Our organizational health
Change management is key to a healthy
organization, which is why we launched
an updated version of the High
Performing T
eams (HPT) program. This
will support our Grow & Deliver strategy
,
underpinning its success and allowing us
to be a high-performing organization.
We’ve continued to build our
Culture and Change network.
A group of 369 volunteers
around the world has been
trained and equipped
to support local change
programs and implement
global changes at a local level.
We’ll continue to develop
and engage them, as they’ve
had a major impact on
managing local changes and
transformations. In 2021, we
achieved an increase in our
EMPLO
YEES
SUST
AINABILITY
ESG rating
agency
Key achievement
We’re consider
ed as a “Low risk” company
.
We’ve received the highest possible rating for six
consecutive years (AAA).
We’ve maintained our score at well above the
industry average, placing us in the top 3% for
more than ten years.
We’ve been awarded the highest possible rating,
Platinum, placing us in the top 1% of more than
65,000 rated companies.
In the latest review
, our ESG performance was
considered Advanced, positioning AkzoNobel in
first place in the chemical industry
.
A family of 16 in Poland moved into a new dream home after we helped make it a reality
. Having been
approached by builder Budimex, we supplied more than 300 liters of Dulux Pr
ofessional and Dulux EasyCare
paint, some of which was used to create artistic murals.
More information about the ratings we’ve received fr
om
various external ESG rating agencies can be found on
our website.
AkzoNobel Cares pr
ojects
2020-2021: 352
Ambition – 2020-2025: 1,000
Female executives
2021: 22%
Ambition – 2025: 30%
Local community members trained
2020-2021: 13,862
Ambition – 2020-2025: 35,000
Organizational health score (OHI)
2021: 72
Ambition – 2025: T
op quartile (75)
33
AkzoNobel Report 2021
|
Sustainability statements
OHI score compar
ed with 2020, ending
the year with a score of 72 (2020: 69),
just three points fr
om top quartile.
A diverse and inclusive
workplace
We’r
e developing an increasingly
engaged, diverse and capable workforce
with a focus on leadership reflecting the
diversity of the communities where we
operate. Our three priorities ar
e:
• Fostering an inclusive culture
• Building and expanding our internal
diversity and inclusion networks
• Strengthening our leadership diversity
and focus on gender balance
We’ve continued to make pr
ogress
on our commitment to diversity and
inclusion (D&I). We r
olled out our
inclusive and respectful workplace
training and continued to promote
“I Belong”, a guide to help managers
lead in an inclusive way
. We’ve also
introduced our inclusive language
guidelines.
D&I has become a growing topic of
interest acr
oss our organization. There’
s
a growing number of T
rue Colors
chapters (focused on leading inclusion
for our LGBTI+ colleagues) and our
Women Inspir
ed Network operates in
many differ
ent countries. Our Equal
Access Board has established strategic
points of contact at senior executive
level, who will help ensure equality
in the workplace for all employees
with disabilities.
In 2021, we set gender targets for
all our businesses and functions to
increase female r
epresentation as part
of leadership accountability
. This will
contribute to our goal of having 30%
female executives by 2025. In 2021, we
had 22% female executives, with 33%
in the Supervisory Board and 43% in the
Executive Committee.
This year
, we joined the UN Global
Compact program T
arget Gender
Equality to support our efforts in
increasing female r
epresentation.
Our CEO, Thierry V
anlancker
, signed
the program’
s Women Empowerment
Principles to show our commitment and
engagement. We also took part in the
Workplace Pride benchmark to r
eview
our current LGBTI+ inclusion ef
forts
and are pleased to be above average
compared with other manufacturing
companies.
Managing and developing
talent
In 2021, we continued to be recognized
as a leading employer in many of our
key countries, including Brazil, China,
France, the Netherlands, Sweden, the
UK and the US.
As part of our ongoing journey towards
a sustainable and diverse leadership
pipeline, we focused on planning how
to develop our top talent. We launched
Grow2Lead, a nine-month pr
ogram
to inspire and engage. It’
s a blended
learning experience with a broad range
of development activities – including
virtual events, webcasts, individual and
group learning assignments – which is
delivered via a custom virtual learning
platform. We also continue to deploy our
top talent across our businesses.
2025
2021
2020
2019
0.4
75
0.2
69
72
61
2025
2021
2020
2019
0.4
30
0.2
21
22
18
Female executives
in %
Ambition
Organizational health score (OHI)
Ambition
Culture and change network
North
America
38
South
Asia
80
South
America
92
EMEA
113
North Asia
46
369 agents
worldwide
AkzoNobel score on the organizational health index of
McKinsey
. Ambition is be top quartile, which is determined
by McKinsey every year across 1,700 companies
worldwide.
Percentage of women at executive level, a pay grade level
at AkzoNobel, which excludes the Executive Committee.
Sustainability statements
|
AkzoNobel Report 2021
34
Overall, employee turnover in 2021 was
14% (13% in 2020); voluntary turnover
was 8% (5% in 2020). The recovery
of the labor market had an impact,
especially on voluntary turnover
.
Last year saw a renewed focus on
capability development to support our
Grow & Deliver strategy
, with particular
regar
d to product management and
end-to-end supply chain. We defined
the skills our employees needed in these
areas and then began to design learning
solutions to address potential gaps.
We also continued to of
fer lear
ning
solutions for needs that emerged as a
result of COVID-19, particularly ar
ound
resilience, digital, social and emotional
skills. We transitioned how most of these
learnings were delivered to a digital/
virtual environment to combat travel
limitations caused by the pandemic.
T
o further increase awareness of our
approach to sustainable business, we’ve
updated our sustainability e-learning. It
focuses on our People. Planet. Paint.
ambitions and how we’re planning to
achieve them. We also hosted several
webinars and workshops to build
capability and awareness ar
ound our
increasing commitment to sustainability
.
More training modules and workshops
on specific sustainability topics will be
launched in 2022.
Dawn of a new generation
We launched an exciting new
initiative in 2021 with the
introduction of our NextGen
Sustainability Council (NGSC).
It’
s been established to bring
a fresh perspective to our
sustainability agenda by
encouraging an appoin
ted
team to proactively identify
opportunities to build on our
achievements and highlight
issues that could arise in the
future.
Applications to join were
received fr
om across the
company and 13 members were
selected, with the Chair of the
inaugural NGSC, T
essa Slagter
(pictured), also taking a seat on
our Sustainability Council.
“By giving future leaders the
opportunity to contribute to
building our sustainable future
and listening to the challenges
they put forward, the company
is demonstrating the sort of
pioneering spirit and industry
leadership we can all be
proud of,” explains Wijnand
Bruinsma, AkzoNobel’
s Director
of Sustainability
.
Adds T
essa: “We aim to drive
positive change, challenge the
current thinking and incr
ease
the sustainability skills and
knowledge of the NextGen
Council members. It has already
been a very rewar
ding process
and we’re looking forwar
d
to making an even bigger
contribution.”
Setting up the NGSC also
demon
strates a tangible
commitment to pioneering
a sustainable future by
considering diverse views and
including as many perspectives
as possible.
2.
9
During the first few months of 2021, we announced
Jitte Flapper as our Scientist of the Y
ear for 2020. The
annual award recognizes colleagues who have made a
tremendous contribution to resear
ch and development over
the course of their career
. His vast knowledge is helping us
to make better coatings that are more sustainable.
35
AkzoNobel Report 2021
|
Sustainability statements
As one of our core values, we put
safety first in everything we do. We’r
e
committed to ensuring every day at
AkzoNobel is as safe as it can be.
Ultimately
, our vision is to achieve zero
injuries and harm through operational
excellence.
We do this thr
ough initiatives in the areas
of people safety and health, process
safety
, and security
. We r
eport, analyze
and learn from all our health and safety
incidents to continuously improve our
safety performance. Our commitment
is underpinned by our Life-Saving Rules
and Golden Principle to stop work if
conditions or behavior are unsafe.
People safety and health
In 2021, we focused our people
safety program on forklift truck safety
and safe driving in general. We also
accelerated our life-critical procedur
es
and Health, Safety
, Environment and
Security (HSE&S) roadmap pr
ogram. We
identified areas that need impr
ovement
in our own operations and put them on
the roadmap with targeted plans and
governance. In addition, we continued
to invest in functional excellence and the
development of our capability in the area
of root cause analysis.
T
o ensure healthy working conditions
for all our employees, we continue to
actively manage occupational illness-
related absenteeism. W
e’ve piloted a
Wellness Checkpoint which supports the
evaluation of psycho-social risk factors.
We’ve leveraged the company-wide
digital compliance assurance process
to underpin our industrial hygiene and
occupational health approach.
In 2021, the total reportable rate (TRR)
for employees and temporary workers
improved to 0.21 (2020: 0.23), meeting
the target level set for 2021 (0.21). In
total, 66% of our manufacturing sites
have been reportable injury-fr
ee for over
a year
. The most frequent causes of
reportable injuries ar
e slips, trips and
falls, struck by or caught in-between
objects and manual handling. The most
frequent injuries ar
e strains/sprains, cuts/
lacerations and fractures.
Our contractor performance improved
in 2021, with a contractor reportable
injury rate of 0.12 (2020: 0.17). The
contractors lost time injury rate
decreased to 0.08 (2020: 0.11).
Unfortunately
, there wer
e two major
incidents this year
. A fatal injury involving
an electronic pallet lift truck in Jakarta,
Indonesia, and a pedestrian sustaining
life-changing injuries after being hit by a
forklift truck in Machelen, Belgium.
Process safety
In 2021, we continued our dedicated
Process Safety Management (PSM)
improvement pr
oject. This project
is designed to strengthen our PSM
program and pr
ocesses to achieve
leading standards in pr
ocess safety
. It
focuses on high quality hazard studies
2021
2020
2019
2018
0.24
0.23
0.21
0.20
T
otal reportable injury rate employees including
temporary workers
The total reportable injury rate (TRR) is the number of injuries resulting in a
medical treatment case, restricted work case, lost time case or fatality
, per
200,000 hours worked. In line with OSHA guidelines, temporary workers are
reported with employees, since day-to-day management is by AkzoNobel.
Lost time injury rate employees including
temporary workers
2021
2020
2019
2018
0.08
0.09
0.11
0.09
T
otal reportable injury rate contractors
Lost time injury rate contractors
The contractors lost time injury rate (L
TlR) is the number of contractor injuries
resulting in a lost time case, per 200,000 hours worked.
The lost time injury rate (L
TlR) is the number of injuries resulting in a lost time
injury per 200,000 hours worked. T
emporary workers are reported together with
employees, since day-to-day management is by AkzoNobel.
The total reportable injury rate contractors is the number of contractor injuries
resulting in medical treatment cases, r
estricted work cases, lost time injuries or
fatalities, per 200,000 hours worked.
2021
2020
2019
2018
0.09
0.07
0.11
0.08
2021
2020
2019
2018
0.19
0.18
0.17
0.12
SUST
AINABILITY
HEAL
TH AND SAFETY
A loss of primary containment is an unplanned release of material, product, raw
material or energy to the environment. They are divided into thr
ee categories,
dependent on severity
, from small, on-site spill/near misses up to Level 1.
Process safety events
2020
2021
Loss of primary containment – Level 1
6
5
Loss of primary containment – Level 2
52
67
Process safety event – Level 3
1,250
1,621
Process
safety
Product
safety
Security
People
safety
Health
Zero injuries
and harm through
operational excellence
Elements
Vision
Foundation
HSE&S
management system
HSE&S
audits
Sustainability statements
|
AkzoNobel Report 2021
36
SUST
AINABILITY
and aims to harmonize safety critical
equipment identification, introduce
standards and impr
ove capability
building with critical leaders and front-
line workers. This is supported by
harmonized leading metrics. The project
will continue in 2022.
Several activities took place to
strengthen our cultur
e of commitment-
based process safety
. We launched
a successful global campaign to
demonstrate leadership commitment
and explain how all employees can
contribute to process safety
. We also
introduced Basis of Safety (BOS)
standards for r
esin manufacturing,
aluminum bonding and high-speed
dispersers that addressed these higher
risk processes and defined company
expectations for these activities. V
arious
engineering standards have been
adopted: for grounding and bonding;
flexible hose management; and
maintenance of solvent storage tanks.
We’ll start 2022 by implementing
a training plan for Process Safety
Fundamentals – focusing on capability
building of front-line workers and
proactively developing task-safe
behaviors. We’ll also continue designing
and implementing BOS and engineering
standards.
Our loss of primary containment (LoPC)
Level 1 and 2 (number of spills) was
higher than last year
. The increased
focus on process safety also r
esulted in
a higher number of Level 3 (near miss)
reports. These give essential input to
our continuous improvement pr
ocesses.
The direct causes identified by our
incident investigations mainly attributed
the number of spills to operational
discipline (35%) and asset integrity
(42%). We saw an incr
easing trend
during 2021 in spills related to handling
of drums and IBCs (intermediate bulk
containers) by lift trucks. In total, 69% of
our manufacturing locations didn’t have
LoPCs, demonstrating our vision of zero
spills is achievable. However
, 20% of our
locations have caused 76% of our spills
over the last three years. In our r
oadmap
approach, we focus on those locations,
ensuring the improvement plans act
upon the underlying root cause.
Security
Our security program pr
otects people,
information, assets and critical business
processes, both on and of
f-site. We
updated the classification for security
incidents in 2021, creating four severity
levels (from 0 to 3 based on severity of
the impact of an incident). Incidents are
also separated into three categories –
crime against a person, property crime
and financial crime.
Globally
, there wer
e 160 security
incidents reported in 2021, br
oadly in
line with previous years. Four wer
e Level
3 (most severe events), of which the
most severe incident was the looting of
our manufacturing site in Umbogintwini
(South Africa), resulting fr
om organized
political unrest in the r
egion.
Theft and vandalism at our stores
repr
esented the highest incident
sub-type – similar to wider society
.
HSE&S management
foundation
Our company-wide HSE&S manage-
ment system is globally certified to ISO
14001 and OHSAS 18001 standards,
with ongoing transfer to ISO 45001.
It includes policies, procedur
es, best
practice and learnings. In 2021,
we updated the self-assessment
questionnaire used for continuous
improvement and audits.
HSE&S audits are performed in thr
ee-
year (for high hazard sites) to five-year
(other sites) cycles. Due to COVID-19,
we conducted the 2021 audit plan with
minor amendments, including changing
over to remote (55%) and/or hybrid
audits (35%) when it was not possible
for (all) auditors to visit a site.
Compliance assurance is a key HSE&S
priority
. It’
s particularly important for
ensuring our license to operate and
business continuity
, due to the fast-
changing regulatory envir
onment in
which we operate. We take a pr
oactive
approach to implementing necessary
changes, from both a risk mitigation and
advocacy perspective. We continue to
use a company-wide digital compliance
assurance process, which includes a
regulatory monitoring and alert system.
It also features a self-assessment tool,
which helps us to identify compliance
with existing regulatory frameworks and
stay up-to-date with the latest changes,
as well as enabling proactive r
esponses
to new requir
ements.
Safety Day 2021
We invest in visible safety leadership and initiatives to
foster employee engagement. During our 11
th
annual
Safety Day
, the theme was “Be human – Be safe”,
which focused on three key messages:
•
Everyone makes mistakes – they happen because
we’re human
•
W
e can design for error – we’ll work to limit the
consequences
•
Learning is vital for improvement – ask “what failed?”
rather than “who failed?”
Employees and contractor partners around the world took part in our 11
th
annual
Safety Day
. The theme in 2021 was “Be human – Be safe”. Various activities were
staged at our locations, with all the appropriate social distancing measures being
carefully observed.
37
AkzoNobel Report 2021
|
Sustainability statements
Responding to COVID-19
We assessed and r
esponded to changing
circumstances thr
oughout the year
. Our regional
and local response structur
e proved invaluable,
given the major regional dif
ferences regar
ding
the impact of COVID-19. Central health and
safety guidelines remained intact, supported by
our Behavior Based Safety (BBS) program. Our
guidelines were expanded by pr
omoting the need
for vaccination. We also supported our employees
in receiving the vaccine and gaining access to
adequate medical care in case of illness. In some
areas, lockdowns caused our staf
f to remain at
company premises overnight. In other areas,
return-to-office/site was intr
oduced in phases.
We continue to monitor conditions and make
adjustments where necessary
.
We’r
e also supporting local communities in urgent
need around the world. In Brazil, we donated
food baskets to underprivileged communities
struggling with unemployment. In Michigan,
US, we supported the cultivation of more than
5,000 pounds of produce to meet the high
demand for food. We also pr
ovided digital tools for
children in India to ensur
e they could access
online classes and continue to study while schools
were closed. Meanwhile, in the UK, we supported
ST
ARS (Sexual T
rauma and Recovery Services),
based in Dorset. ST
ARS offers support – such as
free counseling and workshops – to help educate
young people in schools, the vulnerable and
victims of sexual and domestic abuse, who have
been increasingly r
eaching out for support since
the start of the pandemic.
AKZONOBEL CARES
Caring for society and the communities
in which we operate is a vital part of
our global activity
. Through the social
projects we run under the AkzoNobel
Cares banner
, our AkzoNobel volunteers
work closely with partners around the
world to help transform communities
and make a positive impact. We aim to
initiate more than 1,000 pr
ojects through
AkzoNobel Cares and train mor
e
than 35,000 people in the community
between 2020 and 2025.
AkzoNobel Cares is focused on uplifting
and renovating communities thr
ough
our “Let’
s Colour” initiative, as well as
educating, mentoring and training future
generations, unlocking possibilities for
people who need them most.
In 2021, we staged 182 projects and
trained 11,193 people in the community
in various disciplines, such as painting,
entrepr
eneurship and soft skills.
“Let’
s Colour”
Through our “Let’
s Colour” program,
we continued to transform lives by
revitalizing communities and making
living spaces more liveable and inspiring.
In 2021, we donated 237,000 liters
of paint to renovate community living
spaces in 31 countries, with more than
1,100 employees volunteering their
time. In one of the projects, we used the
transformative power of paint to help
residents of Manavgat in T
urkey rebuild
their lives after the area was devastated
by forest fir
es. In the US,
AkzoNobel Cares
Global partners:
Renovation
Inspire, uplift and renovate
communities
“Let’
s Colour” program
for paints and coatings
Education
Educate, (online) mentor
and train future generations
Other
education
AkzoNobel Cares
Number of projects 2020-2021
Number of people trained 2020-2021
Ambition 2020-2025
Ambition 2020-2025
The transformative power of paint helped residents of Manavgat in T
urkey to
rebuild their lives after the area was devastated by for
est fires. Our Marshall
brand supported efforts to restor
e many of the homes and buildings that were
badly damaged by donating 10,000 liters of paint. As well as being used on
398 houses, the paint helped to revive various other buildings, such as schools
and art centers. T
wenty volunteers from AkzoNobel were also involved in the
“Let’
s Colour” project.
352
13,862
1,000
35,000
Sustainability statements
|
AkzoNobel Report 2021
38
The effects of COVID-19 ar
ound the
world brought a new r
eality and meant
there wer
e other potential human rights
issues we needed to address. As a
result, and in line with the United Nations
Guiding Principles to continuously
assess a company’
s salient human
rights issues, we finalized our second
in-depth salient human rights issues
assessment. While we respect all
human rights equally
, we prioritized
certain issues based on their severity
and likelihood. These were established
following internal data analysis, exter
nal
trends and engagement with our
stakeholders. For example, we held two
(digital) workshops in China and India
with external stakeholders, including
NGO repr
esentatives and human rights
experts.
Our salient human rights issues remain
much the same, although we better
understand in which part(s) of the value
chain the highest risks could occur
, and
which ones will shape our main focus.
For example, “Negative impact on local
communities” is now a stand-alone issue
instead of a sub-issue under Health
and Safety (the negative impacts can
be broader than just health and safety).
Our next steps include assessing our
human rights initiatives and addressing
them together with AkzoNobel’
s other
functions and businesses. We’ve also
created a new
, more diverse Human
Rights Committee, with a more r
obust
governance (see Integrity and com-
pliance management), and updated our
human rights position statement.
Health and safety
Our top priority is the safety of our
people, those we work with and those
who our products ar
e offered to. This
means we carry out due diligence on
thousands of raw materials – some of
which are high risk – looking at how
they can impact our people, our sites
and the communities around them. In
2021, building on the existing Priority
Substances Program and extending the
HUMAN RIGHTS
we added color and revived the
downtown area of Nashville, T
ennessee,
following the extensive damage caused
by the Christmas Day explosion in 2020
(see page 19).
SOS Children’
s Villages
We also continued our partnership with
SOS Children’
s Villages for a fifth year
.
As a member of the Y
outhCan! platform,
we helped to create mor
e employment
opportunities for 2,236 young people at
risk by providing training in painting and
offering soft skills pr
ograms, mentor and
traineeships. The living spaces for SOS
beneficiaries were also r
enewed and
improved. In addition, we welcomed four
more countries to our global partnership,
bringing the total number of countries
involved to 23.
Education Fund
Through our Education Fund, we
continued to support Plan International’
s
gender
-transformative STEM (Science,
T
echnology
, Engineering and Mathe-
matics) education in rural China.
AkzoNobel colleagues participated
in online sessions with the students,
enabling them to benefit from insights
and experiences they wouldn’t gain at
school. The girls in particular were able
to meet female role models, who gave
them extra motivation to pursue a career
of their own choosing.
In India, we continued to run the
AkzoNobel Paint Academy in four
cities, offering skills development to
young people in need. Once the training
is completed, participants will have
opportunities to gain employment with
paint contractors and automotive body
shops. During 2021, we also continued
to promote diversity and inclusion
focused skill training to disadvantaged
groups and sections of society in or
der
to help bridge inequality
. For example,
we gave training to women and found
them jobs as painters. Another project
involved training prisoners and inmates
of juvenile homes, with a number of
them having gone on to start new
careers as painters.
With the help of our T
aubmans brand, a sprawling wall in Port Moresby
, Papua New Guinea, was completely transformed.
The 100-meter
-long concrete surface was brought to life by 13 AkzoNobel volunteers and 25 young people we trained in
the local community
. They used 212 liters of paint during the “Let’
s Colour” project, creating a colorful mural with modern,
traditional and cultural motifs.
Salient human rights issues
Upstream supply
chain
Own
operations
Logistics
Downstream
(customers, end
users)
Health and safety
l
l
l
l
Working conditions
l
l
l
l
Discrimination and harassment
l
Negative impacts on local communities
l
l
Modern slavery
l
l
39
AkzoNobel Report 2021
|
Sustainability statements
SUST
AINABILITY
focus to other sustainability-related raw
material topics, we initiated the Raw
Material Sustainability Group (RMSG).
W
orking conditions
We take our commitment to pr
oviding
good working conditions seriously
, both
for our employees and those visiting our
sites. For example, we’re intr
oducing our
own Global Working Hours standar
d,
ensuring that everywhere in the world,
we’re working a safe number of hours,
even if local laws allow people to work
longer
. We’r
e also reinforcing our ef
forts
to integrate water
, sanitation and hygiene
assessments and audits into our Health,
Safety and Security suite to ensure good
sanitary conditions, the importance
of which has been re-emphasized by
COVID-19.
Discrimination and
harassment
Everyone should be
comfortable in their working
environment and feel they’r
e
treated with dignity and
respect. In 2021, we signed
up to the UN Women’
s
Empowerment Principles.
Our plans for the immediate
future include r
olling out
a global “trusted person”
network, which involves
having a trusted person
at each location with over
100 employees. We’r
e also
aiming for at least 90% of
online employees to complete
inclusive behavior training and
70% of sites to have run our
inclusive behavior workshop.
Impact on local
communities
We aim to be a good
neighbor and contribute to the
well-being of communities.
We work closely with local
neighborhoods to manage
the social impact of our
business activities, address
any concerns about our
operations and enhance
the benefits we’re able to bring. W
e’re
currently conducting due diligence into
our sites to identify where we have
risks in order to addr
ess any possible
negative impact.
Modern slavery
We have zer
o tolerance for moder
n
slavery
, such as child or forced labor
,
and conduct relevant due diligence into
our high risk supply chains. In 2021,
we conducted in-depth resear
ch into
our raw materials portfolio and added
barytes, calcium carbonate, copper
,
fluorspar and talcum to our human rights
due diligence in the supply chain. These
were added to cobalt, mica minerals
and tin, which were alr
eady in scope.
We’ve surveyed all suppliers that dir
ectly
,
or indirectly
, supply us these materials.
By the end of the year
, we had an 85%
response rate. For cobalt and tin, we
surveyed all 132 identified suppliers,
using templates from the Responsible
Minerals Initiative. Of those suppliers
who confirmed using high risk materials
necessary for the functionality of the
product, 90% disclosed their smelters. In
total, 87% of these smelters were either
listed as active or conformant smelters
in the Responsible Minerals Assurance
Process. Suppliers with a “conflict-fr
ee
statement”, but who didn’t disclose the
smelters in their supply chain, haven’t
been included, since our due diligence is
based on the Organization for Economic
Cooperation and Development Guidance
for Responsible Mineral Supply Chains.
For the other materials, a third party sent
out surveys to 180 suppliers to increase
transparency of these supply chains. The
results gave us further insight into our
supply chain complexity and risks. We
can now set up new actions, such as
planning mine audits where insuf
ficient
controls seem to be in place.
Note: Not all of these goods are purchased dir
ectly
, but are
contained in the raw materials we buy
.
Membership of Responsible Mica Initiative formalized
T
owards the end of the year
, we
formalized our partnership with
the Responsible Mica Initiative
(RMI), having been one of the
founders when it was launched
in 2017. The RMI’
s mission is to
establish a fair
, responsible and
sustainable mica supply chain
in India that’
s free of child labor
by 2030.
Used in a wide range of
industries, mica minerals are
mined extensively in India,
where a variety of factors
contribute to poor working
conditions, including the use
of child labor
. Our leverage
to change the situation is
somewhat limited, due to our
position in the supply chain –
several steps away from the
mica mines and processing
units – and the relatively
small amount of indirect mica
sourcing.
Rather than deciding to stop
sourcing pr
oducts that contain
mica from India – ther
eby
eliminating the risk of indirectly
sourcing pr
oducts containing
mica mined and processed
under poor working conditions
– we opted to increase our
leverage through our RMI
membership and do our utmost
to bring about change.
Following the RMI’
s pilot year
,
we continued to focus on
the issue and a commitment
was made to conduct serious
due diligence and look for
creative ways to contribute to
the initiative – which has now
resulted in full membership.
“Formalizing our membership
demonstrates that we take
our responsibility to r
espect
human rights across our value
chain very seriously and we’re
determined to be part of the
solution,” says Anja V
erbeke,
AkzoNobel’
s Global Director of
Integrity and Compliance.
AkzoNobel closely monitors
how mica is sourced and works
hard to ensur
e that the supply
chain which uses the mineral
is made transparent, traceable
and sustainable.
Sustainability statements
|
AkzoNobel Report 2021
40
40
One of the year’
s most significant
developments in our ongoing drive to
help tackle climate change was gaining
official validation for our science-based
sustainability targets from the Science
Based T
argets initiative (SBTi).
SBT
i approval for carbon
reduction target
It confirmed our status as the first paints and coatings
company to receive this appr
oval and is a clear signal
of our intent.
The commitment we’ve made covers the full value chain
and is aligned with the Paris Agreement – which aims to
limit global warming and ensure that global temperatur
e
rise doesn’t exceed 1.5˚C above pr
e-industrial levels.
This includes our own operations (Scope 1 and 2), as
well as Scope 3 upstream and downstr
eam. Scope 3
covers purchased goods and services, application and
use of our products, and end-of-life.
We set the carbon r
eduction target for our own
operations in early 2020 – we’ve targeted a
50% reduction by 2030 – and r
emain well on track,
having reduced our footprint by 21% in 2021
(baseline 2018).
“We’r
e proud to be the first company in our industry to
receive SBTi approval for our carbon reduction target,”
says AkzoNobel CEO, Thierry V
anlancker
. “It’
s a clear
signal that we’re committed to taking str
onger action
to tackle climate change and will be an enormous
innovation driver for what we do in our supply chain
and with our customers.
“Successfully combating the impact of climate change
is everyone’
s responsibility
. So we have to work
with all our value chain partners to transition to lower
carbon alternatives.”
We’r
e already looking for innovative ways to tackle the
issue and have a clear plan to reach our Scope 1 and
2 commitment by transitioning to 100% renewable
electricity and reducing our energy by 30% compar
ed
with 2018.
For Scope 3, we’re taking action by incr
easing our
sustainable solutions, while our pioneering Paint the
Future collaborative ecosystem appr
oach continues
to gather momentum. It’
s focused on engaging
with suppliers and customers around the world to
collectively find solutions to the challenge of cutting
carbon emissions by 50%.
Raw materials
INDIRECT
EMISSIONS
KEY SUPPLIER
SCOPE 3 UPSTREAM
(see Responsible
procurement on page 44)
SBTi target
1.5°
C*
INDIRECT EMISSIONS
CUSTOMER
SCOPE 3 DOWNSTREAM
(see Paint on page 47)
* In line with Paris Agreement.
Distribution
Applicator
End-of-life
SBTi target
1.5°
C*
OWN
OPERA
TIONS
AKZONOBEL
SCOPE 1 and
SCOPE 2
(see Planet on page 41)
Factory
SBTi target
1.5°
C*
HIGHLIGHT
41
AkzoNobel Report 2021
|
Sustainability statements
We’r
e committed to halving our carbon
emissions by 2030, so we’re constantly
striving to improve our energy ef
ficiency
and conversion to renewable electricity
.
In 2021, we reduced carbon emissions
in our operations by 3% (relative) versus
2020, mainly through conversion to
renewable electricity and footprint
optimization. This means we’ve achieved
a reduction of 21% compar
ed with the
2018 baseline – bringing us closer to our
2025 interim ambition of 25%.
Renewable electricity
By 2030, we aim to have shifted to 100%
renewable electricity at all our locations.
We’ve been installing solar panels at
multiple sites and purchasing r
enewable
electricity with certificates of origin. Our
current total shar
e of renewable electricity
use is 45% globally
, approaching our
2025 interim target of 50%. In total,
44 of our locations now use 100%
renewable electricity
, with 23 sites using
solar panels as a supplementary source
of energy
. We plan to incr
ease this
number in the near future.
Energy reduction
We’r
e aiming to cut our energy use by
30% by 2030 (baseline 2018). Initiatives
such as using LED lighting systems,
replacing chillers, optimizing compr
essed
air systems and shutdown management
have contributed greatly to this alr
eady
.
So far
, we’ve reduced energy per ton
of production by 1% (r
elative) versus
our 2018 levels. In 2021, our overall
relative energy use r
emained at 1.83 TJ
per ton of production, compar
ed with
2020. However
, due to the centralization
of electricity procur
ement, part of
the stores organization was elevated
above the materiality threshold and
was therefor
e included in our energy
reporting as of 2021. This r
esulted in an
increase of 3.5%, leading to the r
eported
1.89 TJ per ton of production. Structural
energy efficiency impr
ovementswere
offset by adverse ef
fects (including
product mix and inef
ficiencies due to
raw material shortages), resulting in a
0.5% net increase. W
e also installed
thermal oxidizers to reduce VOC
emissions, as well as solvent recovery
units to reduce our waste. Although
these improvement pr
ojects led to an
increase in energy use, they positively
impacted our VOC emissions reduction
and waste circularity (see W
aste
management).
Driving energy efficiency and
using
more r
enewable electricity
across all our sites globally will
have a significant impact on
reducing our carbon emissions
from our own operations – and
will ultimately help to mitigate
climate change.
V
olatile organic
compounds
The production of paints and
coatings means we have
emissions of volatile organic
compounds (VOCs), which is
included in our cradle-to-grave
carbon footprint. We achieved
a 6% (relative) impr
ovement
versus 2020 in VOC emissions
per ton of product in our
own operations, and a total
of 41% (relative) versus the
2018 baseline.
PLANET
W
e challenge
ourselves and
our partners ever
y
day to be better
global citizens and
protect the future
of our planet.
CARBON EMISSIONS IN OWN
OPERA
TIONS
100% renewable electricity in Europe in 2022
Our ambition to transition to
100% renewable electricity
by 2030 is progr
essing well,
with our operations in Europe
having fully switched over by
January 2022.
Converting to renewable
electricity is key to our
overall ambition of halving
carbon emissions in our own
operations by 2030.
We first announced our
ambition in 2020, with several
European countries among
the first to achieve the 100%
milestone, including the
Netherlands, the UK, Belgium,
Estonia, Ireland, Spain,
Germany and Sweden. We’ve
since added more countries to
the list, notably France, Poland,
Russia and Italy
.
Reaching 100% renewable
electricity in Europe brings our
total share to 45%, close to
meeting our 2025 interim global
target of 50%.
* Compared with 2018 baseline.
Energy reduction*
2021: 1% reduction
Ambition 2030: 30%
Circular waste
2021: 59%
Ambition 2030: 100%
W
ater reuse at water intensive sites
2021: 30% of sites
Ambition 2030: 100%
Carbon reduction (own operations)*
2021: 21% reduction
Ambition 2030: 50%
Renewable electricity use
2021: 45%
Ambition 2030: 100%
Own
operations
Circular use
of materials
(third parties)
Raw
materials
Product
By-product
Waste
35.1
Reusable
31.4*
Non-reusable
66.5
9.5
3,348
76
44
.
6
Material flow
in kilotons
Sustainability statements
|
AkzoNobel Report 2021
42
T
otal greenhouse gas emissions made up of direct emissions from pr
ocesses and
combustion at our facilities and indirect emissions from pur
chased energy
.
Energy use
in 1000 TJ
Energy use
GJ per ton of production
2021
2020
2019
2018
6.0
6.2
5.7
6.3
1.88
1.
83
1.
89
1.91
2021
2020
2019
2018
75
73
71
89
0.06
0.17
0.06
0.17
0.06
0.18
0.06
0.23
Greenhouse gas emissions
in million tons
Direct CO
2
(e) (Scope 1)
kg CO
2
(e) per ton of production
Indirect CO
2
(e) (Scope 2)
We’r
e on a jour
ney to becoming a zero
waste company by 2030, which involves
focusing on both waste and water
. We
continue to promote a cir
cular economy
as part of our focus on reducing waste in
our manufacturing processes, and we’r
e
committed to reusing and r
ecycling
obsolete materials.
For waste, this means we’re well on our
way to zero waste to landfill (defined as
<1% of total waste). In 2021, our waste
to landfill reduced by 77% (absolute)
versus 2020 (1,500 tons) to 2% of total
waste in 2021. In total, there’
s been an
87% (absolute) reduction in waste to
landfill versus the 2018 baseline.
In 2021, we achieved circular use for
around 59% of our obsolete materials.
We’ve identified new outlets for materials
that would otherwise be disposed of
as waste. Overall, this has resulted in
waste avoidance of 9,460 tons, other
-
wise our total waste would be 14%
(absolute) higher
.
Our relative waste (kg/ton of material
produced) didn’
t improve (0%), and as a
result, we didn’
t meet our 2021 inter
nal
goal of 5% overall. The reasons for this
include new acquisitions – which may
sometimes need to align with corporate
standards – raw materials shortages
(which can lead to manufacturing
inefficiencies), and operational and
supply chain challenges. We’r
e driving
various global programs, such as wash
water recycling and solvent r
ecovery
units, to further reduce our waste.
Our ambition is to reuse water at all
our most water intensive sites. We
mainly use water for cooling (77%,
chemically unchanged) at a handful of
our production locations in low water
risk areas. W
ater is also used as a raw
material in production and for cleaning.
A site is considered water intensive if
it uses more than 15,000m
3
per year
,
excluding cooling water
. Currently
,
we have 47 sites that are consider
ed
water intensive per the definition,
WASTE AND W
A
TER
MANAGEMENT
SUST
AINABILITY
2021 numbers include a baseline shift of 199 TJ, or 3.5%, due to central procurement
of electricity
, elevating part of the stores organization above the materiality level.
*
Landfill
represents
1.5 kilotons of
the 31.4 kilotons
of non-reusable
waste.
Water flow
in million m
3
(total for AkzoNobel)
1.1
Other
1.1
Product
1.9
Potable water
1.3
Groundwater
6.4
7.4*
Surface water
Own
operations
43
AkzoNobel Report 2021
|
Sustainability statements
Waste means any substance or object arising fr
om our routine operations which
we discard or intend to discard, or we ar
e required to discard.
Fresh water use
in million m
3
Fresh water use
m
3
per ton of production
2021
2020
2019
2018
10
9
8
9
2.5
2.9
2.9
2.9
2021
2020
2019
2018
21.0
20.0
19.9
21.0
35
31
32
30
34
33
33
34
Fresh water use is the sum of the intake of groundwater
, surface water
and potable water
.
T
otal waste
in kilotons
T
otal reusable waste
T
otal kg per ton of production
T
otal non-reusable waste
As part of our global “Let’
s Colour” program, we teamed up with a community of mural artists in
Bandung, Indonesia, to paint the walls of the Saparua Sports Center
. The venue is a cultural heritage
hub for sports, creativity
, arts and music.
*
Primarily cooling
water
Climate change adaptation and
water risk
As recommended by the T
ask Force on Climate-r
elated
Financial Disclosures (TCFD), we continue to monitor our
risks and opportunities related to climate change. As a
company
, we’re exposed to physical risks – such as
those associated with water scarcity
, flooding and
weather events. We also consider transitional risks that
can lead to changes in technology
, market dynamics
and regulations.
For the last six years, we’ve implemented an internal carbon
price for investment decisions, anticipating the impact of any
future carbon pricing. W
e have sustainability assessments
in place for investment projects, including water risk
assessment for new locations. Annually
, we also quantify
the potential transitional risk impact of any global carbon
taxation by multiplying our carbon footprint with the
internal carbon price. The financial impact is well below 1%
of revenues.
We continue to assess risks r
elated to water
. We use
the Aqueduct water risk atlas developed by the World
Resources Institute to assess the level of risk r
elated to
water at our production locations. Ar
ound 10% of our sites
are in ar
eas rated “extremely high” for overall water risk (with
standard weighting factors). Aqueduct is also used to assess
current climate r
elated risks (coastal flooding, river flooding
and drought). Ar
ound 14% of our locations are in areas rated
“extremely high”. These account for 3% of our fr
esh water
use.
Future risks for 2030 wer
e also evaluated using Aqueduct
(water stress, business as usual). Ar
ound 25% of our
locations are in ar
eas rated “extremely high”, accounting
for 7% of our fresh water use. All locations confirmed as
“extremely high” in any of these assessments will develop a
risk mitigation plan.
We continued to assess our suppliers in 2021 and
challenged them on their water risk, particularly in regions
affected by river or coastal flooding. W
e’re working with
them to look for solutions to these challenges.
Sustainability statements
|
AkzoNobel Report 2021
44
SUST
AINABILITY
repr
esenting 75% of our total freshwater
consumption. If relative fr
eshwater
consumption is less than 250 liters per
ton of product, we consider water r
euse
is in place (best-in-class water intensity
level within AkzoNobel, only reached
through water management and r
euse).
In 2021, this was achieved by 14 out of
those 47 sites.
We’r
e improving by focusing on
recycling and r
eusing process water
by treating our wastewater on-site,
or via third parties. W
e also adapt
formulations, enabling us to reuse water
and reduce our fr
eshwater consumption,
and we’re moving towar
ds waterless
cleaning to help reduce our fr
eshwater
consumption.
T
wo major projects to install around 8,000 solar panels were completed at sites in China – helping
to accelerate our ambition of cutting carbon emissions in half by 2030. The panels were installed at
two of our Decorative Paints plants – more than 5,000 in Shanghai and almost 3,000 in Guangzhou –
representing further pr
ogress for our greener manufacturing plans.
RESPONSIBLE
PROCUREMENT
We continue to work closely with our
suppliers to create value and conti-
nuously improve both our sustainability
and their own. Collaborating and
innovating with our suppliers is key to
achieving our ambition to reduce
carbon emissions across the whole
value chain (see Carbon emissions in
our value chain).
In 2021, we continued to assess and
improve our suppliers’ sustainability
practices using programs and partners
provided by T
ogether for Sustainability
(TfS). Since 2019, we’ve lowered our
spend threshold fr
om €1 million to
€250,000 for our multi-year supplier
sustainability risk program.
We have kept suppliers in the
sustainability assessment program,
even if their spend temporarily dropped
below our spend threshold, due to the
impact of COVID-19. We also added
logistics providers and suppliers in low
risk regions, but with significant spend
45
AkzoNobel Report 2021
|
Sustainability statements
and business impact. As a result, we
now have 1,028 suppliers identified
for the program (2020: 885), covering
81% of our procur
ement spend. One
focus area that came out of the audits
was suppliers’ occupational health
and safety
, on which we made good
progr
ess to improve their performance.
Building on our achievements, we intend
to continue increasing the number of
suppliers identified for our sustainability
program. Our ambition is to have
1,500 suppliers participating in the
program by 2025. W
e’ll also continue
to increase buyers’ and suppliers’
capabilities through the new TfS
Capability Building program.
We continued to use our existing
Supplier Sustainability Balanced Score-
card (SSBS) to collect eco-perfor
mance
KPIs (i.e. waste, energy
, greenhouse gas
emissions) from our suppliers to see
if they’re moving in the right dir
ection
when it comes to meeting their own
sustainability goals. We intend to
increase the number of suppliers in our
SSBS to 100 over the next few years
and will work with them to achieve our
SBTi targets (see page 40).
In 2021, we informed the top
100 suppliers who contribute to our
Scope 3 upstream emissions about our
ambition to reduce carbon emissions
and invited them to collaborate on our
common goal. We followed this up with
a survey to evaluate their maturity
.
We will continue this work during 2022.
Business Partner Code of
Conduct
We expect our business partners to
follow our core values of safety
, integrity
and sustainability
, as specified in our
Business Partner Code of Conduct.
Suppliers sign the code to confirm
their compliance with environmental,
social, human rights and governance
requir
ements. Signatories cover 99%
of the product r
elated (PR) spend
and 89% of the non-product r
elated
(NPR) spend.
Suppliers in sustainability
program
in %
In line with our expectations
Under development
Baseline of 1,028 suppliers (2020: 885). Increase of
baseline due to addition of high spend suppliers and
logistics providers.
This is the dramatic Pão de Açúcar
cable car in Rio de Janeiro, Brazil, which
takes visitors to the top of Sugarloaf
Mountain. As part of a “Let’
s Colour”
project to portray the biodiversity of the
surrounding landscape, our Coral brand
was used to create colorful paintings
of plants and animals on the three
cable car stations. Artist Bruno Big
used more than 540 liters of paint
in 40 different colors, with the art
also serving as a means of raising
environmental awareness.
2021
2020
2019
47
18
51
24
57
27
46
CASE STUDY
Building more resilience
Given that the trend for urbanization will continue
unabated, the way that new buildings are constructed
– and the capacity for existing buildings to be adapted
and renovated – continue to cr
eate new opportunities.
According to the W
orld Green Building Council
(WGBC), the carbon emissions generated by operating
buildings, along with the carbon embodied in building
materials and activities, account for almost a third of
global carbon emissions.
Why does this interest a company like AkzoNobel?
Well, we’r
e a major supplier of sustainable paints and
coatings to the construction industry
. We pr
ovide one
of the largest portfolios of paints and coatings solutions
for green buildings, including powder coatings, coil
coatings, protective coatings and wood coatings
technologies. It means we can make an important
contribution to the ongoing transformation of the built
environment, which aims to r
educe the carbon footprint
of buildings, increase cir
cularity in buildings and make
them healthier places to live and work.
Our extensive portfolio of sustainable solutions is
qualified for use on green buildings in countries
around the world. The pr
oducts we supply can help in
achieving green building certifications (or gr
een labels)
such as LEED, WELL and BREEAM. There ar
e three
broad ar
eas where we really make a dif
ference. We
supply products that have an impact on:
• Climate action – providing products that enable lower
energy consumption in the application/use phase
and contain lower embodied carbon
• Health and well-being – bringing health and well-
being benefits to users of buildings by
, for example,
improving indoor air quality
• Circularity – enabling waste reduction, using less
energy and resour
ces, using more renewable
and reused materials, and of
fering longer
-lasting
performance
We’r
e an active partner of the WGBC, driving the
development of more gr
een and sustainable buildings
for everyone. As the first paints and coatings company
to have its science-based sustainability targets officially
validated by the Science Based T
argets initiative (SBT
i),
our commitment to building resilience for climate,
people and economies is clear
.
Ultimately
, it’
s all about using our pioneering spirit and
centuries of paints and coatings expertise to deliver the
most sustainable solutions for our customers and the
world around us.
Y
ou can learn more about our commitment to green
buildings on our website.
Our world is changing – and so is the way
we look at buildings. Recent global events
have impacted how we use them, while
population expansion and economic growth
will inevitably mean we’ll need more of them.
47
AkzoNobel Report 2021
|
Sustainability statements
P
AINT
W
e keep push-
ing boundaries
to develop
pioneering
paint solutions
that make a
world of
difference.
In 2020, we set an ambition to increase
revenue fr
om sustainable solutions to
more than 50% by 2030. W
e decided
to focus not only on our eco-premium
solutions that offer significantly better
sustainability benefits compared with
mainstream solutions, but to focus on
all solutions that bring sustainability
benefits to our customers. We call this
overall category “Sustainable solutions”.
We changed focus due to the global
growth in market demand for mor
e
sustainable solutions.
By focusing on the
sustainability benefits we
offer
, we continue to influence
the growing acceptance of
more sustainable solutions
in our markets. We work
closely with our suppliers
and customers to deliver
these products and services, while
ensuring economic value at every stage.
We identify the sustainability value
we bring to our customers by using
the Sustainable Product Portfolio
Assessment (SPP
A) framework. We
co-developed the SPP
A with other
chemical companies and the World
Business Council for Sustainable
Development (WBCSD). It’
s now the
leading sustainable portfolio framework
tool in the chemical industry
. The SPP
A
gives a holistic view of the sustainability
characteristics of our product portfolio.
T
ogether with our customer
-focused
product stewar
dship process, it enables
value-selling strategies tailored to
specific customer needs. So we can
take a harmonized approach in our
portfolio management, creating a unique
baseline for future portfolio ambitions.
Our products fall into one of thr
ee
categories:
Sustainable solutions,
Performers, T
ransitioners (see visual at
bottom of page).
A sustainable solution is a product
that meets at least one of the following
criteria.
SUST
AINABLE
SOLUTIONS
Health and
well-being
Reduced carbon
and energy
Less
waste
Longer-lasting
performance
Reduce, reuse
and renew
* Baseline 2018.
Sustainable
solutions
– Products that pr
ovide
sustainability advantages to our customers
Performers
– Products that have no immediate
negative or positive sustainability impact
T
ransitioners
– Products that have
known sustainability risks
Recycled plastic packaging
Ambition 2025: 50% recycled content
to be used in plastic packaging by
Deco Europe
Carbon reduction
Ambition 2030: 50%* carbon reduction in
the full value chain
Sustainable solutions
Ambition 2030: More than 50% of r
evenue
from sustainable solutions
2021: 39%
W
e continue to
influence the growing
acceptance of
more sustainable
solutions
Sustainability statements
|
AkzoNobel Report 2021
48
A sustainable solution does not adversely
affect any of these sustainability criteria
throughout the value chain.
In 2021, 39% of our revenue came fr
om
sustainable solutions. We launched
new products with clear sustainability
benefits and further reduced the use
of chemical substances of concern.
Several examples of sustainable
solutions can be found in the Strategy
and operations section. 74% of our
total portfolio has been assessed
according to the SPP
A methodology
,
the remainder is extrapolated, based
on the sustainable solutions percentage
of the relevant business unit. During
the year
, our product management
teams continued to work on the SPP
A
categorization, while focusing on new
product developments.
Product stewar
dship is our approach
to ensuring product safety and its
sustainability aspects are consider
ed
throughout the value chain –
from raw material extraction,
R&D, manufacturing, transport,
marketing and application,
through to end-of-life.
Our Product Stewar
dship
Continuous Improvement T
ool
(PSCIT) helps monitor and drive
continuous improvement.
Our highly acclaimed Priority
Substance Program continues
to help us identify and
control the use of hazar
dous
substances. It’
s embedded in
our processes and ensur
es
we’re ahead of any changes to
regulations. The governance
of the program is assur
ed by
the Raw Material Sustainability
Group (RMSG).
A training program continues to
be developed and delivered to
all relevant functions thr
oughout
AkzoNobel to ensure everyone
is aware of priority substances
and how they impact our
own operations.
A new initiative from our Dulux Decorator Centre network in the UK is helping to make
a real differ
ence to disadvantaged young people while bringing new talent into the
coatings industry
. A range of jobs has been made exclusively available for those aged
18 to 24 who are facing long-term unemployment. Launched in partnership with The
Prince’
s T
rust Kickstart program, the initiative is also boosting the decorating trade,
which has suffered a skills shortage in r
ecent years.
Royal recognition for our sustainability leadership
A major new sustainability
award was pr
esented to
AkzoNobel by His Royal
Highness The Prince of W
ales
at the COP26 summit held in
Glasgow
, Scotland.
We wer
e one of the first
recipients of the T
erra Carta
Seal, which recognizes global
companies that are driving
innovation and demonstrating
their commitment to, and
momentum towards, the
creation of genuinely
sustainable markets.
The award is part of the T
erra
Carta, a recovery plan for
nature, people and planet
which was introduced in early
2021 through HRH The Prince
of W
ales’ Sustainable Markets
Initiative. AkzoNobel was
the only paints and coatings
company to receive the honor
.
“Having our efforts r
ecognized
by the award of the T
erra Carta
Seal is a source of gr
eat pride
for everyone in our company
,”
said CEO Thierry V
anlancker
,
who was in Glasgow to
receive the honor
. “It’
s a clear
endorsement of all the work
we’re doing acr
oss AkzoNobel
and everything we’ve achieved
so far
.
“It also confirms the vital role
that paints and coatings can
play when you combine the
precious and irr
eplaceable
power of nature with the
transformative power of paint
– which lies at the heart of
what we do for people and
the environment.”
SUST
AINABILITY
CARBON EMISSIONS
IN OUR V
ALUE CHAIN
Climate change mitigation is an
integral part of our approach to
sustainable business and plays
an important role in our company
strategy
. It brings risks, but also
creates opportunities. In 2021, we
announced an ambitious target of
reducing carbon emissions acr
oss
our full value chain by 50% by 2030,
taking 2018 as our baseline.
Our Scope 3 carbon footprint is
currently at 14.5 million tons.
It includes:
• Upstream: Category 1 –
purchased goods and services
(including packaging)
• Downstream: Category 10 –
pro
cessing of sold products;
Category 11 – use of sold
products; Category 12 – end-of-
life treatment of sold pr
oducts
and VOC emissions in
processing/use
49
AkzoNobel Report 2021
|
Sustainability statements
While we continue to make investments
and launch new products, it will be
several years before we r
eally start to
see the impact. So we expect to deliver
the biggest benefits and improvements
in the second half of the decade.
Our ambitions are aligned with the Paris
Agreement, which aims to limit climate
change and ensure the global tempera-
ture doesn’
t rise more than 1.5˚C above
pre-industrial levels. Appr
oved by the
Science Based T
argets initiative (SBT
i),
this will help to drive our innovation and
collaboration with our value chain part-
ners, including customers and suppliers.
The innovation and development of
our sustainable solutions plays a key
role. W
e’re able to offer our customers
– and their customers in turn – sustai
n-
able solutions that enable them to
reduce their own emissions and use
products with a lower carbon footprint.
Developing these sustainable solutions
and services involves the vast majority
of our 2,699 people in RD&I teams
and of our €230 million innovation
investments.
In 2021, we continued to focus on
product carbon footprint assessment,
helping our customers to analyze and
reduce their own carbon footprints.
We’r
e encouraging all our value chain
partners to transition to the use of
renewable energy sour
ces and work
with us to reduce the carbon emissions
from VOCs and fr
om the application
and use of our products, and to
increase the use of r
enewable raw
materials.
RECYCLED CONTENT
IN P
ACKAGING
All the pieces fell perfectly into place
when our Inca brand supported a
project to celebrate diversity in Uruguay
.
Artist Ximena Fernández Castro
used our products to paint a colorful
puzzle mural onto a wall surrounding
a children’
s play area in the La
Blanqueada district of Montevideo.
The “Let’
s Colour” project was promoted
by the local municipality
. A great way
to use color to communicate an
important message.
One of our goals in becoming more
circular is to use at least 50% r
ecycled
content in the plastic packaging used
by our Decorative Paints Europe
business by 2025. We’r
e initially
focusing on this particular business as
more than half of our plastic packaging
is used in this area of our activities.
We’ve continuously impr
oved our
key plastic packs in recent years. By
working together with our packaging
suppliers, we’ve been able to achieve
up to 70% recycled content in our
key packs without increasing the
packaging weight or reducing its
performance. We’ve started to r
oll
out this recycled content in our
plastic packaging in various European
markets.
In 2022, we’ll accelerate the
implementation of plastic packaging
containing recycled content together
with our suppliers.
W
e’re encouraging all our
v
alue chain partners to
transition to more sustainable
products and commit to our
SBT
i target.
Sustainability statements
|
AkzoNobel Report 2021
50
Managing
sustainability
Materiality matrix
People
Planet
Paint
Importance for AkzoNobel
Medium
Low
High
Medium
Low
High
Importance for stakeholders
A
E
H
C
F
G
J
B
D
I
T
opic
Report 2021
A
Climate change adaptation
Climate change adaptation and water risk
B
Diverse, inclusive and
healthy organization
Employees
C
Emissions and energy
Carbon emissions in own operations and
carbon emissions in our value chain
D
Health and safety
employees and customers
Health and safety
E
Human rights
Human rights
F
Sustainable product
portfolio
Sustainable solutions
G
Community involvement
AkzoNobel Cares
H
Materials and waste
Waste and water management
I
Responsible procurement
Responsible procurement
J
Water and wastewater
Waste and water management
The Executive Committee is
responsible for incorporating our
sustainability agenda into the
company strateg
y and monitoring
the performance of each business
through the Operational Control
Cyc
le.
Given our focus on
sustainability
,
o
verall ownership
of sustainability is with the CEO
.
Materiality assessment
We use the principle of materiality to
review our strategic priorities and assess
the topics included in the Sustainability
statements of this Report 2021. During
2021, we updated the methodology to
determine and prioritize those topics
most material to our company and our
stakeholders. We’ve determined the
most material topics for a company
in our industry
, based on the material
topics identified by reporting frameworks
(e.g. GRI and SASB) and sustainability
indexes (e.g. EcoV
adis, Sustainalytics).
The internal and exter
nal importance
for each of these material topics are
determined and validated annually and
reported in our annual r
eport. More
details can be found on our website.
Based on the assessment to determine
the most material topics for our industry
,
biodiversity and land use do not show
as a material topic. Nevertheless,
we recognize the importance of this
in society
. We continue to disclose
metrics related to biodiversity – such
as emissions (carbon, NOx, SOx, and
VOC) and pollutant emissions (COD) –
on our website and in our annual report.
We continue to further investigate the
materiality of biodiversity and land use.
Reporting principles and
frameworks
When combining disclosures in this
Report 2021 with disclosures on our
website, we report in accor
dance with
2021 GRI standards. W
e’re also in
the process of fully implementing the
recommendation of the T
ask Force on
Climate-Related Financial Disclosures
(TCFD) and the World Economic Forum
(WEF). In addition to an index table
for GRI, TCFD and WEF
, we provide
an index table on the Sustainability
Accounting Standards Boar
d (SASB)
on our website.
We use our internally developed
reporting principles to make our
reporting mor
e precise and better
aligned with our business and
operations. They are aligned with
the Global Reporting Initiative (GRI)
standards. The complete r
eporting
principles can be found on our website,
while a summary is included in the
Appendix of this Report 2021.
SUST
AINABILITY
51
AkzoNobel Report 2021
|
Sustainability statements
The preparation of our Sustainability
statements requir
es management
to make judgments, estimates and
assumptions that affect amounts
reported, especially for sustainable
solutions and Scope 3 carbon footprint.
The estimates and assumptions are
based on experience and various other
factors believed to be reasonable under
the circumstances. The estimates and
underlying assumptions are r
eviewed
on an ongoing basis. More details
on the methodology and significant
assumptions can be found in the
reporting principles on our website.
EU taxonomy disclosure
The T
axonomy Regulation establishes
the framework for the EU taxonomy
by setting out four conditions that an
economic activity must meet in order to
qualify as environmentally sustainable.
A qualifying activity must:
•
Contribute substantially to one or
more of six envir
onmental objectives,
being:
1.
Climate change mitigation
2.
Climate change adaptation
3.
Sustainable use and protection of
water and marine resour
ces
4.
T
ransition to a circular economy
5.
Pollution prevention and contr
ol
6.
Protection and r
estoration of
biodiversity and ecosystems
•
Do no significant harm to any of the
other environmental objectives
•
Be carried out in compliance with
minimum (social) safeguards
•
Comply with technical screening
criteria. The technical screening
criteria specify the performance
requir
ements for any economic activity
that determine under what conditions
that activity makes a substantial
contribution to a given environmental
objective and does not significantly
harm the other objectives
The above environmental objectives
are/will be further detailed out with
technical screening criteria for
determining the conditions under
which an economic activity qualifies
as contributing substantially to the six
objectives. For the financial year 2021,
two of the six objectives listed above
have been further detailed out and are
applicable for reporting in 2021: climate
change mitigation and climate change
adaptation. Companies are r
equired
to report on the pr
oportion of tur
nover
(revenues), capital expenditur
es (Capex)
and operating expenditures (Opex)
that is associated with environmentally
sustainable economic activities. For
the purpose of the calculation of
eligible activities, the following financial
information has been derived from
AkzoNobel’
s 2021 financial statements:
•
Revenues is consolidated exter
nal
revenues as r
eported in our
consolidated statement of income
•
Capital expenditures is the sum
of additions in property
, plant and
equipment, intangible assets and
right-of-use assets from both
investments and acquisitions resulting
from business combinations. Note
that capital expenditures as included
in the 2021 financial statements
excludes the impact from right-of-use
assets, as well as the impact from
acquisitions resulting fr
om business
combinations
•
Operating expenditures is calculated
in accordance with the EU taxonomy
as direct non-capitalized costs
incurred for the day-to-day servicing
of assets, consisting of resear
ch
and development costs, short-term
leases, maintenance and repair costs
and other similar costs. This definition
differs fr
om operating expenses
as included in our consolidated
statement of income. As the operating
expenses in accordance with the
EU taxonomy are not significant for
AkzoNobel, we make use of the
exemption in the EU taxonomy and
disclose 0% eligibility for Opex
The core activities of AkzoNobel,
being the manufacturing of paints and
coatings, are not consider
ed to be
among the largest potential contributors
to climate change mitigation and climate
change adaption by nature. Ther
efore,
AkzoNobel’
s core activity (manufacturing
of paints and coatings) is not defined as
an eligible activity for EU taxonomy by
the legislator
. As a result, the company
does not have any eligible revenues
under the EU taxonomy
.
The outcomes of the EU taxonomy
assessment for 2021 in relation to the
climate change mitigation and climate
change adaptation environmental
objectives can be summarized as
follows:
•
Revenues: Per the EU taxonomy
definitions, AkzoNobel does not have
any eligible activities and therefor
e no
eligible revenues
•
Capex: Eligible activities amount to
3% of Capex
•
Opex: Eligible activities amount to 0%
of Opex
Although we have limited eligible
activities under the current EU taxonomy
,
which mainly consist of investments in
water treatment units and solar panels,
around 39% of our r
evenue comes from
sustainable solutions (see Paint section)
and our current total shar
e of renewable
electricity use is 45% globally (see Planet
section). In addition, our innovation
investments are focused ar
ound
increasing sustainable solutions in our
product portfolio.
In addition, in 2021, our carbon
reduction target of 50% r
eduction by
2030 for the full value chain was
assessed and validated by the Science
Based T
argets initiative. Our ambition
is in line with the 1.5˚C pathway
, as
defined in the Paris Agreement and
demonstrates our clear commitment to
climate change mitigation. For our own
operations, we have already r
educed our
relative carbon footprint by 21%, closing
in on our 2025 interim target of 25%
(see Planet section).
We also continued to monitor the risks
and opportunities related to climate
change following the recommendations
of the TCFD (see Planet section).
Sustainability statements
|
AkzoNobel Report 2021
52
SUST
AINABILITY PERFORMANCE SUMMARY
People
Area
Unit
2017
2018
2019
2020
2021
Ambition 2025
Employees
Organizational health score
score
–
58
61
69
72
T
op quartile 75
Female executives
1
%
19
20
18
21
22
30
People, process and product safety
Fatalities employees
number
0
0
2
0
1
T
otal reportable injury rate employees/
temporary workers
/200,000 hours
0.20
0.20
0.24
0.23
0.21
Lost time injury rate employees/
temporary workers
/200,000 hours
0.06
0.09
0.08
0.09
0.11
–
Occupational illness rate employees
/200,000 hours
0.011
0.012
0.003
0.010
0.003
–
Fatalities contractors (temporary workers
plus independent)
number
1
0
0
0
0
T
otal reportable injury rate contractors
/200,000 hours
0.12
0.18
0.19
0.17
0.12
–
Lost time injury rate contractors
/200,000 hours
0.06
0.07
0.09
0.11
0.08
Life-changing injuries
number
2
3
3
2
2
Loss of primary containment – Level1
number
5
6
3
6
5
–
Loss of primary containment – Level2
number
43
63
64
52
67
–
Regulatory actions – Level 4
number
0
1
0
0
0
Security incidents Level 3
number
–
–
–
–
4
HSE management
Management audits plus reassurance audits
number
32
25
32
28
29
–
AkzoNobel Cares
2020-2025
Community people trained
number
2,863
4,276
4,078
2,669
11,193
35,000
Projects
number
224
126
225
170
182
1,000
1
2017 data includes discontinued operations.
The indicators that fall within the scope of limited
assurance of the external auditor are marked with the
following symbol:
Our reporting principles can be found in
the Appendix.
53
AkzoNobel Report 2021
|
Sustainability statements
1
2021 number includes a baseline shift of 199 TJ, or 3.5%, due to central procurement of electricity
,
elevating part of the stores organization above the materiality level.
2
As of 2021, we report on sustainable solutions instead of eco-premium solutions.The r
eporting period
for both eco-premium as well as sustainable solutions is November
-October
.
3
Category 1: purchased goods and services.
4
Category 10: processing of sold products; category 11: use of sold pr
oducts; category 12: end-of-life
treatment of sold products; VOC.
5
V
ersus 2018 baseline.
Planet
Area
Unit
2017
2018
2019
2020
2021
Ambition 2030
Energy use and emissions
Energy use
1
– per ton of production
1000TJ
GJ/ton
6.39
1.88
6.20
1.91
6.02
1.88
5.69
1.83
6.33
1.89
–
(30%)
5
Renewable energy (own operations)
%
30
31
31
33
37
–
Renewable electricity (own operations)
%
37
38
37
40
45
100
Greenhouse gas emissions – Dir
ect CO
2
(e)
emissions (Scope 1)
– per ton of production
kiloton
kg/ton
69.66
20.53
62.90
19.42
58.29
18.18
57.16
18.42
64.51
19.27
–
–
Greenhouse gas emissions – Indir
ect CO
2
(e)
emissions (Scope 2)
– per ton of production
kiloton
kg/ton
237.8
70.11
226.0
69.77
183.1
57.13
168.2
54.21
172.1
51.40
–
–
Greenhouse gas emissions – CO
2
(e)
kg/ton
91
89
75
73
71
–
V
olatile organic compounds
– per ton of production
kiloton
kg/ton
1.71
0.50
1.57
0.49
1.19
0.37
0.95
0.31
0.96
0.29
–
–
Resource efficiency
T
otal waste
– per ton of production
kiloton
kg/ton
77
22.77
67
20.97
67
21.00
62
19.96
67
19.87
–
T
otal waste – circular
%
51
52
55
58
59
100
T
otal reusable waste
kiloton
37
33
34
32
35
–
T
otal non-reusable waste
– per ton of production
kiloton
kg/ton
40
11.90
34
10.63
33
10.28
30
9.57
31
9.39
–
Hazardous waste total
– per ton of production
kiloton
kg/ton
33
9.76
30
9.13
29
9.07
28
8.93
31
9.19
–
Hazardous waste non-reusable
– per ton of production
kiloton
kg/ton
16
4.64
15
4.59
14
4.46
15
4.70
17
4.95
–
Hazardous waste to landfill
– per ton of production
kiloton
kg/ton
0.6
0.17
0.69
0.21
0.45
0.14
0.23
0.07
0.11
0.03
–
Fresh water use
– per ton of production
million m
3
m
3
/ton
9.62
2.84
9.27
2.86
8.05
2.51
9.12
2.94
9.56
2.86
–
Fresh water consumption
– per ton of production
million m
3
m
3
/ton
–
–
–
–
–
–
–
–
1.27
0.38
–
Supplier management
Suppliers participating in sustainability program
% against baseline
–
60
65
75
84
–
Suppliers in sustainability program – under
development
% against
baseline
–
22
18
24
27
–
Suppliers in sustainability program – in line with
our expectations
% against
baseline
–
38
47
51
57
–
Business Partner Code of Conduct product-related
% of spend
97
98
98
98
99
–
Business Partner Code of Conduct non
product-related
% of spend
86
83
84
89
89
–
Paint
Area
Unit
2017
2018
2019
2020
2021
Ambition 2030
Sustainable product portfolio
Sustainable solutions
2
% of revenue
–
–
–
–
39
>50
Eco-premium solutions
2
% of revenue
21
22
22
21
–
–
V
alue chain emission
Cradle-to-grave carbon footprint
(Scope 1, 2 and 3)
million tons
–
14.3
13.8
12.8
14.7
–
Scope 3 upstream
3
million tons
–
6.5
6.3
5.9
6.8
–
Scope 3 downstream
4
million tons
–
7.5
7.3
6.7
7.7
–
Sustainability statements
|
AkzoNobel Report 2021
54
Circular vision
becoming a reality
Based in Arnhem, Alucha develops innovative waste
recycling solutions. They enter
ed our first ever Paint the
Future startup challenge hoping to generate inter
est for
their circular alternative to calcium carbonate, a mineral
which is applied in paint and fillers. After being named
as one of the five winners, a sourcing agr
eement was
put in place and we started working together
.
The potential was obvious. They were developing an
extraction technology for recovering minerals and bio-oil
from paper sludge which pr
omised major sustainability
benefits. Using Alucha’
s circular solution can take
mining of calcium carbonate out of the equation.
With the feedstock being paper sludge, it also upcycles
part of a waste stream, contributing to the cir
cular
economy
. All important factors when considering our
science-based target of reducing carbon emissions by
50% across the full value chain by 2030.
“Calcium carbonate traditionally comes out of mines
and quarries in great quantities and is used in a variety
of everyday products, many of which ar
e eventually
thrown away
,” explains Alucha CEO, Gijs Jansen
(pictured). “Either way
, you lose the calcium carbonate,
with any subsequent burning through waste incineration
generating carbon emissions. Our technology to
recover calcium carbonate means less waste and less
reliance on mining.”
As part of a pilot project, we carried out extensive
testing with Alucha to find a suitable product. Their
circular mineral is now being used as an alternative
for mined calcium carbonate and clay in one of our
pre-deco exterior/masonry fillers. The launch pr
oduct
will become available as part of our Moltofill Aussen
range in Germany
, Austria and Switzerland, and as part
of our Polyfilla Exterior Plaster range in France, Italy and
Belgium. The product meets our criteria of “r
educed,
reused and r
enewed material use”, qualifying as a
sustainable solution and helping our customers to work
with more cir
cular products.
Our ongoing work with Alucha clearly illustrates that
achieving our People. Planet. Paint. ambitions relies
heavily on collaborative innovation, and it will help to
guide our future partnerships.
Alucha is now planning to open its first circular calcium
carbonate production facility
. The aim is to start with
a small scale operation (75 tons), and increase this to
13 kilotons per year in 2022.
Stand by for a prime example of why we set up our Paint
the Future collaborative innovation ecosystem. It’
s the
story of how Dutch startup Alucha entered our inaugural
global challenge in 2019 and, two years later
, is engaged
in a pilot project with AkzoNobel to supply a cir
cular raw
material – extracted from paper sludge – which is being
used in one of our products.
CASE STUDY
watch video
55
LEADERSHIP AND
GOVERNANCE
An overview of our leadership and their
activities during the year
, along with details
of our corporate governance structure,
risk management, executive remuneration,
compliance and integrity management, and
AkzoNobel and the capital markets.
Our Board of Management and
Executive Committee
56
Statement of the Board of Management
57
Statement of Chair of Supervisory Board
58
Our Supervisory Board
59
Report of the Supervisory Board
60
Corporate governance statement
66
Risk management
74
Integrity and compliance management
76
Remuneration report
80
AkzoNobel and the capital markets
88
Martijn Schuppers
| 1920 | 2019 | acrylic,
alkyd, oil on polyester canvas | 130 × 90 cm |
Collection AkzoNobel Art Foundation
Leadership and governance
|
AkzoNobel Report 2021
56
OUR BOARD OF MANAGEMENT AND
EXECUTIVE COMMITTEE
Thierry V
anlancker
CEO
and Chair of the Board of
Management and Executive
Committee
(1964, BE)
Thierry joined AkzoNobel in 2016,
bringing more than 28 years
of experience in the chemicals
industry
. He led operations in
polymers, performance coatings
and chemicals at DuPont and
was President of Fluor
oproducts
at Chemours. He’
s also a non-
executive member of the Board of
Directors of Sika AG and Aliaxis
S.A. In May 2021, he joined the
Board of Dir
ectors of Etex N.V
.
(a sister company of Aliaxis S.A.)
as a non-executive director
.
Maarten de V
ries
CFO and
member of the Board of
Management and Executive
Committee
(1962, NL)
Maarten joined AkzoNobel in
2018. He spent the previous
three years as CFO at Intertrust
Group and TNT Expr
ess. He was
a member of the Management
Board of Intertrust Gr
oup and the
Executive Board of TNT Expr
ess.
Joëlle Boxus
Chief Human
Resources Of
ficer and
member of the Executive
Committee
(1971, BE)
Joëlle rejoined AkzoNobel as
Chief Human Resources Of
ficer
in 2020. She had previously been
global HR leader for AkzoNobel’
s
former Specialty Chemicals
business. Joëlle managed
the separation of Specialty
Chemicals before becoming part
of the Executive Committee of
the newly established company
.
In 2018, she returned to Belgium
to become Chief Human
Resources Of
ficer at Etex N.V
.
before r
ejoining AkzoNobel.
David Prinselaar
Chief
Manufacturing Officer and
Member of the Executive
Committee
(1974, FR)
David joined AkzoNobel in 2015
from Reckitt Benckiser
, taking
responsibility for the Performance
Coatings operations and then
manufacturing for AkzoNobel
as a whole from January 2018.
In March 2019, David took over
the role of Chief Supply Chain
Officer and became a member of
the Executive Committee. During
2021, he began a new role as
Chief Manufacturing Officer
.
Michael Friede
Chief
Commercial Of
ficer –
Performance Coatings and
member of the Executive
Committee
(1980, DE)
Michael joined AkzoNobel in
July 2021 as Chief Commercial
Officer – Performance Coatings.
Before that, he worked in various
countries within the chemical
industry for companies such
as Covestro and Bayer AG.
He held roles in general manage-
ment, sales and marketing,
procur
ement and within
corporate functions. In Sep
-
tember 2021, Michael was
appointed to the Board of Pearl
Polyurethane Systems LLC as a
non-executive member
.
Karen-Marie Katholm
Chief
Supply Chain Officer
(1967, DK)
Karen-Marie joined AkzoNobel
in September 2021, having
held various global leadership
roles acr
oss sourcing, supply
chain and operations. Before
moving to AkzoNobel, she was
Integrated Operations Leader
for DuPont Nutrition &
Biosciences – having joined
Danisco A/S (later DuPont) in
2009. Karen-Marie has mor
e
than 20 years of experience
working at various large and
international food manufacturers,
such as Orkla, United Biscuits
and Arla Foods. She is also a
non-executive member of the
Boards of Dir
ectors of Green
Hydrogen Systems A/S
and NTG Nordic T
ransport
Group A/S.
From left to right:
Joëlle Boxus, Dr
. Hilka
Schneider
, Thierry Vanlancker
,
Karen-Marie Katholm, Michael
Friede, Maarten de Vries,
David Prinselaar
57
AkzoNobel Report 2021
|
Leadership and governance
ST
A
TEMENT OF THE BOARD OF MANAGEMENT
The Board of Manage
ment’
s state-
ment on the financial statements, the
management report and internal
controls.
We pr
epared this Report 2021 in line with
International Financial Reporting Standards
(IFRS), as adopted by the EU, and the financial
reporting r
equirements included in Part 9 of
Book 2 of the Dutch Civil Code.
T
o the best of our knowledge:
• The financial statements in this Report 2021
give a true and fair view of the assets and
liabilities; financial position and profit or loss of
our company and the undertakings included
in the consolidation taken as a whole
• The management report in this Report
2021 includes a fair review of the position at
December 31, 2021, the development and
performance during the financial year 2021
of AkzoNobel, and the undertakings included
in the consolidation taken as a whole, and
describes our principal risks
The Board of Management is r
esponsible for
the establishment and adequate functioning
of a system of governance, risk management
and internal controls within our company
.
Consequently
, a broad range of pr
ocesses and
procedur
es has been implemented, designed
to provide contr
ol by the Board of Management
over the company’
s operations. These include
measures r
egarding the general control
environment, such as a Code of Conduct, policies
and procedur
es and authority rules, as well as
specific measures, such as a risk management
system, a system of controls and a system of
letters of financial repr
esentation by responsible
management at various levels within our company
.
All these processes and pr
ocedures are aimed
at providing a r
easonable 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. For a detailed description of the
company’
s inter
nal risk management, please
refer to the Risk management section.
With respect to supporting and monitoring
of compliance with laws and regulations
– including our Code of Conduct – an
Integrity and Compliance Committee has
been established. The Compliance function
makes rules available through the Policy
Portal, manages the online and face-to-face
compliance training program, pr
ovides legal
expert support and manages investigations
related to our SpeakUp! complaints pr
ocedure.
The Internal Control function maintains
AkzoNobel’
s Inter
nal Control Framework,
monitors the compliance and includes
updates regar
ding 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
comfort to the Board of Management, as well
as the Supervisory Board, that our system of
risk management and internal controls – as
designed and repr
esented by management –
is adequate and effective. While we r
outinely
work towards continuous impr
ovement of our
processes and pr
ocedures regar
ding financial
reporting, the Boar
d of Management confirms
that according to the curr
ent state of affairs, to
the best of its knowledge:
• The report provides suf
ficient insights into any
failings in the effectiveness of the internal risk
management and control systems. Ther
e have
been no material failings in the effectiveness of
internal risk management and control systems
• These systems provide reasonable assurance
that the financial reporting does not contain
material inaccuracies
• It is justified that the financial reporting is
prepar
ed on a going concer
n basis
• The report states the material risks and
uncertainties relevant to the expectation of
the company’
s continuity for the 12-month
period after report pr
eparation
For a detailed description of the risk manage-
ment system and the principal risks identified,
see the Risk management and Integrity and
compliance management chapters. We have
discussed the above opinion and conclusions
with the Audit Committee, the Supervisory
Board and the external auditor
.
Amsterdam, February 28, 2022
The Board of Management
Thierry V
anlancker
, CEO and Chair of the
Board of Management
Maarten de V
ries, CFO and member of the
Board of Management
Dr
. Hilka Schneider
General
Counsel and member of the
Executive Committee
(1970, DE)
Hilka joined AkzoNobel in January
2022. With expertise in M&A,
corporate law and governance,
she worked for various industries
as an external lawyer
, and then
in-house at DHL and Demag
Cranes (now Konecranes).
Before joining AkzoNobel, Hilka
was Group Dir
ector Legal,
Compliance and Board Of
fice
and a member of the Group
Executive Committee at travel
company TUI.
EXECUTIVE COMMITTEE
43%
57%
Leadership and governance
|
AkzoNobel Report 2021
58
ST
A
TEMENT OF CHAIR OF SUPERVISORY BOARD
For AkzoNobel, the lockdowns resulted
in a surge in demand for decorative
paints, initially in the do-it-yourself sector
.
More r
ecently
, demand also increased
in professional channels, with people
deciding to invest in upgrading their
homes as they were spending mor
e time
in them. The market for performance
coatings – AkzoNobel’
s largest business
area – suf
fered during 2020, but is
now showing signs of rebounding as
investment in construction and other
industries starts to return.
Having navigated supply chain issues
and various other challenges in 2020
to successfully deliver on its 15 by 20
ambition, 2021 was the first year that
AkzoNobel could fully focus on its new
Grow & Deliver strategy
. Building on
the progr
ess made during the last five
years, the attention is now on returning
the company to growth rates that ar
e
at least at industry levels, and growing
margins with an ambition of delivering
significant progr
ess in ear
nings and
strengthened market positions over the
coming years.
From an operations perspective, 2021
proved to be just as challenging as
2020. The many headwinds resulting
from COVID-19 persisted, with the
stress on the global supply chain having
a particular impact. The company
responded well, however
, and was
able to limit most of the effects that the
restricted supplies of raw materials
could have had on service levels to
our customers.
The biggest challenge in 2021 came
from the almost unpr
ecedented
increases in costs and transportation,
which put our margins and profitability
under severe pr
essure. Management
identified these challenges very early
on and implemented significant price
increases, which wer
e needed to
protect pr
ofitability and the health of
the company in a timely and highly
professional manner
. As a result of
this, and the strong implementation
of strategic and operational initiatives,
the company was able to deliver a
significant increase in turnover
, driven
by both higher prices and increasing
volumes. The company’
s absolute
results fr
om operations were in line with
last year’
s strong performance, although
the operating margin was, as expected,
lower than 2020. The Supervisory Board
is very satisfied with the result and the
fact that AkzoNobel’
s ability to compete
and win in its global markets has been
further strengthened.
Much of the management focus during
the year had to be on operating margin
and ensuring that customer demand
was met. However
, securing long-term
progr
ess on the company’
s Grow &
Deliver strategy was also a priority and
we were gradually able to shift our
attention back to this as we spent more
time discussing growth opportunities
and progr
ess on strategic initiatives
in Supervisory Board meetings. It’
s
important that the company continues to
move forward and we wer
e impressed
with the progr
ess made in a number
of important areas, wher
e we saw the
organization stepping up despite various
distractions.
Participation in the company’
s organi-
zational health survey hit an all-time high,
as did engagement levels. With many
colleagues having to work from home
and opportunities for “normal” working
heavily restricted, this was an excellent
achievement. A lack of face-to-face
contact was something the Supervisory
Board also had to contend with, which
resulted in most of our meetings having
to take place virtually
. Nevertheless, we
stayed in regular contact to ensur
e that
we remained closely involved with all
company developments.
Although the company didn’t make as
much progr
ess on its safety agenda
as we would have liked – partly due to
operational issues caused by COVID-
19 – the Supervisory Board was
particularly encouraged by the strong
progr
ess that continues to be made in
the area of sustainability
. The award of
the highly prestigious T
erra Carta Seal
was a significant honor and underlines
AkzoNobel’
s unwavering commitment
to having a positive impact in all areas of
its activities.
This commitment was further
demonstrated by the evolution of
Nils Smedegaard Andersen
(1958, DK) Chair
Initial appointment: 2018
T
erm of office:
2018-2022
Chair of the Board of Directors of
Unilever plc.; Former non-executive
Director of BP plc.; Former CEO of A.P
.
Moller
-Maersk A/S; Former CEO and
President of Carlsberg A/S.
Over the last two years,
COVID-19 has impacted the
world,
people,
habits and businesses in a massive way
.
It has created unpredictability
,
volatility
,
challenges and
opportunities to varying degrees across industries.
OUR SUPERVISORY BOARD
59
AkzoNobel Report 2021
|
Leadership and governance
People. Planet. Paint., which has now
taken on far greater pr
ominence. Initially
introduced as a way of explaining
AkzoNobel’
s approach to sustainable
business, it has come to truly repr
esent
everything AkzoNobel stands for
.
Coupled with the Paint the Future
collaborative innovation ecosystem –
which goes from str
ength to strength
– the company is well positioned to
continue being a frontrunner in both
innovation and sustainability
.
After another difficult year
, the manage-
ment team and all employees should
be proud of their ef
forts in 2021.
AkzoNobel has shown itself to be an
agile and competitive company and
the senior leadership continues to
demonstrate a capacity for tackling
ongoing challenges while striving for
future success. It’
s important that
progr
ess continues to be made,
and improvements ar
e ongoing in
various areas, such as commer
cial
excellence, supply chain optimization
and strengthening pr
ocesses and
systems. The Supervisory Board is
looking forward to the next phase of the
company’
s ongoing jour
ney
.
I would like to thank my Supervisory
Board colleagues, the Boar
d of
Management and Executive Committee
for all their efforts during another
extraordinary year
. Most importantly
,
I want to thank AkzoNobel’
s employees
around the world for their continued
passion and commitment, which helped
to deliver a solid performance during
tough times.
Amsterdam, February 28, 2022
Nils Smedegaard Andersen
Chair of the Supervisory Board
Patrick Thomas
(1957, UK)
Initial appointment:
2017
T
erm of office:
2021-2025
Chair of Johnson
Matthey plc.; Member
of the Supervisor
y
Board of Covestro
A.G.; Former Chair and
CEO of Bayer Material
Science A.G.; Former
non-executive Director
of BG Group plc. and
Aliaxis S.A.; Former
President of Specialties,
Huntsman International
LLC; Former CEO at
Polyurethanes division
of ICI plc.
Dick Sluimers
(1953, NL)
Initial appointment:
2015
T
erm of office:
2019-2023
Chair of the Supervisor
y
Boards of NIBC Bank
N.V
. and Euronext N.V
.;
Member of the Board of
Directors of FWD Group
Limited; T
rustee of the
Erasmus Uni-versity
T
rust; Member of the
Board of Governors of
the State Academy of
Finance and Econo-
mics; Senior Advisor
Bank of America Europe
DAC; Former CEO
of APG Group N.V
.;
Former member of the
Supervisor
y Board of
Atradius N.V
.
Jolanda Poots-Bijl
(1969, NL)
Initial appointment:
2019
T
erm of office:
2019-2023
CFO of Royal van
Oord; Member of the
Supervisor
y Board of
Pon Holdings B.V
.;
Former member of the
Supervisor
y Boards
of N.V
. Nederlandse
Gasunie and Blokker
Holding B.V
.
Pamela Kirby
(1953, UK)
Initial appointment:
2016
T
erm of office:
2020-2024
Non-executive
Director at
Reckitt
Benckiser plc., Hikma
Pharmaceuticals plc.
and DCC plc.; Former
Senior Independent
Director at Victrex plc.;
Former CEO of
Quintiles
T
ransnational Corp
.;
Former senior executive
at Astra Zeneca plc.
and F
. Hoffman-La
Roche
Byron Gr
ote
(1948, US and UK)
Deputy Chair
Initial appointment:
2014
T
erm of office:
2018-2022
Non-executive Director
of Anglo-American plc.,
Standard Chartered plc.
and T
esco plc.; Former
non-executive Director
of Unilever N.V
.
and Unilever plc.;
Former Board member
of BP plc.
Leadership and governance
|
AkzoNobel Report 2021
60
REPORT OF THE SUPERVISORY BOARD
Supervisory Board activities 2021
Q1
Q2
Q3
Q4
•
Review Q4 2020 financials and
performance
•
Review 2020 annual report,financial
statements and profit allocation
•
Final 2020 dividend
•
Assurance report sustainability
statements 2020
•
2020 external audit report
•
Share buyback program
•
Grow & Deliver update
•
Business updates
•
M&A strategy update
•
Risk management: Risk session
outcomes
•
HSE full-year report
•
Operating model review
•
Remuneration policies Board of
Management and Supervisory Board
•
Review Q1 2021 financials and
performance
•
Investor Relations update
•
Grow & Deliver update
•
Business updates
•
M&A strategy update
•
HSE and safety update
•
Compliance training
•
Innovation strategy update
•
Human Resources 2021-2023 Plan
(incl. organizational health score)
•
Global Process Organization update
•
Global Business Services update
•
Review Q2 2021 financials and
performance
•
Investor Relations update
•
Business updates
•
Grow & Deliver update
•
Enterprise risk management update
•
M&A strategy update
•
Integrated Supply Chain strategy update
•
Research and Development update
•
Manufacturing strategy update
•
HSE and safety update
•
Sustainability strategy update
•
Review Q3 2021 financials and
performance
•
Interim dividend 2021
•
Share buyback program
•
M&A strategy update
•
Information Management strategy update
•
Grow & Deliver update and review
•
HSE and safety update
•
Functional and business strategy review
•
Budget 2022
•
Investor Relations update
•
Business updates
•
Long-term strategy discussion
The table provides an overview of relevant topics discussed and r
eviewed in Supervisory Board meetings in 2021.
MEETINGS AND A
TTENDANCE
The Supervisory Board values the
attendance of its meetings by all
members. If Supervisory Board
members are unable to attend a
Supervisory Board or committee
meeting, they inform the relevant Chair
of their reasons. Supervisory Boar
d
members always receive the materials
for each specific meeting, allowing them
to offer input and discuss any agenda
items with the relevant Chair and pr
ovide
a proxy to act on their behalf. In 2021,
the Board of Management attended
all regular and all additional meetings.
The Executive Committee attended
the majority of the meetings. Almost
all plenary sessions of the Supervisory
Board wer
e preceded or succeeded
by executive sessions of the Super
-
visory Board, with or without the
CEO in attendance. The Chair had
regular one-on-one calls with all
Supervisory Board members to discuss
individual impressions on the functio-
ning of the Supervisory Board and
items covered.
The Supervisory Board aims for all
(regular) meetings to be held physically
.
However
, during 2021, most meetings
were virtual due to COVID-19 r
elated
measures. The virtual meetings wer
e
held with video conference capabilities,
enabling Supervisory Board members
to perform their role appr
opriately
.
Strategy reviews
During 2021, the Supervisory Board
continued to allocate adequate time to
discuss strategic activities, including
detailed business analyses and portfolio
reviews. It r
eceived regular updates on
the roll-out and pr
ogress of the new
Grow & Deliver strategy by the Executive
Committee. The Supervisory Board also
reviewed and advised on the changes
made to the operational model. In
December
, the Supervisory Board and
Board of Management, together with
the other members of the Executive
Committee, held a two-day strategy
meeting, when the Supervisory Board
performed an in-depth review of the
progr
ess made towards the ambitions
as part of Grow & Deliver and the
Financial Plan 2021-2023. Additionally
,
and with a focus on long-term value
creation, several strategic opportunities
were r
eviewed and discussed, also
taking various external views into
consideration. The Supervisory Board
also reviewed and discussed functional
updates, including Finance, Information
Management, Integrated Supply
Chain, Human Resources, Innovation,
and Health, Safety
, Environment and
Security
. The Supervisory Board
received compr
ehensive market
updates and advised on, reviewed and
approved the business continuity and
contingency plans.
Supervisory Board attendance r
ecord
Regular SB
Additional SB
AC
RC
NC
Nils Smedegaard Andersen
8/8
7/7
7/7
4/4
Jolanda Poots-Bijl
8/8
7/7
6/7
Sue Clark
1
3/3
4/6
3/3
1/1
Byron Grote
8/8
5/7
7/7
Michiel Jaski
1
3/3
5/6
2/2
Pamela Kirby
8/8
7/7
7/7
4/4
Dick Sluimers
8/8
7/7
7/7
4/4
Patrick Thomas
8/8
7/7
7/7
The table indicates the meeting attendance for the Supervisory Board (SB), the Audit Committee (AC), the Remuneration
Committee (RC) and the Nomination Committee (NC) for regular and additional meetings. Additional meetings were
scheduled ad-hoc when needed to ensure the Supervisory Board was suf
ficiently informed and could make considered
decisions regarding (potential) acquisitions and the r
emuneration policies. As some of the additional meetings were
scheduled at short notice, it impacted the ability of members of the Supervisory Board to attend all additional meetings.
1
Retired on April 22, 2021, after completing a four
-year term.
61
AkzoNobel Report 2021
|
Leadership and governance
Sustainability
The Supervisory Board views sustain-
ability as an intrinsic value driver in the
work of all businesses and functions.
During 2021, the Supervisory Board
continued to assess sustainability as
part of strategy and targets. During
the semi-annual progr
ess updates on
sustainability
, the Supervisory Board
reviewed and advised on the ambitions
set out by the company’
s People. Planet.
Paint. strategy
, as well as the internal
sustainability governance and exter
nal
reporting frameworks. The Supervisory
Board r
eviewed the company’
s response
to climate change, focusing on efforts
to reduce emissions acr
oss the whole
value chain (including Scope 1, 2 and
3) to achieve the announced science-
based targets. Other topics discussed
included the further strengthening of our
sustainability governance by introducing
the NextGen Sustainability Council.
The company’
s People. Planet. Paint.
ambitions and progr
ess are further
considered as part of the functional
updates and as part of the Supervisory
Board’
s review of the company’
s
innovation efforts and pr
ograms. Further
details are included in the Sustainability
statements.
Performance and management
planning
Individual Board of Management and
Executive Committee performance
was addressed in Supervisory Boar
d
meetings, following recommendations
from the Remuneration Committee.
For more details, see the r
eport of the
Remuneration Committee.
Discussions on corporate performance
were held at each r
egular Supervisory
Board meeting and included business
reviews and performance updates
from corporate functions. Forwar
d
looking targets were also addr
essed
in light of these reviews, and both the
proposed budget and operating plan
for 2022 were diligently r
eviewed by
the Supervisory Board in Q4, taking
into account the supply chain situation
and other prevailing market conditions.
Following this assessment, the Super
-
visory Board has appr
oved the proposed
budget and operating plan for 2022.
During the year
, the Supervisory Board
was pleased to see the company
continuing to benefit from management’
s
strategic initiatives, including its focus on
strong margin management when facing
significant raw material cost inflation.
The nature of this performance and the
company’
s capital allocation priorities
were all consider
ed in the Supervisory
Board’
s approval of the dividend
proposal (further details on the 2021
dividend proposal can be found in the
Financial information).
Risk management
The Supervisory Board views risk
management as an essential mechanism
to safeguard the business and assets of
the company
, and to secure long-term
performance and value creation. As the
Supervisory Board sought to assur
e
itself of the robustness of the company’
s
risk mitigation and internal controls,
it received multiple risk management
updates during the year
.
The Board of Management and
Executive Committee maintain the risk
management framework and system
of internal controls. The Supervisory
Board and the Audit Committee monitor
the implementation of risk mitigating
measures for the key risks, as identified
by the Board of Management and the
Executive Committee during the year
by means of risk updates and reviews.
Further details are included in the Risk
management chapter
.
Corporate governance
The Supervisory Board continuously
reviews the company’
s corporate
governance and its compliance with the
Dutch Corporate Governance Code.
The Supervisory Board r
eceived updates
on legislative developments such as
the Bill on Gender Diversity to take
into account in its composition and
succession planning.
T
alent management and
succession planning
In 2021, the Supervisory Board – after
discussing its own composition and
succession plans – proposed the
reappointment of Patrick Thomas as
member of the Supervisory Board. The
reappointment was appr
oved at the
AGM held on April 22, 2021. Following
the retir
ement of Sue Clark and Michiel
Jaski as members of the Supervisory
Board, the number of members of the
Supervisory Board was r
educed to six
as of April 22, 2021.
The requir
ements of the Dutch
Corporate Governance Code and the
skills matrix, updated further upon
recommendation by the Nomination
Committee, were consider
ed throughout
the process.
During 2021, the Supervisory Board
discussed the composition of the Board
of Management. Upon nomination by
the Supervisory Board, the r
eappoint-
ment of Thierry V
anlancker as member
of the Board of Management for a
two-year term was approved at the AGM
held on April 22, 2021.
The Supervisory Board further discussed
and supported the CEO’
s appointments
of other members of the Executive
Committee. With the split of Integrated
Supply Chain in February 2021 into
two focus areas, Supply Chain and
Manufacturing, David Prinselaar took
on the new role of Chief Manufacturing
Officer
. As per September 1, 2021,
Karen-
Marie Katholm was appointed
Chief Supply Chain Officer
. In the interim,
the role of Chief Supply Chain Of
ficer
The Super
visor
y Board
was pleased to see the
company continuing to
benefit from management’
s
strategic initiatives,
inc
luding cost savings.
Leadership and governance
|
AkzoNobel Report 2021
62
was filled by an external consultant with
a standing invitation to all meetings of
the Executive Committee. Michael Friede
was appointed as Chief Commercial
Officer – Performance Coatings per
July 1, 2021, with the CEO continuing
to repr
esent all commercial aspects
of Decorative Paints in the Executive
Committee. With Isabelle Deschamps
stepping down as General Counsel, her
responsibilities wer
e taken over by mem-
bers of the AkzoNobel Legal Group on
an ad interim basis, until the appoint-
ment of Hilka Schneider as the new
General Counsel per January 1, 2022.
Independence of the
Supervisory Board
Supervisory Board members ar
e required
to act critically and independently of
one another
, the Board of Management,
the Executive Committee and the
company’
s stakeholders. Each member
of the Supervisory Board meets the
independence requir
ements of the
Corporate Governance Code and
completed the annual independence
questionnaire addr
essing the relevant
requir
ements for independence.
Supervisory Board evaluation
T
o assess its effectiveness, the
Supervisory Board carried out an
internal performance evaluation of
itself, its individual members, its
Audit, Remuneration and Nomination
Committees, the Chair
, as well as
the relationship with the Boar
d of
Management and the Executive
Committee. The process consisted of
Supervisory Board members completing
a confidential questionnaire.
The Chair had one-on-one calls with all
Supervisory Board members to discuss
individual impressions on the functioning
of the Supervisory Board and items
covered in 2021. In a separate meeting
without the Board of Management, the
Supervisory Board discussed the r
esults
of the evaluation questionnaires. The
Supervisory Board also discussed the
functioning of the Board of Manage-
ment, the performance of its individual
members and reflected on the impr
ove-
ment areas agr
eed during last year’
s
evaluation.
The Supervisory Board is pleased to
confirm the evaluation concluded that the
Supervisory Board and its committees
continue to operate proficiently
. There’
s a
dynamic and open atmosphere between
the Supervisory Board and the Executive
Committee. Sufficient time was allocated
to discuss the topics that reflected
the future strategic priorities for the
company
. Adequate time was spent on
the differ
ent business units and (virtually)
meeting with AkzoNobel’
s people around
the world. The impact of COVID-19 again
meant that most of the interaction had
to take place virtually in 2021. As soon
as restrictions allow
, spending more
time in person will be prioritized. The
Supervisory Board agr
eed that executive
succession planning will remain a key
area of focus going forwar
d.
Financial statements and profit
allocation
The Board of Management submitted the
report and financial statements, including
the report of the Boar
d of Management,
to the Supervisory Board for r
eview and
approval. The financial statements of Akzo
Nobel N.V
. for the financial year 2021
were audited by PricewaterhouseCoopers
Accountants N.V
. (PwC).
The financial statements and the report
were extensively discussed by the Audit
Committee with the external auditors,
in the presence of the CFO, and by the
full Supervisory Board with the Boar
d
of Management and the Executive
Committee. Based on these discussions,
the Supervisory Board is of the opinion
that the 2021 financial statements of
Akzo Nobel N.\/. form an adequate basis
to account for the supervision provided
(see the Financial information). The Audit
Committee monitors the follow-up by
management on the recommendations
made by the external auditors. The
Supervisory Board r
ecommends that the
AGM adopts the financial statements as
presented in this Report 2021 and, as
proposed by the Boar
d of Management,
the proposed total dividend for 2021
of €1.98 (2020: €1.95), including a final
dividend of €1.54 per share. An interim
dividend of €0.44 (2020: €0.43) per
share was paid in November 2021. This
reflects the continued commitment to
providing a stable to rising dividend. The
dividend will be paid in cash.
In addition, it is requested that the AGM
discharges the members of the Board of
Management from their r
esponsibility for
the conduct of business in 2021 and the
members of the Supervisory Board for
their supervision in 2021.
AUDIT COMMITTEE
All Audit Committee members have
extensive accounting and financial
management expertise. Issues discussed
in Audit Committee meetings were
Committees of the Supervisory Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Nils Smedegaard Andersen (Chair)
Member
Chair
Byron Grote (Deputy Chair)
Chair
Sue Clark
Member*
Member*
Michiel Jaski
Member*
Pamela Kirby
Member
Member
Jolanda Poots-Bijl
Member
Dick Sluimers
Chair
Member
Patrick Thomas
Member
REPORT OF THE SUPERVISORY BOARD
* Until retirement in April 2021
63
AkzoNobel Report 2021
|
Leadership and governance
reported back to the full Supervisory
Board in subsequent meetings.
External audit
PwC, AkzoNobel’
s exter
nal 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 and
report, as well as on the scope and
outcome of the review on the selected
non-financial indicators, as included in
the Sustainability statements, to provide
limited assurance. The Audit Committee
held independent meetings with the
external auditor and critically reviewed
and constructively challenged their audit
approach, fees, risk assessment and
audit plan for the year ahead.
The Audit Committee performed an
annual review of the services of the
external auditor
, and at each meeting
considered and assessed the status
of the auditor’
s independence. Further
details on the external auditor can be
found in the Corporate governance
statement.
Risk management and internal
control systems
The Audit Committee reviewed the
company’
s overall approach to
governance, risk management and
internal controls, its processes,
outcomes, financial reporting and
disclosures. It r
eceived regular updates
from auditors and functions and was
provided with compr
ehensive risk and
internal control reports during the year
.
In its review
, the Audit Committee
considered the impact of changes to
systems and processes, such as the
IT landscape rationalization and the
implementation of regional accounting
centers on the internal controls. In
addition, the Audit Committee reviewed
the annual operating plan (including
budget) and AkzoNobel’
s dividend
proposals, as well as multiple IT security
and control updates. During 2021, the
Audit Committee received and r
eviewed
several updates on AkzoNobel’
s
Internal Control Framework. The Audit
Committee also met regularly with senior
executives. The Executive Committee
is responsible for ensuring an ef
fective
compliance control framework and has
delegated part of the responsibilities
to the Integrity and Compliance
Committee. The Supervisory Board’
s
Audit Committee oversees this
responsibility
.
Business and function reviews
In fulfilling its oversight responsibilities in
relation to risk management and internal
control systems, the Audit Committee
also received updates fr
om functions
such as Finance, T
reasury
, Information
Management and T
ax throughout the
year
. These updates also inform the
Audit Committee’
s review of the annual
operational plan, including budget.
During 2021, the Audit Committee
reviewed and advised on the company’
s
roadmap on sustainability r
eporting.
Internal Audit
The Internal Auditor presented all main
audit findings to the Audit Committee
and discussed the progr
ess of the
audit plan. During the year
, the Audit
Committee approved Internal Audit’
s
plan and strategy
, and also agreed on
the budget and resour
ce requirements
for the function. The Audit Committee
also met separately with the Internal
Auditor during the year to discuss the
results of the audits performed and the
status of the follow-up on action plans
identified. In 2021, the Audit Committee
was satisfied with the effectiveness of
the Internal Audit function.
Results and financial statements
Before each publication of the quarterly
results and the financial statements,
the Audit Committee reviewed the
financial results. In addition, the Audit
Committee reviewed and commented on
the interim and final dividend proposals
and on reports and pr
ess releases to
be published. This was in addition to
the work undertaken by the company’
s
Disclosure Committee in r
eviewing the
company’
s disclosure of potentially
price sensitive information. Based on
these discussions, the Audit Committee
Audit Committee activities 2021
Q1
Q2
Q3
Q4
•
Review Q4 2020 financial statements
and annual results
•
Review 2020 annual report and accounts
•
External audit report
•
Assurance r
eport sustainability
statements 2020
•
Review risk management and internal
control
•
Final dividend 2020
•
Share buyback program
•
HSE audit findings
•
Integrity and Compliance report 2020
•
Exposure report
•
IT/cybersecurity update
•
Review Q1 2021 financial statements
•
Investor Relations update
•
Integrity and Compliance mid-year
report
•
Exposure report
•
Review evaluation external auditor
•
Audit fee 2021
•
Review and approval PwC audit plan
•
Internal Audit Q1 2021 report
•
Internal Audit strategy update
•
IT/cybersecurity update
•
T
reasury update
•
Review limited assurance sustainability
selected indicators
•
Sustainability reporting update
•
Review Q2 2021 financial statements
•
Internal Audit Q2 2021 report
•
Investor Relations update
•
Review Q3 2021 financial statements
•
Interim dividend 2021
•
Share buyback program
•
Internal Audit Q3 2021 report
•
T
ax strategy update
•
IT/cybersecurity update
•
Integrity and Compliance Q3 2021 report
•
Internal Control framework update
•
Finance transformation update
•
Review budget 2022 and outlook
•
Hard close audit report
•
Internal Audit plan 2022
Leadership and governance
|
AkzoNobel Report 2021
64
advised the Supervisory Board on
the publications and disclosures, and
on the interim and final dividends. All
quarterly or annual releases of financial
results wer
e approved by the full
Supervisory Board prior to publication
and release. T
o ensure its ef
fectiveness
and expertise, the Audit Committee
was provided with r
egular updates on
IFRS developments and the anticipated
impact of these developments on the
financial statements. In addition, the
Audit Committee reviewed and assessed
management assertions made in regar
d
to relevant accounting tr
eatments.
The external auditor
, as required by
auditing standards, also considers
the risk of management override of
controls. Nothing has come the attention
of either the Audit Committee or the
external auditor to suggest any material
misstatement related to suspected or
actual fraud involving management
override of controls.
REMUNERA
TION COMMITTEE
Management performance
review
The work of the Remuneration
Committee during Q1 focused on 2020
performance, individual performance
reviews of Boar
d of Management
members and the Executive Committee.
The Remuneration Committee also
reviewed various incentive plans, the
economic circumstances and the r
elative
performance compared with top peers.
Remuneration report 2020
The Remuneration report 2020 was
submitted to the AGM held on April 22,
2021, for its advisory vote. There was
no majority in favor
. The Supervisory
Board took this feedback into account
and the company reached out to its
stakeholders to further engage on this
topic. Learnings were taken on board
by the Remuneration Committee and
Supervisory Board and have been
addressed in the Remuneration r
eport.
Remuneration policy review
In 2021, the Remuneration Committee
and Supervisory Board concluded their
review of the r
emuneration policies for
the Board of Management and
Supervisory Board in light of the
new Grow & Deliver strategy
,
while considering input received
from stakeholders and the
requir
ements of the Shareholder
Rights Directive II and the Dutch
provisions implementing the
Shareholder Rights Dir
ective II.
The Remuneration Committee
recommended the amendment of
the remuneration policies for the Boar
d
of Management and Supervisory Board
for consideration by shareholders at
the AGM of April 22, 2021. Both were
approved.
Management salary review
The Remuneration Committee reviewed
the base salaries and established
relevant forwar
d-looking target ranges
for variable remuneration of Boar
d
of Management members and other
members of the Executive Committee.
The base salaries will continue to be
assessed in light of market conditions,
the rewar
d structures of peer group
companies and performance. The
Remuneration Committee considered
the pay ratios within the company and
how these compare with peer gr
oup
companies. Forward-looking target
ranges for variable remuneration of the
Board of Management wer
e discussed
and proposals for the r
emuneration of
other Executive Committee members
were r
eviewed and discussed with the
CEO. Further information can be found
in the Remuneration report.
NOMINA
TION COMMITTEE
Board of Management and
executive succession
During 2021, the Nomination Committee
recommended the r
eappointment of
Thierry V
anlancker as member of the
Board of Management and CEO to the
Supervisory Board for consideration by
shareholders at the AGM of April 22,
Remuneration Committee activities 2021
Q1
Q2 & Q3
Q4
•
Review of management performance 2020
•
Review of Short-term Incentive Plan and Long-term
Incentive Plan
•
Review remuneration policy for Board of Management
and Supervisory Board
•
Approval of 2020 pay-out under Short-term Incentive
Plan and Performance Incentive Plan and vesting of
shares under Long-term Incentive Plan
•
Review remuneration policy for Board of Management
and Supervisory Board
•
2020 Remuneration report
•
Review of management base salaries for 2021
•
T
arget setting 2021
•
Review of Long-term Incentive Plan
•
Review of feedback Annual General Meeting 2021
•
TSR peer group review
•
Preparation Remuneration report 2021
•
Review of 2021 (preliminary) performance outlook
REPORT OF THE SUPERVISORY BOARD
Related information
Further details about the remuneration of members of the
Board of Management and Executive Committee can be
found in the Remuneration report and in Note 26 of the
Consolidated financial statements.
65
AkzoNobel Report 2021
|
Leadership and governance
2021. Furthermore, the Nomination
Committee was consulted and gave its
advice regar
ding the composition of the
Executive Committee and the positions
that became vacant during 2021.
Supervisory Board succession
During 2021, the Nomination Com-
mittee continued to discuss the size,
structure and composition of the
Supervisory Board. Following thor
ough
consideration, the Nomination Com-
mittee recommen
ded the reappointment
of Patrick Thomas to the Supervisory
Board for consideration by shar
eholders
at the AGM of April 22, 2021. With the
first terms of Sue Clark and Michiel
Jaski having ended in 2021, the number
of Supervisory Board members was
reduced to six.
The Supervisory Board has updated its
skills matrix, as shown above. It contains
full details of the current Supervisory
Board composition. The schedule of
Supervisory Board succession and the
profiles of the Supervisory Boar
d
mem
bers can also be found on our
website.
ADDITIONAL REMARKS
All Supervisory Board members would
like to express their appr
eciation to the
Board of Management and Executive
Committee, and to all the company’
s
employees around the world, for their
outstanding dedication and hard work
during the year
.
Nomination Committee activities 2021
Q1
Q2, Q3 and Q4
•
Supervisory Board succession planning
•
Review (re)appointment scheme
•
Boar
d of Management and Executive Committee
succession planning
•
Supervisory Board succession planning
•
Update skills matrix
•
Review (re)appointment scheme
•
Boar
d of Management and Executive Committee
succession planning
Supervisory Board skills and pr
ofiles
N.S.
Andersen (m)
J.
Poots-Bijl (f)
B.
Grote (m)
P.
Kirby (f)
D.
Sluimers (m)
P.
Thomas (m)
Independent
l
l
l
l
l
l
Consumer goods end-user segment
l
l
l
Industrial end-user segment
l
l
l
l
l
l
Buildings and infrastructure
end-user segment
l
l
T
ransportation end-user segment
l
l
l
l
l
l
(International) business, commerce, finance/economics
l
l
l
l
l
l
Scientific/information technology experience
l
l
l
l
Public sector experience
l
l
Management experience
l
l
l
l
l
l
Business strategy planning
l
l
l
l
l
l
Investor relations
l
l
l
l
l
Manufacturing experience
l
l
l
l
Supply chain/logistics experience
l
l
l
l
Social, environmental or
sustainability experience
l
l
l
l
l
l
Finance expert
l
l
l
Four or less external directorships
l
l
l
l
l
l
Dutch/EU national
l
l
l
Non-EU national
l
l
l
Pensions experience
l
l
Business-to-business sales experience
l
l
R&D experience
l
l
l
Legal experience
l
Industrial/employment relations
l
Risk management
l
l
l
l
Consulting
l
l
l
(f) = female (m) = male
Leadership and governance
|
AkzoNobel Report 2021
66
CORPORA
TE GOVERNANCE ST
A
TEMENT
Akzo Nobel N.V
. is a public limited
liability company (naamloze
vennootschap) established under the
laws of the Netherlands, with common
shares listed on Eur
onext 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 are organized under Dutch
law in a so-called two-tier system,
comprising a Board of Management
(solely composed of executive directors)
and a Supervisory Board (solely
composed of non-executive directors).
The Supervisory Board supervises and
advises the Board of Management and
ensures a str
ong exter
nal presence in
the governance of the company
. The
two Boards ar
e 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 requir
ements 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 ar
e explained
in accordance with the Code’
s “comply
or explain” principle. For the full version
of the Code, visit www
.mccg.nl
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 best interests of the company
.
Where changes ar
e made, these
will be reported and explained in the
annual report for the r
elevant year and
discussed at the subsequent AGM.
BO
ARD OF MANAGEMENT AND
EXECUTIVE
COMMITTEE
The Board of Management is entrusted
with the management of the company
.
When it comes to the management
of our business, it operates in the
context of an Executive Committee. The
Executive Committee comprises the
members of the Board of Management
(currently the Chief Executive Of
ficer
(CEO) and the Chief Financial Officer
(CFO)), the Chief Supply Chain Officer
,
Chief Manufacturing Officer
, Chief
Commercial Of
ficer – Performance
Coatings, the General Counsel and the
Chief Human Resources Of
ficer
.
The composition of the Executive
Committee ensures that functional,
operational and commercial expertise
is entrenched at the highest level
of the organization. Among other
responsibilities, the Boar
d of
Management defines the company’
s
strategic direction. It establishes
and maintains internal policies
and procedur
es for effective risk
management and control, manages the
realization of the company’
s operational
and financial targets, its sustainability
performance and its pursuit of long-
term value creation. In fulfilling their
duties, Board of Management members
are assisted by the Executive Com-
mittee and guided by the interests of
the company and its affiliated
enterprises, taking into consideration
the relevant inter
ests of the company’
s
stakeholders.
The Board of Management and
Executive Committee promote openness
and engagement through a SpeakUp!
grievance mechanism and have
established a Code of Conduct, policies,
rules and procedur
es incorporated in the
company’
s Policy framework, in order
to drive a culture of good governance,
consistency and functional excellence.
The values of good governance,
sustainability and teamwork adopted
by the Board of Management ar
e
incorporated in these documents.
The Board of Management believes
these values contribute to a culture
focused on long-term value creation
Supervisory
Board
Share-
holders
Commercial
Integrated
Supply Chain
Support
functions
Board of
Management
Executive
Committee
AkzoNobel aspires to
the highest standards of
corporate governance
and seeks to consistently
enhance and improve
corporate governance
performance,
emphasizing
transparency and a
sustainable culture of long-
term value creation.
67
AkzoNobel Report 2021
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Leadership and governance
and actively encourages these values
through leading by example.
A strong company cultur
e fostering
a solid and well-embedded balance
between performance and organizational
health is highly valued by the Board of
Management and Supervisory Board,
and is fundamental to AkzoNobel’
s
strategy
.
Our company culture forms an important
part of discussions involving internal
organizational changes, Human
Resources strategy updates, as well
as any functional updates. Since 2018,
Insight surveys have been performed
involving all employees, focused on
our wider organizational health (see
the Sustainability statements). The
Executive Committee and Supervisory
Board r
egularly discuss the results of the
survey
, the targets and the actions taken
to achieve such targets.
The Board of Management takes
precedence; all Executive Committee
decisions requir
e a majority of the
members of the Board of Management.
The Board of Management can decide
to reserve decisions for itself. The
members of the Board of Management
remain accountable for all decisions
made by the Executive Committee. The
Board of Management is accountable
for its performance to the Supervisory
Board and is accountable to the
shareholders of the company at the
AGM. The Executive Committee
members who are not also members
of the Board of Management r
eport to
the CEO.
The Supervisory Board has r
egular
,
direct interaction with all members of the
Executive Committee and all Executive
Committee members attend most
Supervisory Board meetings.
The CEO leads the Executive Committee
in its overall management of the
company
. He is the main point of liaison
with the Supervisory Board. The CFO is
responsible for overseeing AkzoNobel’
s
finances, its corporate control, investor
relations and information management.
The tasks, responsibilities and
procedur
es of the Board of Management
and Executive Committee are set out
in their Rules of Procedur
e. These rules
have been approved by the Supervisory
Board and ar
e available on our website.
Authority to repr
esent the company is
vested in the two members of the Board
of Management, acting jointly
. 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, and
available from, the Dutch Chamber of
Commerce.
The Directors of the company’
s business
units and the Corporate Directors in
charge of the differ
ent functions report
to individual Executive Committee
members with specific responsibility for
their activities and performance.
Appointment
Board of Management members ar
e
appointed and removed fr
om office
by the AGM. The current Boar
d of
Management members were first
appointed by EGMs (Extraordinary
General Meetings) held in 2017, with
the CEO being reappointed for another
two-year term at the AGM in 2021.
The other members of the Executive
Committee are appointed by the CEO,
after consultation with the Supervisory
Board. Boar
d of Management members
are appointed for a term not exceeding
four years, with the possibility of
reappointment.
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 Boar
d
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 Boar
d of
Management requir
e a simple majority of
the votes cast by shareholders.
Under certain conditions specified in
the Articles of Association, shareholders
may also be entitled to nominate
Supervisory Board or Boar
d of
Management members for appointment.
Such appointments requir
e a two-thirds
majority
, repr
esenting at least 50% of the
outstanding share capital, in or
der to be
adopted at an AGM (or EGM).
Diversity
AkzoNobel believes in the strength
of diversity and, in accordance with
the Code, a Diversity Policy has
been adopted for the composition
of the Board of Management and
Executive Committee. The objective
of the Diversity Policy is to enrich the
Board of Management’
s perspective,
improve performance, incr
ease member
value and enhance the probability of
achievement of the company’
s goals
and objectives. The Diversity Policy
addresses concr
ete targets relating
to diversity
, including nationality
,
age, gender
, education and work
background. Mor
e information on the
We extended our successful partnership with Mercedes-Benz, one of the world’
s
most renowned automotive brands. Through our Sikkens brand, we’ll continue to
be a recommended supplier of vehicle refinish pr
oducts and services in China and a
preferred partner in Indonesia for another four years.
Leadership and governance
|
AkzoNobel Report 2021
68
progr
ess on our commitment to diversity
and inclusion can be found in the
Sustainability statements.
A consistent and structured appr
oach is
applied to succession planning for the
Board of Management and Executive
Committee, taking into account the
implementation of the Diversity Policy
.
AkzoNobel currently diverges fr
om
the gender target of at least 30%
female and at least 30% male Board of
Management members.
It is believed that due to the size of the
Board of Management (being only two
members), this divergence is justified
and has ensured the best candidates
for the roles wer
e nominated by the
Supervisory Board and appointed by
shareholders. Following the appointment
of Michael Friede, Karen-Marie Katholm
and Hilka Schneider as new Chief
Commercial Of
ficer – Performance
Coatings, Chief Supply Chain Officer and
General Counsel respectively
, AkzoNobel
has a gender diversity of 43% female
repr
esentatives at Executive Committee
level. More information on AkzoNobel’
s
overall diversity and inclusion efforts
can be found in the Sustainability
statements.
Outside directorships
Specific rules on outside board positions
of members of the Executive Committee
– which are mor
e stringent than the
requir
ements of the Dutch Civil Code –
can be found in the Rules of Procedur
e.
Conflicts of interest
During 2021, no transactions were
reported under which a member of the
Board of Management or Executive
Committee had a conflict of interest
which was of material significance to the
company and to the relevant member
.
Remuneration
The current r
emuneration policy for
the Board of Management was last
amended following approval by the AGM
held on April 22, 2021. The details of this
policy can be found in the Remuneration
report. The service contracts of the
members of the Board of Management
contain change of control pr
ovisions.
Further details can be found in the
Remuneration report and Note 26 of
the Consolidated financial statements.
The service contracts of the Board of
Management are compliant with the
Code. The main elements of these
contracts are available on our website.
Operational Control Cycle
The Executive Committee holds regular
meetings to discuss the implementation
of the company’
s strategy
and functional agendas.
Additional meetings are held
to discuss specific topics
as requir
ed. The Board of
Management and Executive
Committee have delegated
authorities to individual
Executive Committee
members and to certain
committees and councils. T
o help plan
for success and ensure alignment within
the entire AkzoNobel organization on
the strategic and operational plan, an
Integrated Business Planning (IBP)
process acr
oss the company’
s global
businesses and functions is in place.
IBP provides, on a monthly basis,
visibility on the long-term integrated
business and financial plan, which
covers the product portfolio, demand
and supply
. It therefor
e ensures early
attention and remedial actions, wher
e
appropriate, on any potential gaps.
The monthly IBP cycle ends with the
Corporate Management Business
Review (CMBR), which is chaired by
the CEO. The Executive Committee
attends the CMBR meetings, where
it reviews the consolidated long-term
company perspective, including risks
and opportunities, decides on escalation
and possible scenarios and supervises
the key performance indicators with
corrective actions, if applicable.
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 performance.
It further ensures the alignment of
sustainability activities across functions
and businesses. The council, which
meets quarterly
, consists of business
unit and functional directors, as well
as the CEO. As of 2021, the Chair of
the NextGen Council is also part of the
Sustainability Council.
Significant sustainability aspects material
to the company are r
eviewed annually
,
AkzoNobel has a gender
diversity of 43% female
representatives at
Executive Committee level
CORPORA
TE GOVERNANCE ST
A
TEMENT
Our CEO, Thierry V
anlancker
, attended a meeting of the European CEO Alliance
– a cross-industry effort to fight climate change, build economic r
esilience and
help make a success of the EU Green Deal. He gave his backing to policy
recommendations supporting a progr
essive and ambitious push to achieve
climate neutrality
. Proposals included facilitating the transformation of the
buildings sector – which is of particular interest to AkzoNobel – and speeding up
the restructuring and renewal of the energy system in all EU member states.
SUPERVISORY BOARD
33%
67%
DK
16.7%
UK
33.3%
US/UK
16.7%
NL
33.3%
Tenure
in years
0-4
5-8
69
AkzoNobel Report 2021
|
Leadership and governance
with input from internal and external
stakeholders. The Sustainability Council
focuses on topics with the biggest
impact on accelerating AkzoNobel’
s
strategy to create shar
ed value, building
on our core values of safety
, integrity and
sustainability
.
Progr
ess regarding sustainability
objectives, development, target setting
and implementation is reviewed quarterly
by the Executive Committee, and semi-
annually by the Supervisory Board. The
Audit Committee takes an active role
in assessing the quality and reliability
of sustainable performance reporting
and PwC has been engaged to perform
an assurance engagement on specific
indicators included in the Sustainability
statements. Their report can be found in
the Financial information.
Integrity and Compliance
SpeakUp! Committee
The Integrity and Compliance SpeakUp!
Committee reviews investigations into
material violations of laws, regulations
and internal rules, as well as SpeakUp!
reports. It also decides on disciplinary
measures and contr
ol improvement
actions, and monitors and responds to
any trends or irr
egularities. By submitting
these cases through a central Integrity
and Compliance SpeakUp! Committee,
the company ensures transpar
ency and
consistency of measures thr
oughout the
organization. More details can be found
on page 78.
Executive Pensions Committee
The Executive Pensions Committee
oversees the general pension policies
of AkzoNobel’
s various pension plans
and their financial consequences for the
company
. The committee is chaired by
the CFO and includes the Chief Human
Resources Of
ficer
, the General Counsel
and Corporate Directors of T
reasury
,
Pensions and Rewards.
Disclosure Committee
The Board of Management has
established a Disclosure Committee,
which consists of senior executives with
a background in corporate law
, finance
and investor relations. The task of the
Disclosure Committee is to establish
and maintain disclosure contr
ols and
procedur
es, and to advise the CEO, CFO
and General Counsel on the accurate
and timely disclosure of material financial
and non-financial information.
SUPERVISORY BO
ARD
This section provides an overview of
the responsibilities and governance
of the Supervisory Board. For an
understanding of the activities of the
Supervisory Board over the past year
,
refer to the Statement of the Chair of the
Supervisory Board and the Report of the
Supervisory Board. The r
esponsibility 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
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 the company and
its stakeholders. Major investments,
acquisitions and functional initiatives are
subject to Supervisory Board appr
oval.
The Supervisory Board is governed
by its Rules of Procedur
e (available on
our website). The Rules of Procedur
e
include the profile and the charters of
the Committees, which set out the tasks
and responsibilities of the Supervisory
Board, as well as its operational
processes.
Composition
In compliance with the Dutch Civil Code,
the Supervisory Board has a balanced
composition reflecting the natur
e and
variety of the company’
s businesses,
their international spread and expertise
in fields such as finance, economics,
information technology (IT), societal,
environmental and legal aspects of
business, government and public
administration.
The Supervisory Board maintains a skills
matrix, which provides an overview of
the skills and experience of the individual
members. The skills matrix can be found
in the Report of the Supervisory Board.
In addition, in accordance with the
Code, a Diversity Policy has been
adopted for the composition of the
Supervisory Board in its Rules of
Procedur
e. The objective of this policy
is to ensure a balanced composition,
taking account of nationality
,
age, gender
, education and work
background. For 2021, ther
e are no
divergences to report.
When nominating and selecting new
candidates for the Supervisory Board,
Leadership and governance
|
AkzoNobel Report 2021
70
account is taken of the Supervisory
Board pr
ofile and skills matrix, the
requir
ements of the Act on Management
and Supervision, and the principles and
provisions of the Code.
Appointment
Members of the Supervisory Board ar
e
nominated, appointed and dismissed
in accordance with pr
ocedures
identical to those previously outlined
for the members of the Board of
Management. In accordance with the
Code, Supervisory Board members ar
e
eligible for re-election once for a period
not exceeding four years. Members
may be re-elected a second time for a
period of two years. This period may be
extended by two years at the most. In
the event of a reappointment after an
eight-year period, reasons must be given
in the Report of the Supervisory Board.
T
erms of appointment are based on a
reappointment scheme, available on our
website. In 2021, one reappointment to
the Supervisory Board was pr
oposed to,
and approved by
, the AGM held on April
22, 2021.
Induction and training
Following appointment to the
Supervisory Board, new members
receive a compr
ehensive 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 requir
ements. The induction
includes meetings with the CEO,
CFO, all other Executive Committee
members and relevant members of
senior management, as well as site
visits. This enables new Supervisory
Board members to quickly build up
an understanding of AkzoNobel’
s
businesses and strategy
, as well as
the key risks and issues the company
faces. In addition, the Chair ensures
the Supervisory Board is pr
ovided with
regular updates, attends business
unit deep dives and ensures 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 ar
e of material significance
to the company
, and to the relevant
Supervisory Board member
, require
the approval of the Supervisory Boar
d.
Any such decisions will be recor
ded in
the annual report for the r
elevant year
,
with refer
ence to the conflict of interest
and a declaration that the relevant best
practice provisions of the Code have
been complied with. During 2021, no
transactions were r
eported under which
a member had a conflict of interest
which was of material significance to the
company and to the relevant member
.
Remuneration of the
Supervisory Board
Supervisory Board members r
eceive
a fixed annual remuneration and
attendance fee, which is determined
by the AGM. According to the Code,
it is not possible for members to be
remunerated in shar
es. An amendment
to the Remuneration Policy for the
Supervisory Board was appr
oved at
the AGM held on April 22, 2021. More
information on the remuneration of the
members of the Supervisory Board
and the Remuneration Policy of the
Supervisory Board can be found in the
Remuneration report and Note 26 of the
Consolidated financial statements.
SUPERVISORY BO
ARD
COMMITTEES
The Supervisory Board has established
three permanent committees – the Audit
Committee, Nomination Committee and
Remuneration Committee. Information
on the activities, 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 r
esponsibilities,
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 Boar
d
CORPORA
TE GOVERNANCE ST
A
TEMENT
This is the hugely impressive Dubai Eye, the world’
s highest and largest Ferris wheel, which was opened to visitors in late
2021. Measuring a dizzying 250 meters and featuring more than 9,000 tons of steel, we were sole supplier of pr
otective
coatings for the massive structure. It means we’ve now coated four of the world’
s most iconic observation wheels, the others
being the London Eye, Melbourne Star Observation Wheel and Singapore Flyer
.
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AkzoNobel Report 2021
|
Leadership and governance
Rules of Procedur
e. The committees
report on their deliberations and findings
to the full Supervisory Board.
SHAREHOLDERS AND THE
ANNUAL GENERAL MEETING
The AGM is an integral part of the
governance of the company and
its system of checks and balances.
The AGM reviews the annual r
eport
and decides on the adoption of the
financial statements and the dividend
proposal, as well as the discharge
and (re)appointment of members of
the Supervisory Board and Boar
d of
Management.
The AGM is convened by public notice
and the agenda, notes to the agenda
and the procedur
e for attendance and
voting at the meeting are published in
advance and posted on our website.
Matters proposed for consideration,
approval or adoption ar
e tabled as
separate agenda items and explained in
writing in advance of the meeting.
These proposals include, wher
e relevant:
• Adoption of the financial statements
• Dividend proposal
• Discharge of members of the
Supervisory Board and Boar
d of
Management
• (Re-)election of members of the Board
of Management and Supervisory
Board
• Advisory vote on the Remuneration
report
• Other important matters, such as
major acquisitions or the sale or
demerger of a substantial part of the
company
, as requir
ed by law
• Authorization of the Board of
Management to issue new shares
• Authorization of the Board of
Management to repur
chase shares
• Remuneration of members of the
Supervisory Board
• Material changes to the remuneration
policy of the Board of Management
• Amendments to the Articles of
Association (for more details see
art. 57 of the Articles of Association,
available on our website)
The company provides r
emote voting
possibilities to its shareholders. Holding
shares in the company on the r
ecord
date determines the right to exercise
voting rights and other rights relating to
the AGM. All resolutions ar
e made on
the basis of the “one share, one vote”
principle (assuming an equal par value
for each class of shares). All r
esolutions
are adopted by absolute majority
, unless
the law or the company’
s Articles of
Association stipulate otherwise.
Holders of common shares in aggr
egate
repr
esenting at least 1% of the total
issued capital, or
, according to the
Official List of Eur
onext Amsterdam
N.V
., repr
esenting a value of at least
€50 million, may submit proposals
for the AGM agenda. Such proposals
must be adequately substantiated and
submitted in writing, or electronically
, to
the company at least 60 calendar days
in advance of the meeting. Draft minutes
of the AGM are made available on the
company’
s website within three months
of the meeting date. The final minutes
are made available online within
six months of the meeting date.
Share classes
AkzoNobel has three classes
of shares: common shar
es,
cumulative preferr
ed shares and
priority shares. Common shar
es
are traded on the Eur
onext
Amsterdam stock exchange.
Common shares ar
e also traded
over
-the-counter on OTCQX in the US
in the form of American Depositary
Receipts (each American Depositary
Receipt repr
esenting one-third of a
common share). On December 31,
2021, a total of 181.6 million common
shares and 48 priority shar
es had been
issued. This includes shares held in
treasury which cannot be voted on
and which are not eligible for dividend.
Shareholders owning 3% or mor
e of the
issued capital and/or voting rights must
report this to the Dutch Authority for
the Financial Markets (AFM) as soon as
the threshold is r
eached or exceeded.
Relevant reporting by shar
eholders can
be found in the “Register of substantial
holdings and gross short positions” at
www
.afm.nl
The majority of shares in Akzo Nobel
N.V
. are included in a global certificate
and held through the system maintained
by the Dutch Central Securities
Depository (Euroclear Nederland). In
the past, Akzo Nobel N.V
. also issued
(physical) bearer shar
e certificates
(Bearer Certificates). A limited number
of Bearer Certificates have not yet
been surrender
ed to Akzo Nobel N.V
.,
although holders of Bearer Certificates
are entitled to a corr
esponding number
of shares in Akzo Nobel N.V
. It is noted
that, as a result of Dutch legislation
which became effective as of July 2019,
the relevant shar
es were register
ed in the
name of Akzo Nobel N.V
. by operation
of law as per January 1, 2021. Pursuant
to this legislation, owners of Bearer
Certificates will continue to be entitled
to a corresponding number of shar
es in
Akzo Nobel N.V
. until January 2, 2026.
On that date, their entitlement will expire
by operation of law
.
The priority shares ar
e held by the
Foundation Akzo Nobel (Stichting Akzo
Nobel). The priority shares ar
e limited
in transferability and profit entitlement
(see Note F of the Company financial
statements). The Foundation’
s Board
consists of members of AkzoNobel’
s
Supervisory Board who ar
e not members
of the Audit Committee. The Meeting
of Holders of Priority Shares has the
nomination right for the appointment of
members of the Board of Management
Related information
For more details about AkzoNobel shar
es and Bearer
Certificates, contact Investor Relations:
investor
.relations@akzonobel.com
Leadership and governance
|
AkzoNobel Report 2021
72
and the Supervisory Board, as well as
the right to approve amendments to the
Articles of Association of the company
.
No cumulative preferr
ed shares have
been issued to date. Cumulative preferr
ed
shares mer
ely have a financing function,
which means if necessary
, and possible,
they will be issued at or near the prevailing
quoted price for common shares.
The AGM held on April 22, 2021,
authori
zed the Board of Management for
a period of 18 months after that date or
,
if earlier
, until the date on which the AGM
again extends the authorization – subject
to approval fr
om the Supervisory Board
– to issue shares in the capital of the
company free fr
om preemptive rights,
up to a maximum of 10% of the issued
share capital. The Boar
d of Management
was also given a mandate to acquire
and to cancel held or acquired common
shares in the company’
s share capital.
The maximum number of shares that
the company will hold in its own share
capital at any time shall not exceed 10%
of its issued share capital.
Anti-takeover provisions
and control
According to the Code, the company is
requir
ed to provide an overview of its
actual or potential anti-takeover mea-
sures, and to indicate in what cir
cumstan-
ces it is expected that they may be used.
The priority shares may be consider
ed
to constitute a form of anti-takeover
measure, in r
elation 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 r
elation 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 mor
e
shareholders, acting in a concerted way
,
is materially in conflict with the interests
of the company
. In such cases, the
Supervisory Board and the Boar
d 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 Boar
d of
Management in such circumstances.
Although a deviation from pr
ovision 4.3.3
of the Code, the Supervisory Board
and the Board of Management ar
e 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 adverse to the company’
s
interests, the two Boar
ds reserve
the right to use all available powers
(including the right to invoke a response
time in accordance with pr
ovisions 4.1.6
and 4.1.7 of the Code), while taking into
account the relevant inter
ests of the
company and its affiliate enterprises and
stakeholders.
AUDITORS
The external auditor is appointed by the
AGM on proposal of the Supervisory
Board. The appointment is r
eviewed every
four years and the results of this r
eview
and assessment are r
eported to the AGM.
The external auditor attends all meetings
of the Audit Committee, and the meeting
CORPORA
TE GOVERNANCE ST
A
TEMENT
A stylish mural was created at a multicultural center for women in the Netherlands, thanks to help from our Flexa brand. Six
of our colleagues took part in the “Let’
s Colour” project, which was all about brightening up the interior of the Jasmijn center
in Groningen. Around 500 women fr
om different backgrounds and cultur
es regularly use the center
, which now has more
inspiring surroundings in which to meet each other and follow a series of courses and activities.
73
AkzoNobel Report 2021
|
Leadership and governance
of the Supervisory Board at which the
financial statements are appr
oved.
During these meetings, the auditor
dis
cusses the outcome of the audit
pro
ce
dures and the reflections ther
eof in
the auditors’ report. In particular
, the key
audit matters are highlighted. The auditor
receives the financial information and
underlying reports of the quarterly figur
es
and can comment on and respond to this
information. The external auditor is present
at the AGM and shareholders may ask
questions with regar
d to the audit.
Auditor independence
The Audit Committee and Board of
Management report their dealings with
the external auditor to the Supervisory
Board annually
, and also discuss the
auditor’
s independence.
Other services
One area of particular focus in corporate
governance is the independence of
the auditors. The Audit Committee has
been delegated direct r
esponsibility
for the compensation and monitoring
of the auditors and the services they
provide to the company
. Pursuant to the
Audit Profession Act, the auditors ar
e
prohibited fr
om providing the company
with services in the Netherlands other
than “audit services aimed at providing
assurance 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 r
eferred 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 requir
ements, unless local
statutory requir
ements so dictate. In
order to anchor this in our pr
ocedures,
the Supervisory Board adopted the
AkzoNobel Rules on External Auditor
Independence and Selection and the
related AkzoNobeI Pr
ocedure on Auditor
Independence. These documents are
available on our website.
Internal Audit
The Internal Audit function is mandated
to provide the Boar
d of Management,
Executive Committee and Audit
Committee with independent, objective
assurance on the adequacy of the
design and operating effectiveness of
the internal control framework described
below
. The Internal Auditor reports to
the Board of Management and has
direct access to the Audit Committee
and its Chair
. The function performs its
mandate based on a risk-based audit
plan, which is approved by the Boar
d of
Management and the Audit Committee.
It reports a summary of the audit findings
quarterly to the Board of Management
and Executive Committee, and the Audit
Committee, which culminates in an
annual assessment of the quality and
effectiveness of the company’
s internal
control systems.
SHARE DEALING RULES AND
RULES ON DISCLOSURE
CONTROL
In accordance with Dutch Iaw and
regulations (including the Eur
opean
Market Abuse Regulation), the company
maintains insider lists and exercises
controls ar
ound the dissemination and
disclosure of potentially price sensitive
information.
All employees and the members of
the Board of Management, Executive
Committee and Supervisory Board, ar
e
subject to the AkzoNobel Share Dealing
Rules, which limit their opportunities
to trade in AkzoNobel securities.
T
ransactions in AkzoNobeI shares
carried out by Board of Management,
Executive Committee and Supervisory
Board members (including their closely
associated persons) are, as and when
requir
ed, notified to the Dutch Authority
for the Financial Markets (AFM).
The Board of Management, Executive
Committee and Supervisory Board
members requir
e authorization from
the General Counsel prior to carrying
out any transactions in respect of
AkzoNobeI 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. In addition, all
employees are subject to the AkzoNobeI
Rules on Disclosure Contr
ol.
INTERNAL CONTROLS AND RISK
MANAGEMENT
Internal controls
The company has adequate procedur
es
for internal controls. The Board of
Management and Executive Committee
have established several Risk, Control
and Compliance Committees, which
are explained on page 76. In 2021,
we invested in enhancing our Internal
Control Framework and pr
ocess,
alongside the continued work on
system embedded controls, standar
d
role design and segr
egation of duty
monitoring. An integrated Risk and
Internal Control department supports all
businesses and functions in their work.
Risk management
Our risk management system is
explained in more detail in the next
chapter
. Reference is made to the
Statement of the Board of Management
relating to internal risk management and
control systems.
The AkzoNobel internal control
framework
Control envir
onment
Setting objectives
Responding to risk
Control activities
Monitoring activities
Information and communication
Leadership and governance
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AkzoNobel Report 2021
74
RISK MANAGEMENT
Doing business inherently involves taking
risks. By seeking to take 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 to pr
ovide transparency in our
processes and operations.
The Board of Management and
Executive Committee are r
esponsible
for managing the risks associated with
our activities and the establishment and
adequate functioning of appropriate risk
management and control systems (see
Statement of the Board of Management).
RISK MANAGEMENT
FRAMEWORK
Our risk management framework
is in line with the Enterprise Risk
Management – Integrated Framework
of COSO and the Dutch Corporate
Governance Code. It provides
reasonable assurance that our business
objectives can be achieved and our
obligations to customers, shareholders,
employees and society can be met.
For more information on our risk
management framework, including
clarity on risk appetite, visit the Risk
management section on our website.
RISK MANAGEMENT IN 2021
Risk management is an embedded
company-wide activity
, under
the responsibility of the Boar
d of
Management and Executive Committee,
focused on the areas of major risk
exposure.
During 2021, we held a significant
number of enterprise risk workshops
across the organization, as well as
one workshop focused on fraud risk.
Identified risk scenarios are prioritized
by responsible management teams
and functional experts, followed by the
definition of adequate mitigating actions.
We consider risk assessment and
mitigation to be a continuous process,
carried out against the background
of an evolving risk landscape, which
includes short, medium and longer
-term
challenges.
The symbols alongside the risk
descriptions opposite repr
esent
management’
s assessment of risk
development, compared with 2020.
For information related to financial
risk, see Note 27 of the Consolidated
financial statements.
W
e continuously
strive to foster a
high awareness of
business risks and
internal control.
Executive
Committee top 10 risks
and risk responses
Functions
and
business
units top 10
risks and risk
responses
Areas of
major risk
exposure (pr
ojects)
top 10 risks and
risk responses
Enterprise
Risk
Management
process
Risk identication
and assessment
Risk
proles
Risk response
per risk prole
Actions
Risk
proles
and
risk
responses
Enterprise
Risk
Management
reporting
Supervisory
Board
Risk
consolidation
Risk
transparency
75
AkzoNobel Report 2021
|
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Symbols indicate the following:
Risk assessed to increase.
Risk assessed to remain fairly stable.
External – Strategic
Global economy and the
geopolitical context
The world’
s unpredictable
geopolitical situation, with its
impact on supply and demand
and the highly competitive
markets in which we operate,
requir
es our ongoing attention
to protect our financial
performance.
Mitigating actions
• Geopolitical assessment as
part of investment decisions
and medium-term operational
planning
• Deployment of commercial
and procur
ement excellence
programs
• Continued focus on operatio-
nal cost, complexity reduction
and margin management
External – Strategic
Supply disruptions
and key raw material
shortages
Supply disruptions due to
continued worldwide supply
shortages, climate change
impacts and catastrophic
events on the supplier side
requir
e continuous attention to
protect our service levels to our
customers.
Mitigating actions
• Maintain and further improve
strong industry and market
intelligence analysis of
suppliers and raw material
market
• Drive supply chain network
design, end-to-end from
supplier to end customer
• Roll out raw material plan
through integrated business
planning
• Assess climate change impact
and develop mitigation plans
for own operations and key
suppliers’ locations (see
Sustainability statements)
• Continue to apply an internal
carbon price for large
investment decisions (see
Sustainability statements)
• Continue to deploy our
sustainable product portfolio
management to further
develop low carbon and
more cir
cular solutions (see
Sustainability statements)
•
External – Strategic
Pandemic
The risk of a global pandemic
materialized in 2020. The
company acted to safeguard
employee health and well-
being and minimize business
disruption.
Mitigating actions
• Safety guidelines for our staff,
contractors and/or third-party
suppliers working on our
premises, updated in r
eal time,
based on local regulations/
guidance
• Focus on well-being support
to our staff
• Agility of supply chain and
distribution channels
• Continuous monitoring of
pandemic impact, including
updating of forecasts
• Continued focus on opera-
tional cost and complexity
reduction
External – Operational
Information technology
and cybersecurity
With the increasing frequency
and magnitude of cybersecurity
threats facing us, we’r
e
taking additional measures to
strengthen our security to be
better able to respond and
recover as quickly as possible
in the event of an incident
impacting our company
.
Mitigating actions
• Continually reinforcing a cyber
-
security culture (intensified
training, awareness cr
eation)
• Continuation of system
rationalization to remove
redundant legacy systems
where they exist
• Increasing collaboration with
suppliers on various detection
and response activities and
measures
Internal – Strategic
Organic growth
Market leadership in those
parts of the world where our
markets are gr
owing is one of the
cornerstones of our strategy
. A
global presence, in combination
with locally tailored go-to-market
models, is an essential ingredient
of success.
Mitigating actions
• Drive BU strategic mandates
underpinning Grow & Deliver
strategy
• Investment in sales capability
and deployment of commercial
excellence programs
• Driving demand planning,
product innovation and supply
chain agility through integrated
business planning
Internal – Strategic
Innovation, identification
and successful imple
men-
tation of major trans-
forming technologies
Our leadership positions and
future success ar
e underpinned
by investment in resear
ch, the
adoption of major transforming
technologies and continuous
development of the talents and
skills of our people.
Mitigating actions
• Improve product management
lifecycle through the Pr
oduct
Management Network
• Build leading capability and
value chain collaboration to
underpin our 50% carbon
reduction commitment by
2030
• IT resources to support the
business in new technology
applications
Internal – Operational
Attraction and retention
of talent
Our organization’
s ability to
attract and retain talent in a
tightening talent market and
rapidly evolving business
environment determines, to a
large extent, the success of our
organization to deliver on our
targets.
Mitigating actions
• Strengthen AkzoNobel’
s
employer value proposition,
based on our commitment
to employee growth and the
company’
s purpose
• Focus on talent acquisition
plan, talent development
programs and succession
planning (e.g. T
alent and
Opportunity Review
, Y
oung
AkzoNobel, nomination of
T
alent Managers)
• Embed T
alent Management
Framework driving talent and
leadership development
Leadership and governance
|
AkzoNobel Report 2021
76
INTEGRITY AND COMPLIANCE MANAGEMENT
Below is a summary of the 2021
priorities and key activities, and the
outcomes thereof, as r
equired pursuant
to the Dutch Decree on the publication
of non-financial information.
GOVERNANCE AND
ORGANIZA
TION
The Executive Committee is responsible
for maintaining a culture of integrity
and ensuring an effective Integrity
and Compliance program and contr
ol
framework. The Supervisory Board’
s
Audit Committee oversees this respon-
sibility
. The Executive Committee has
delegated certain responsibilities to the
following working committees (which
are further explained on our website):
Integrity and Compliance
governance committees
We’ve r
edesigned the Integrity and
Compliance governance model and have
Integrity and Compliance governance
committees in place in all eight business
units, Global Manufacturing, Global
Supply Chain and our key countries.
These committees consist of business
unit leadership and key corporate
function leaders, including the Integrity
and Compliance Manager
. The
Integrity and Compliance governance
committees identify
, discuss and
address tr
ends, risks and best practices,
and drive the operationalization of the
Integrity and Compliance program into
the organization, with a strong focus on
prevention. All committees meet at least
on a quarterly basis.
Integrity and Compliance
SpeakUp! Committee
Reviews investigations into SpeakUp!
reports involving alleged violations of
the Code of Conduct and material
violations of laws and regulations.
Also decides on disciplinary measures
and control impr
ovement actions, as
well as monitoring and responding to
any trends or irr
egularities identified
in investigations. By submitting these
cases through a central Integrity and
Compliance SpeakUp! Committee, the
company ensures transpar
ency and
consistency of measures thr
oughout
the organization. There have been
no individual matters or disciplinary
actions discussed with the Integrity and
Compliance SpeakUp! Committee that
would warrant separate disclosure in the
annual report. Should ther
e be material
compliance matters, or material internal
control weaknesses or impr
ovements
in the future, these would be addr
essed
through the RCCs (see below) and
discussed with the Audit Committee and
external auditor
, and where appropriate
disclosed in accordance with the
applicable legal requir
ements.
Risk, Control and Compliance
Committees (RCC)
Responsible for supervising the
effectiveness of the contr
ol environment
and reviewing weaknesses in this
environment, as well as pr
ogress on
improvement actions. Ther
e are eight
business unit RCCs and seven functional
RCCs, in addition to a group RCC. They
each met quarterly in 2021.
Human Rights Committee
Responsible for supervising the
company’
s human rights control
framework and driving further expansion
of the human rights program. W
e
have strengthened the governance
of our human rights program. For
more information on our human rights
framework and program, see the
Sustainability statements.
Privacy Committee
Responsible for supervising the
company’
s privacy control framework
and driving further expansion of the data
privacy program. Several critical pr
ojects
were successfully deliver
ed in 2021.
These included the introduction of a new
program for the international transfer of
personal data in order to comply with
the Schrems II ver
dict of the EU Court of
Justice, and the creation and submission
of stand-alone Binding Corporate Rules
for the UK due to Brexit. Thr
oughout the
year
, a lot of work was carried out on
digital privacy compliance – e.g. cookie
compliance and social media (marketing)
activities – as well as the implementation
of new local privacy laws, such as in
Brazil, South Africa and more r
ecently in
Saudi Arabia and China.
Integrity and Compliance
function
Day-to-day management of our Integrity
and Compliance program is delegated
to the Integrity and Compliance team.
The function is led by the Director of
Integrity and Compliance, who reports to
the General Counsel. This team includes
experts in integrity and compliance
program design, legal experts in the field
of competition law
, anti-bribery and anti-
corruption, export control and sanctions,
data privacy and human rights, and
the regional Integrity and Compliance
managers in all regions driving the
implementation of the program.
T
o ensure the company maintains and
strengthens its cultur
e of integrity
, the
Integrity and Compliance team – together
with various other functions and stake-
holders across the organization – focuses
its efforts on the following key ar
eas:
• Help leaders set a strong tone at the
top and lead by example
• Drive awareness and ownership
of all employees through ef
fective
policy management, training and
communication
W
e’re committed to leading with
integrity in our industry
.
It’
s one
of our three core values for doing
business.
We continue to further
advance and e
xpand our Integrity
and Compliance program to help
ensure compliance with laws
and regulations,
empower and
enable our employees to make f
air
and honest decisions and bring
integrity to life.
77
AkzoNobel Report 2021
|
Leadership and governance
• Design and implement effective
controls
• Risk management
• Investigations of SpeakUp! matters,
focused on identifying control
action items and sharing lessons
learned
The regional Integrity and Compliance
managers contribute to further
strengthening the cultur
e of integrity
.
This includes identifying and addressing
local risks and cooperating with the
businesses and functions to tailor the
program to local needs, monitor contr
ols
and follow up on SpeakUp! cases.
In 2021, the heads of Integrity and
Compliance, Internal Control and Internal
Audit met at least quarterly to discuss
findings and trends, and to align actions.
RISK MANAGEMENT
Every year
, each business unit and major
function identifies its key compliance
risks and defines actions to mitigate
these risks. These actions form part of
the business unit/function integrity and
compliance plan, which in turn forms
part of a larger BU/function legal plan.
POLICY MANAGEMENT
We continued to impr
ove and expand
our Policy Portal, a one-stop-shop
for key policies, rules and procedur
es
relating to our global pr
ocesses and
key topic areas. By r
educing complexity
and increasing transpar
ency and
consistency
, it’
s easier for employees
to access and understand which rules
apply to their job. As part of our policy
lifecycle management, we revised,
for example, rules and procedur
es on
various anti-bribery and anti-corruption
risks. We also distributed business-
friendly practical guidance, one pagers
and do’
s and don’ts, for example
regar
ding conflicts of interest, customer
incentive programs and pricing. Our
policies and supporting tools drive
awareness and knowledge within the
broader organization; no major risks
or issues have been identified in the
aforementioned compliance fields.
COMMUNICA
TION
We launched a new tagline for Integrity
and Compliance – Bring integrity to
life – as it’
s everyone’
s responsibility
to do business the right way
. In order
to increase awar
eness and ownership
among all employees on integrity and
compliance topics, we redesigned
the Integrity and Compliance monthly
communication campaigns to address a
specific topic through a quiz, r
eflecting
lessons learned from real-life cases. W
e
also launched “3P Guidance (Purpose,
Process and Per
ception)” to help the
organization think through the ethical
dilemmas shared on a quarterly basis
through our Integrity and Compliance
governance committee meetings, and
through various other channels. In
addi
tion, we celebrated another global
Integrity Week, with the 2021 theme
being: “Conflict of interest – Be an
open book”.
TRAINING AND EDUCA
TION
We continued to counsel and educate
employees on integrity and compliance
rules and controls thr
ough e-lear
nings
and in-person sessions. Due to the
challenges posed by COVID-19, only a
limited number of face-to-face trainings
took place. Virtual and video conference
trainings were of
fered to help increase
employee engagement. Employees
are also r
equired to follow mandatory
role-based and risk-based e-learnings.
T
raining included our Code of Conduct,
fraud, operating a diverse and respectful
workplace, competition law
, export
control, information security and data
privacy
. We focused in particular on our
blue collar workers, as we designed
a new
, short and interactive Code of
Conduct training covering topics of
special relevance to them, leading to
>90% completion rates.
THIRD P
ARTY RISK MANAGE-
MENT PROGRAM
We conducted a curr
ent state
assessment to establish the maturity of
our current thir
d party risk management
program and all r
elated processes. In
addition, we completed an assessment
of our current in-use technology
.
We further expanded the scope of our
third party scr
eening to address recent
regulatory developments. For example,
in line with new legislation in Colombia,
we put in place risk-based screening of
our business partners in order to pr
event
money laundering, financing of terrorism,
and financing of proliferation of weapons
of mass destruction (in addition to
bribery and corruption).
MONITORING
We have several pr
ocesses to monitor
compliance by employees and
business partners with our rules and
procedur
es. Managers are also requir
ed
to self-assess and confirm compliance
with company rules and procedur
es
as part of the internal control self-
assessment. Our supplier performance
is monitored thr
ough the EcoV
adis
self-assessments and on-site third party
audits that we carry out via the T
ogether
for Sustainability initiative. From a
competition law perspective, we also ran
amnesty programs for newly acquir
ed
businesses as part of the integration
process into the wider gr
oup.
The Internal Audit function performs
numerous audits on our operations.
Their audit plan is risk-based and
takes account of prior compliance and
internal control findings. Several internal
audits were held at the r
equest of the
Integrity and Compliance function to
validate compliance with our rules
and procedur
es in certain units or on
certain risk areas. W
e have also further
advanced our Gift and Conflict of Interest
Register
, and designed automated key
anti-bribery and anti-corruption controls
to increase contr
ol efficiency
.
Leadership and governance
|
AkzoNobel Report 2021
78
GRIEV
ANCE AND INVESTIGA
TION
We wer
e highlighted by T
ransparency
International NL as having the number
one whistleblowing framework in its
most recent study of top companies
in the Netherlands. Our SpeakUp!
grievance mechanism offers employees
and third parties a means to raise
concerns relating to compliance with our
Code of Conduct. In 2021, we created a
dedicated investigation team, who follow
an investigation protocol which adher
es
to strict principles of confidentiality
,
respect for anonymity
, non-retaliation,
objectivity and the right to be heard. The
investigation program is being evaluated
to reflect the EU Whistle-blower Dir
ective
as transposed into national laws.
In 2021, the total number of reports
across all channels incr
eased slightly
,
driven by a number of factors, including
increased communication on the
SpeakUp! process, COVID-19 r
elated
concerns and use of the system to make
general enquiries unrelated to the Code
of Conduct. We continue to see
higher levels of reporting thr
ough our
SpeakUp! hotline, web portal and
mailboxes, as opposed to reports to/by
management. All reports and alerts
led to 19 dismissals and various
other disciplinary measures and
control impr
ovements, confirming
the value of the company’
s
grievance framework.
REPORTING
During 2021, the Director of Integrity
and Compliance reported every four
months to the Executive Committee and
the Audit Committee of the Supervisory
Board on material developments of
the Integrity and Compliance program.
Should there be any material
investigation matters, these are
discussed with the external auditor on
a quarterly basis.
There have been no individual matters
or disciplinary actions discussed with
the Integrity and Compliance SpeakUp!
Committee that would warrant separate
disclosure in the annual r
eport. Should
there be material compliance matters or
material internal control weaknesses or
improvements in the futur
e, these would
be addressed thr
ough the RCCs and
discussed with the Audit Committee and
external auditor
, and where appropriate,
disclosed in accordance with the
applicable legal requir
ements.
Visit the SpeakUp! reporting website
https://akzo.no/SpeakUp
The number of dismissals from investigations was not centrally tracked in 2019.
SpeakUp! reports
2019
2020
2021
T
otal reports and alerts register
ed
222
250
305
Reports received through SpeakUp!
164
180
232
Integrity
59
61
94
Safety
5
21
17
Sustainability
100
98
121
Dismissals resulting from SpeakUp! r
eports
–
6
6
Conclusions to SpeakUp! reports closed in
calendar year 2021:
Substantiated
Unsubstantiated
Other (e.g. referred)
28
82
54
27
70
46
33
50
106
79
AkzoNobel Report 2021
|
Leadership and governance
CASE STUDY
The exhibition showcases works from past and pr
esent
and offers a contemporary look at the world ar
ound
us, with new and experienced talent hanging side by
side. The works on display unfold to present a diverse
spectrum of images and stories, constantly giving rise
to new connections.
All Eyes shares a compelling mix of styles, including
special treasur
es from the collection, works of art fresh
from the studio and early acquisitions that pr
oudly
justify their position as milestones in the changing spirit
of the age.
“Since the AkzoNobel Art Foundation was established
in 1995, our aim has been to acquire works that r
eflect
the world as we experience it,” says Hester Alberdingk
Thijm, Director of AkzoNobel’
s Art Foundation (pictured
below). “We look for artists who ar
e questioning
and transforming our global society
. All Eyes is the
culmination of more than 25 years of powerful images
and stories.”
Artists on display include Otobong Nkanga, Remy
Jungerman, Melanie Bonajo, Afra Eisma, Ger van Elk,
Susan Hiller
, Louise Giovanelli, Y
ael Bartana, Emma
T
albot, Roger Hior
ns and Jan Andriesse.
In line with AkzoNobel’
s proud heritage, color
,
innovation and technology are among the main
collecting themes. “The AkzoNobel Art Foundation
is generally regar
ded as being one of the most
progr
essive corporate collections in Europe – partly
because it has always regar
ded diversity as an
important principle,” adds Thierry V
anlancker
,
AkzoNobel CEO and Chair of the AkzoNobel Art
Foundation. “Out of more than 1,800 artworks, half
have been created by women and many ar
e by
non-Western artists. With this new exhibition, we’re
proud to celebrate that diversity and the pioneering
spirit we share in art, science and business.”
The All Eyes exhibition was opened by Rein Wolfs,
Director of the Stedelijk Museum in Amster
dam
(pictured below on the left along with Hester Alber
dingk
Thijm and Thierry V
anlancker).
All Eyes on AkzoNobel Art
Foundation’
s 25th anniversar
y
AkzoNobel’
s Art Foundation has been collecting art
for more than 25 years, underlining the company’
s
dedication to supporting culture and the arts. This called
for a special celebration during 2021 with the opening
of the All Eyes jubilee exhibition at the company’
s head
office in Amster
dam, the Netherlands.
Artwork pictured left: Y
ael Bartana | What If Women Ruled The
World | neon | 260 x 98 cm | AkzoNobel Art Foundation
Leadership and governance
|
AkzoNobel Report 2021
80
REMUNERA
TION REPOR
T
Changes in the remuneration policy for
the Board of Management compar
ed
with the previous policy ar
e as follows:
1.
We decided to update the labor
market peer group and only include
EU peers.
Dutch European
• ASML
• Air Liquide
• DSM
• Arkema
• Philips
• Clariant
• Randstad
• Covestro
• RELX
• Evonik Industries
• Signify
• Givaudan
• Wolters Kluwer
• Henkel
• Lafarge Holcim
• Sika
• Solvay
As AkzoNobel seeks to outperform
its sector peers and aims to attract
high caliber members of the Board of
Management, a competitive refer
ence
point for total remuneration is set between
median and third quartile of the Eur
opean
peer group: median for base salary and
STI and between median and third quartile
for L
TI. Remuneration increases above
the median market level are r
eserved for
Board of Management members who
consistently outperform their targets.
2.
T
o support transparency and
alignment with the strategic plan, the
list of STI metrics chosen from each
year is being replaced by specific
STI metrics that will be applicable
throughout the ef
fective period of the
policy
. Metrics for the STI and L
TI are
directly derived fr
om the strategic plan
and have been updated compared
with the previous policy
.
3.
In order to reach the competitive total
compensation level, and in line with
market practice, the on-target value
of the variable remuneration has been
adjusted. For the CFO, the on-target
short-term incentive (STI) level has
been increased fr
om 65% to 80% of
base salary
. For the CEO, the L
TI has
been increased fr
om 150% to 200%
of base salary
, emphasizing the long-
term focus of the pay-for
-performance
relationship.
4.
As the Performance Incentive Plan
concluded in 2020, from 2021
onwards, the temporary suspension
of the Share-Matching Plan is being
lifted as planned. This reiterates the
importance of share ownership,
which underpins alignment over the
long term. The Share-Matching Plan
is being simplified by removing the
link between allowed investment and
the share-matching level, and the
fulfillment of the Share Ownership
Requirement (SOR).
Changes in the remuneration policy for
the Supervisory Board compar
ed with
the previous policy ar
e summarized
below:
An external consultant has carried out
an external benchmark of Supervisory
Board membership fees versus AEX
companies and AkzoNobel’
s European
remuneration peer gr
oup. Based on
this benchmark, the Board concluded
that the level of the fixed fees – which
have remained unchanged since 2014 –
fell short of a competitive level. The fixed
fees for Supervisory Board members
have therefor
e been increased: by
€20,000 for the Chair and the Deputy
Chair
, and by €15,000 for the other
members. Committee fees and the
attendance fee for meetings outside
the country of residence r
emain
unchanged.
Visit our website for a full description of
the remuneration policy for the Boar
d
of Management and the Supervisory
Board.
The 2020 Remuneration report r
eceived
49.7% of favorable votes at the AGM
(advisory vote). Investors and other
stakeholders explained they would
have liked more details on the Boar
d
of Management’
s personal objectives
relating to the short-term incentive. They
also perceived a lack of transpar
ency on
the discretionary adjustment to evaluate
performance against the ROI target for
long-term incentives, which was set
at the beginning of 2018 to align with
the new Grow & Deliver strategy
. This
2021 report includes impr
ovements in
transparency on the r
elevant personal
objectives, as requested, and is subject
to an advisory vote at the 2022 AGM.
Strategic focus
We have a clear strategic focus to
become the refer
ence in paints and
coatings, with strong global brands,
leading market positions and a
balanced geographic exposure acr
oss
all regions. W
e strive to outperform our
competitors, to deliver a solid return to
our shareholders and to achieve long-
term sustainable value creation for all our
stakeholders.
Our Grow & Deliver strategy is aimed
at achieving growth at least in line with
our relevant markets, while delivering
further profitability impr
ovement.
Revenue growth, EBITDA and r
etur
n
on investment are the prime success
indicators of this balanced approach.
The Supervisory Board closely monitors
realization of the strategy and r
egularly
discusses progr
ess with the Board of
Management.
The overriding importance of our
long-term sustainable value creation
is reflected in the composition of the
remuneration packages for members
of our Board of Management and
Supervisory Board, as it is essential
to attracting and retaining high
caliber members to our Board of
Management and Supervisory Board.
The revised Eur
opean directive on the
encouragement of long-term shareholder
engagement (SRD II), and its codification
This report includes both a summary of
our Board of Management and Supervisory
Board r
emuneration policies, and our annual
report on r
emuneration, which sets out how
our policy was applied in 2021 – and how
it will be applied in 2022. On April 22, 2021,
the AGM approved the new r
emuneration
policies for the Board of Management, with
a majority of 86.3% of the votes, and for the
Supervisory Board, with a majority of 99.0%
of the votes.
81
AkzoNobel Report 2021
|
Leadership and governance
in Dutch law
, have been considered in
the disclosure pr
esented in this report.
1.
REMUNERA
TION FOR THE
BO
ARD OF MANAGEMENT
The remuneration policy is designed to
incentivize the Board of Management
to achieve the company’
s objectives,
while balancing the perspectives
of shareholders and other key
stakeholders. The focus on performance
is achieved by including both short and
long-term incentives that are aligned with
the company strategy to realize long-
term sustainable value creation. V
ariable
remuneration pr
ovides an incentive to
realize long-term value cr
eation. For
the short term, the Supervisory Board
sets operational targets over a one-year
period that are crucial to the company
and are pr
e-conditions to value creation.
The biggest portion of the remuneration
packages of Board of Management
members is directly aimed at strategic
priorities that contribute to building
sustainable long-term value creation,
with targets for return on invested
capital, adjusted EBITDA, revenue
growth and specific envir
onmental,
social and governmental (ESG) goals.
Prior to agreeing on incentives, the
Remuneration Committee conducted
scenario analyses of the possible
financial outcomes of meeting differ
ent
performance levels, and how they may
affect the structur
e and value of the Board
of Management’
s total remuneration.
The scenarios that have been evaluated
by the Remuneration Committee involve
the following:
• Threshold or below: Under
-
performance or performance at
threshold level, no STI pay-out and no
vesting of L
TI shares
• T
arget: Performance broadly in line
with expectations, STI pay-out and
vesting of L
TI shares at target
• Maximum: Exceptional performance,
STI pay-out and vesting of L
TI shares
at maximum
• Maximum plus: Same as maximum
scenario, but a share price incr
ease
after three years of 10% is consider
ed
The Remuneration Committee
has concluded that, based on the
scenarios considered and the total
remuneration level in each scenario,
there’
s a strong r
elationship between
pay and performance for the Board
of Management. The remuneration
policy also helps avoid any unintended
Goal
The goal of AkzoNobel’
s remuneration policy for the Board of Management is to of
fer an on-target total remuneration package
around the median of the labor market peer group for base salary and STI, and between median and thir
d quartile for L
TI.
Purpose
Design and link to strategy
V
alue
T
otal direct compensation
Is the basis for benchmark efforts, i.e. the refer
-
ence to the labor market peer group.
Base salary and variable income. V
ariable income concerns the perfor-
mance-related short-term incentive (STI) and the long-term incentive plan (L
TI).
In addition, Board of Management members are entitled to certain benefits.
V
alue of each respective item is specified in
more detail below
.
Base salary
Basic pay for the job.
Aims to provide a fair and competitive basis for the total pay level to attract
high caliber leaders. In-depth benchmark at least every three years.
Base salaries at AkzoNobel target the median
of the labor market peer group. Remuneration
increases above the median market level are
reserved for Board of Management members
who consistently outperform their targets.
Short-term incentive (STI)
Aligning short-term business objectives and
business drivers towards long-term value
creation. Driving pay for performance.
The Supervisory Board sets operational targets for the respective perfor
-
mance year and determines the extent to which they have been achieved.
By ensuring that long-term value creation is properly r
eflected in stretched
yet achievable targets, the realization of strategic business objectives is
addressed. 70% of the on-target STI is linked to financial objectives and 30%
is related to personal objectives.
On-target performance: 100% of annual base
salary for CEO and 80% for CFO. Maximum
opportunity for CEO capped at 150% and for
CFO at 120%. Threshold: no STI pay-out below
threshold level.
Long-term incentive (L
TI)
Encouraging long-term, sustainable economic
and shareholder value creation – both absolute
and relative to competitors – and to align Board
of Management interests with those of share-
holders, as well as ensuring retention of the
members of the Board of Management.
Performance shares are awar
ded every year
, to be converted into shares upon
realization of pre-defined targets, observing a thr
ee-year vesting period. An
additional two-year holding period after vesting applies. Performance targets
are based on company strategy
, driving long-term value creation. 80% of
L
TI targets are linked to financial goals and 20% are linked to environmental,
social and governmental (ESG) goals. Performance is measured over three
financial years, starting with the year of grant.
The on-target grant equals 200% of base salary
for the CEO and 150% for the CFO. Maximum
vesting opportunity is 150% of the number
of performance shares vested, which equals
300% for the CEO and 225% for the CFO.
Shareholding requir
ement
Aligning reward to the inter
ests of stakeholders
and emphasizing confidence in performance
and strategy
.
Members of the Board of Management are expected to build up a shar
ehold-
ing in the company; the minimum shareholding requir
ement must be accrued
in five years. Considered are shar
es privately purchased and vested shares
granted under AkzoNobel share-based compensation plans.
The minimum share-holding requir
ement is
300% of annual base salary for the CEO and
150% for the CFO.
Share-Matching Plan
Aligning reward to the inter
ests of stakeholders
and emphasizing confidence in performance
and strategy
.
The Share-Matching Plan awards shar
es to members for shares they have
invested in from their STI proceeds and held over a thr
ee-year period. When
they retain these shares for thr
ee years, the company will match such shares
one on one, subject to continued employment.
Board members are r
equired to invest 25%
of their STI proceeds (net after tax and other
deductions) and may invest another 25% (max
investment is 50% of total net STI).
Pension and other benefits
Post-retirement r
emuneration and other bene-
fits, creates alignment with market practice.
A company paid contribution, based on age, to allow participation in a private
pension plan, as applicable to Netherlands-based employees. Other benefits
include sick pay (aligned with Netherlands-based employees) and a monthly
transportation allowance of €2,000.
Pension contributions for both the CEO and
CFO equal 19.6% of base salary
.
Leadership and governance
|
AkzoNobel Report 2021
82
consequences of providing incentives
that are too attractive and support
inappropriate risk-taking, by selecting
a total direct compensation pay mix
at target that consists of at least 25%
of base salary and defining maximum
opportunities and targets that closely
reflect AkzoNobel’
s overall performance.
Goal-setting is crucial to driving pay for
performance aligned with the company
strategy
, and to ensure that decisions
made – and results deliver
ed – are
aligned with the interests of AkzoNobel’
s
stakeholders. The Supervisory Board
sets goals, their respective weight
and targets (i.e. metrics) for the
respective performance year under
the STI and L
TI scheme, considering:
(1) Company strategy (2) Focus on
long-term value creation (3) Historical
performance, business future outlook
and circumstances and priorities (4)
Stakeholder expectations. Goals must
be stretching yet achievable.
When implementing the policy
, the
Remuneration Committee consults
external remuneration professionals to
obtain appropriate benchmark data, and
independent advice on other matters as
requir
ed. The remuneration principles
that apply for the Board of Management
are aligned with those applied mor
e
broadly in the company
. This provides a
shared sense of purpose and dir
ection
at differ
ent management levels and
a shared r
eward when success is
achieved. The table on page 81 specifies
the elements of the remuneration policy
,
describing purpose, design and the
link to our company strategy
, as well as
their (potential) value. The table below
gives an overview of the remuneration
of the members of the Board of
Management who were in of
fice in 2021.
A split between the proportions fixed
versus variable remuneration paid is
shown in the diagram at the bottom of
this page.
Base salary
The 2021 base salaries were appr
oved
at the AGM on April 22, 2021, and made
retr
oactively effective from January 1,
2021:
• Thierry V
anlancker
, CEO: €1,150,000
• Maarten de Vries, CFO: €710,000
Short-term incentive (STI)
In 2021, the financial objectives of the
short-term incentive were adjusted
operating income (OPI) and operational
cash flow (OCF). The individual and
qualitative objectives reflect pr
ogress
towards the achievement of long-
term strategic objectives. The tables on
page 83 summarize the performance
achieved.
Remuneration of Board of Management for the r
eported financial year
Fixed
remuneration
V
ariable
remuneration
Post-contract
compensation
4
T
otal
remuneration
in €
L
TI value
based on
Base
salary
Fringe
benefits
1
One-year
variable
2
Multi-year
variable L
TI
3
Thierry V
anlancker
Chief Executive Officer
IFRS2 expenses
1,150,000
33,500
888,950
3,973,511
225,400
6,271,361
Market value at year
-end
5
1,150,000
33,500
888,950
3,216,345
225,400
5,514,195
Maarten de Vries
Chief Financial Officer
IFRS2 expenses
710,000
33,500
439,064
1,261,556
139,200
2,583,320
Market value at year
-end
5
710,000
33,500
439,064
916,268
139,200
2,238,032
1
Social security contributions and car arrangement.
2
In 2022, the Board members will invest 50% of their STI proceeds
(net after tax) under the Share-Matching Plan.
3
Costs relating to share awar
ds include non-cash expenses of
performance share plan and Share-Matching Plan.
4
Compensation intended for build-up of retirement benefits instead
of pension contributions.
5
Market value at year
-end for multi-year variable L
TI is based on
the number of shares that vested during the year multiplied by the
share price of €96.50 at December 31, 2021.
CEO fixed vs performance-linked
in %
CFO fixed vs performance-linked
in %
Base salary
Fringe benefits
Post-contract compensation
One-year variable
Multi-year variable
Fixed
22.5
Performance-linked
77.5
Short-term
36.6
Long-term
63.4
Fixed
34.2
Performance-linked
65.8
Short-term
51.2
Long-term
48.8
REMUNERA
TION REPOR
T
83
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|
Leadership and governance
In determining the outcome of the STI
elements, the Remuneration Committee
applied a reasonableness test in which
the actual level of the performance
was critically assessed in light of the
assumptions made at the beginning
of the year
, taking into account the
continued impact of COVID-19 and
shortages (including significant price
increases) in raw materials. The test also
included an assessment of the progr
ess
made with the strategic objectives under
prevailing market conditions.
The Remuneration Committee subse-
quently determined that bonus
payments for the Board of Management
would be:
• Thierry V
anlancker
, CEO: €888,950
(77.3% of salary)
• Maarten de Vries, CFO: €439,064
(61.84% of salary)
No matching shares wer
e granted
to the CEO or CFO in 2021, as this
arrangement was suspended for STI
payments made in the years 2019, 2020
and 2021. The value of the Share-
Matching Plan for these three years
was invested in the 2020 Performance
Incentive Plan.
LONG-TERM INCENTIVES (L
TI)
Conditional grant L
TI share plan
2021-2023
The Remuneration Committee
determines the grant levels to be made
in respect of members of the Boar
d
of Management, within the limits and
plans that have been approved by
shareholders. In 2021, the CEO r
eceived
a conditional grant of shares equivalent
to the face value of 200% of his annual
base salary and the CFO received a
conditional grant of shares equivalent
to the face value of 150% of his annual
base salary
. The grant price was
determined based on the average share
price of an AkzoNobel common share in
the two weeks following publication of
the annual results on February 17, 2021:
• 26,713 shares were conditionally
granted to Thierry V
anlancker
, CEO
• 12,369 shares were conditionally
granted to Maarten de V
ries, CFO
V
esting of the conditional grant is linked
to four performance metrics:
Measure
Weight
AkzoNobel adjusted EBITDA (in mln)
40%
AkzoNobel return on investment (in %)
20%
AkzoNobel revenue growth (in %)
20%
Environmental, social and governance
(ESG)
20%
Revenue growth is compar
ed with a defi-
ned industry peer group, consisting of the
following companies in the paints and
coatings sector: Sherwin-Williams, Nippon
Paint, PPG, Axalta and BASF Coatings.
Organic growth rates to calculate the
performance take into consideration price,
mix, volume growth and exclude the
effects of exchange rates and mergers
and acquisitions. For Axalta and Sherwin-
Williams, only organic growth percentage
of the performance coatings business
growth is taken into consideration.
The ESG targets consist of four equally
weighted targets related to AkzoNobel’
s
People. Planet. Paint. approach (see
table on page 84).
The Supervisory Board determines
for each target: (i) the performance
level below which no shares vest; (ii)
the performance level at which the
target number of shares vest; and (iii)
the performance level at which the
maximum number of shares vest.
Special restricted shar
e grant
At the 2021 AGM, CEO Thierry
V
anlancker was reappointed for a
two-year period. His reappointment was
supported with 97.5% of the votes at the
STI on financial objectives
Performance metric
Weighting
Threshold
Maximum
Performance
Pay-out
Adjusted OPI (in € mln)
40%
Corresponding target
1,000
1,150
1,092
Corresponding award
0%
150%
92.0%
36.8%
OCF (in € mln)
30%
Corresponding target
1,000
1,250
774
Corresponding award
0%
150%
0%
0%
T
otal
36.8%
STI on personal objectives
Personal
objective
Assessment of performance
0%-150%
Perfor
-
mance
Weighting
Weighted
pay-out CEO
Weighted
pay-out CFO
Pricing strategy
Significant (above target) progress has been made on this initiative to of
fset
raw material increases.
150%
1/6
Performance
score of
135%
Resulting in
pay-out of
40.5%
Performance
score of
135%
Resulting in
pay-out of
40.5%
Organization
New operating model for Grow & Deliver implemented and fully operational.
Y
ear one achievement for implementation of the key strategic initiatives
above financial plans for majority of the plans.
140%
1/3
Culture
OHI score improved by thr
ee points.
% female leaders in Senior Executive roles according to plan (2021 targets).
Started the change leadership journey and also executed on commitments/
areas for improvement.
127%
1/2
Leadership and governance
|
AkzoNobel Report 2021
84
REMUNERA
TION REPOR
T
AGM. As part of his reappointment, Mr
.
V
anlancker was granted a special grant of
17,500 AkzoNobel shares to compensate
for the loss of shares due to the two-year
reappointment and the fact that shar
es
granted as from 2021 will only vest on a
pro-rated basis. As the special grant was
not subject to performance conditions,
it was decided to apply a 30% discount
on the “on-target” value.
The special share grant came into ef
fect
on July 21, 2021 (i.e. the first day of the
open window after the AGM) following a
notification to the Netherlands Authority for
the Financial Markets (Autoriteit Financiële
Markten, “AFM”) and vested in full that
same day
. The shares have a r
estriction
date of April 20, 2023 (or the actual date
of the AGM at which Mr
. V
anlancker will
relinquish his position as CEO).
V
esting of the L
TI share plan
2019-2021
Under the L
TI share plan 2019-2021,
conditional grants of 21,379 shares
were made to the CEO and 14,387
shares to the CFO.
In line with the remuneration policy
,
vesting of 50% of the shares conditio-
nally granted in 2019 was linked to
AkzoNobel’
s ROI performance, which was
reviewed at the end of the performance
period by the Supervisory Board. The
targeted ROI of 25% – which was also
applicable to the share grant in 2019
as part of the 15 by 20 strategy – was
intended to deliver profitability in line with
leading peers. It was initially announced
by previous management in April 2017.
When the Grow & Deliver strategy
was launched, the company updated
its ROI ambition in 2020 from 25% to
20%, taking into account lower revenue
growth, the impact of IFRS 16 and
recent bolt-on acquisitions. As a r
esult,
as they did last year
, the Supervisory
Board r
ecognized that the 2019 ROI
pay-out curve, with an ambition of 25%,
no longer aligned with the new strategy
.
They applied their discretionary power to
evaluate performance against the 2020
ROI pay-out curve, with an ambition
of 20%. In both pay-out curves ROI is
excluding unallocated cost (the metric
for the L
TI plans up to 2020; as of 2021,
the metric is including unallocated
costs). Actual AkzoNobel ROI excluding
unallocated cost performance in 2021
was 19.5%. On a linear pay-out curve,
with a threshold of 17%, corr
esponding
to a pay-out of 50%, an on-target of
20%, and a maximum of 25%, this
resulted in a vesting of 91.67% for this
specific part of the long-term incentive.
For the 2019 conditional grant, 50%
was linked to AkzoNobel’
s relative total
shareholder r
etur
n (TSR) performance
compared with the companies in a
defined industry peer group consisting of
the following nine companies:
• Asian Paints
• PPG
• Axalta
• RPM
• Masco Corp
• Sherwin-Williams
• Nippon Paint
• Kansai Paint
• Tikkurilla
International
Following the acquisition of Tikkurilla
by PPG, the Remuneration Committee
decided to freeze Tikkurilla’
s share
price at €14.23. This share price was
calculated as the average closing
2021 remuneration of the Boar
d of Management –
Number of performance-related shar
es
Plan
Performance
period
Awar
d date
V
esting
date
End of
holding
period
Balance at
January 1
2021
Awarded
in 2021
V
ested
in 2021
Forfeited
in 2021
Dividend
in 2021
Balance at
December
31, 2021
Thierry
V
anlancker
Chief Executive
Officer
ANS2018
2018 – 2020
January 1
2018
February 17
2021
February 17
2023
18,020
—
(18,020)
—
—
—
ANS2019
2019 – 2021
January 1
2019
March
2022
March
2024
23,733
—
—
(10,079)
456
14,110
ANS2020
2020 – 2022
January 1
2020
February
2023
February
2025
19,246
—
—
—
370
19,616
ANS2021
2021 – 2023
January 1
2021
February
2024
February
2026
—
26,713
—
—
513
27,226
Maarten de Vries
Chief Financial
Officer
ANS2018
2018 – 2020
January 1
2018
February 17
2021
February 17
2023
15,344
—
(15,344)
—
—
—
ANS2019
2019 – 2021
January 1
2019
March
2022
March
2024
15,971
—
—
(6,783)
307
9,495
ANS2020
2020 – 2022
January 1
2020
February
2023
February
2025
12,952
—
—
—
249
13,201
ANS2021
2021 – 2023
January 1
2021
February
2024
February
2026
—
12,369
—
—
237
12,606
Metrics used for ESG targets
T
otal recordable injury rate (TRR)
Per 200,000 hours, three-year average.
T
otal waste - circular
As the percentage circular waste of total waste.
Energy use (GJ/ton)
Per ton of production.
Renewable electricity
Use of renewable electricity (own operations).
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AkzoNobel Report 2021
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Leadership and governance
share price in the four weeks befor
e
news of the acquisition became public.
Independent external experts conducted
an analysis to calculate the number of
shares that would vest accor
ding to
the TSR ranking. In order to adjust for
changes in exchange rates, all local
currencies wer
e converted into euros.
Relative TSR vesting scheme for the
conditional grants
Rank
V
esting (as % of 50%
of conditional grant)
1
150
2
135
3
120
4
100
5
75
6
50
7
25
8-10
0
AkzoNobel’
s TSR performance during
the period 2019 to 2021 resulted in
the seventh position within the ranking
of the peer group companies. This
ranking resulted in a vesting of 25% for
this part of the long-term incentive, as
shown in the table on the left. Based
on the company’
s combined ROI and
TSR performance, the final vesting
percentage of the 2019 conditional grant
– after including the dividend yield of
13.14% during the performance period –
equaled 66.0%.
The Remuneration Committee
determined that:
• Thierry V
anlancker would vest 14,110
shares, subject to a further two-year
holding requir
ement to align the
long-term interests of the members
of the Board of Management and our
shareholders. At December 31, 2021,
these shares had a market value of
€1,361,615
• Maarten de Vries would vest 9,495
shares, subject to a further two-year
holding requir
ement to align the
long-term interests of the members
of the Board of Management and our
shareholders. At December 31, 2021,
these shares had a market value of
€916,268
An overview of shares awar
ded, or due
to, Board of Management members is
shown on page 84.
Claw back and value adjustment
In 2021, there was no cause for a
claw back or value adjustment by the
Remuneration Committee.
Comparative table of remuneration and company performance over last five r
eported financial years
Divestment Specialty Chemicals
in €
2017
2018
2019
2020
2021
Remuneration CEO
Thierry V
anlancker
Fixed compensation
1,135,825
1,151,900
1,186,500
1,245,800
1,408,900
T
otal rewards (excl. one-of
f special payments)
2,825,863
2,899,883
3,561,212
3,494,689
4,465,361
One-off special payments
n/a
n/a
n/a
2,067,000
1,806,000
T
otal rewards (incl. benefits and one-of
f special payments)
2,825,863
2,899,883
3,561,212
5,561,689
6,271,361
% change fixed rewards
(15%)
1%
3%
5%
13%
% change total rewards
(20%)
3%
23%
56%
13%
Remuneration CFO
Maëlys Castella
Maarten de Vries
Fixed compensation
715,016
797,600
819,800
865,500
882,700
T
otal rewards (excl. one-of
f special payments)
2,169,290
1,515,816
1,843,977
2,168,658
2,583,320
One-off special payments
n/a
n/a
n/a
1,391,000
n/a
T
otal rewards (incl. benefits and one-of
f special payments)
2,169,290
1,515,816
1,843,977
3,559,658
2,583,320
% change fixed rewards
1%
12%
3%
6%
2%
% change total rewards
37%
(30%)
22%
93%
(27%)
Company performance
Net income attributable to shareholders
832,000,000
6,674,000,000
539,000,000
630,000,000
829,000,000
Net income % change
(14)
702
(92)
17
32%
ROI % (excluding unallocated cost)
18.0
16.6
17.2
20.6
19.5
ROI % change
(13%)
(8%)
4%
20%
(5%)
Adjusted operating income (OPI)
905,000,000
798,000,000
991,000,000
1,099,000,000
1,092,000,000
Adjusted OPI % change
(2%)
(12%)
24%
11%
(1%)
Average remuneration on a full-time equivalent basis of employees
Average salary per employee
1
53,453
56,619
54,825
56,061
54,220
% change average remuneration
(9%)
6%
(3%)
2%
(3%)
CEO pay ratio
58.6
56.4
65.0
99.2
115.7
2
CEO pay ratio (excl. one-off special payments)
58.6
56.4
65.0
62.3
82.4
In years of transition, the compensation for the newly appointed Board of
Management member has been annualized.
1
Calculated as employee benefits over average number of employees.
2
The CEO pay ratio is higher due to the one-off reappointment grant of
17,500 shares and a lower average salary per employee.
Leadership and governance
|
AkzoNobel Report 2021
86
2021 Remuneration of the Supervisory Board
in €
Remuneration
Attendance fee
Committee
allowance fees
T
otal remuneration
Nils Smedegaard Andersen, Chair
150,000
2,500
20,000
172,500
Byron Grote, Deputy Chair
93,000
2,500
25,000
120,500
Pamela Kirby
80,000
—
15,000
95,000
Dick Sluimers
80,000
—
20,000
100,000
Sue Clark*
24,835
—
4,657
29,492
Patrick Thomas
80,000
2,500
20,000
102,500
Michiel Jaski*
24,835
—
6,209
31,044
Jolanda Poots-Bijl
80,000
—
20,000
100,000
T
otal 2021
612,670
7,500
130,866
751,036
T
otal 2020
618,536
45,000
168,489
832,025
REMUNERA
TION REPOR
T
Loans
The company does not grant loans,
advance payments or guarantees to
members of the Supervisory Board,
members of the Executive Committee or
any family member of such persons.
Shareholding r
equirements and
share matching
Board of Management members ar
e
expected to build up a share-holding
requir
ement in the company
. The
minimum shareholding r
equirement
must be accrued within five years. This
includes privately purchased shar
es, and
vested shares granted under AkzoNobel
share-based compensation plans. The
minimum shareholding r
equirement
is 300% of annual base salary for the
CEO and 150% of annual base salary
for the CFO. As of December 31, 2021,
CEO Thierry V
anlancker held 74,598
shares. Shar
es acquired in 2021 by the
CEO contribute towards his r
equired
shareholding. On December 31, 2021,
he fulfilled this requir
ement by holding
the equivalent of 626% of his annual
base salary in shares. As of December
31, 2021, CFO Maarten de V
ries held
14,643 shares. Shar
es acquired by the
CFO during 2021 contribute towards his
requir
ed shareholding. On December
31, 2021, he fulfilled this requir
ement by
holding the equivalent of 199% of his
annual base salary
.
Shares obtained by Boar
d of Manage-
ment members under the performance-
related shar
e plan are taken into account
for share ownership purposes once
they have become unconditional. This
includes vested shares to be r
etained
during the two-year blocking period after
vesting. In 2021, CEO Thierry V
anlancker
received 1,720 matching shar
es that
were conditionally granted in 2018 under
the Share-Matching Plan. On December
31, 2021, there wer
e no shares that
qualified for share-matching under the
Share-Matching Plan.
Board contracts
Agreements for Boar
d of Management
members are concluded for a period not
exceeding four years. After the initial term,
reappointments may take place for conse-
cutive periods of up to four years each. At
the 2021 AGM, CEO Thierry V
anlancker
was reappointed for a two- year period.
His reappointment was supported with
97.5% of the votes at the AGM.
At the AGM to be held in 2022, the
reappointment of the CFO, Maarten
de V
ries, will be scheduled. The notice
period by the Board member
, and by
the company
, shall be subject to a
six-month term. Members of the Board
of Management normally retir
e in the
year they reach legal r
etirement age.
Comparative information
Internal pay ratios are a relevant input
factor for determining the appropriate-
ness of the implementation of the
remuneration policy
, as recognized in
the Dutch Corporate Governance Code.
In 2021, the ratio between the annual
total compensation for the CEO and
the average annual compensation for
an employee was 115.7 (2020: 99.2).
Further details on the development of
these amounts and ratios over time can
be found on the previous page.
Over the last few years of transition,
the company’
s financial performance
fluctuated significantly as the table on
the previous page shows. In 2018, net
profits incr
eased sharply
, mainly due to
the divestment of Specialty Chemicals,
with a deal result of €5,811 million after
tax. The transition was also reflected
in the development of remuneration. In
2018, the increase in average salary was
influenced by the inclusion of a one-off
€57 million pension cost for the UK gua-
ranteed minimum pension equalizations.
In 2020, total rewar
ds (including
benefits) for the Board of Management
included a one-off special payment for
the 2020 Performance Incentive Plan,
which incentivized improvement on the
company’
s return on sales (ROS). The
plan was put in place and approved
by the AGM following the divestment
of Specialty Chemicals. In 2021, total
rewar
ds (including benefits) for the CEO
included a one-off special shar
e grant to
compensate for the loss of shares due
to the two-year reappointment and the
fact that shares granted as fr
om 2021
will only vest on a pro-rated basis.
*
Until April 22, 2021.
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AkzoNobel Report 2021
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Leadership and governance
3
Until April 30, 2019.
4
Deputy Chair as of October 18, 2016.
1
As of May 1, 2018.
2
Until April 30, 2018.
5
Until April 24, 2020.
6
From November 30, 2017, until April 22, 2021.
Comparative table of remuneration of the Supervisory Boar
d over last five reported financial years
in €
2017
2018
2019
2020
2021
Nils Smedegaard Andersen, Chair
1
—
111,373
162,500
157,500
172,500
Anthony Burgmans
2
169,400
53,215
—
—
—
Peggy Bruzelius
3
116,200
119,318
37,710
—
—
Byron Grote, Deputy Chair
4
134,300
135,500
130,500
114,250
120,500
Louis Hughes
2
120,000
32,322
—
—
—
Pamela Kirby
100,000
92,500
92,500
87,500
95,000
Dick Sluimers
95,000
107,500
107,500
90,000
100,000
Ben V
erwaayen
5
95,000
95,000
92,500
32,775
—
Sue Clark
6
7,900
87,995
92,500
87,500
29,492
Patrick Thomas
7
10,400
90,659
97,500
92,500
102,500
Michiel Jaski
6
5,400
78,159
87,500
85,000
31,044
Sari Baldauf
8
100,000
—
—
—
—
Jolanda Poots-Bijl
9
—
—
59,166
85,000
100,000
T
otal remuneration
953,600
1,003,541
959,876
832,025
751,036
% change total remuneration
12.98
5.24
(4.35)
(13.32)
(9.73)
2.
REMUNERA
TION FOR THE
SUPERVISORY BO
ARD
Supervisory Board members r
eceive a
fixed annual fee for their membership
and one or more fixed committee
fee(s). In addition, Supervisory Board
members receive an attendance fee for
any Supervisory Board or committee
meetings they attend outside their
country of residence. T
ravel expenses
and facilities are borne by the company
and reviewed by the Audit Committee.
Implementation of the remuneration
policy for the Supervisory Board in
2021 resulted in the pay-out shown in
the table on page 86. According to the
Code, members are not r
emunerated in
shares. A five-year overview of the total
remuneration of the Supervisory Boar
d is
presented in the table above.
3
.
REMUNERA
TION POLICY FOR
THE YEAR 2022
The remuneration policies for the Boar
d
of Management and Supervisory Board
were r
eviewed by the Supervisory Board
in 2020/2021 and approved at the AGM
in 2021, taking into consideration input
from stakeholders, the r
equirements of
the EU Directive on the encouragement
of long-term shareholder engagement
(SRD II) and the Dutch regulation
implementing this Directive.
Remuneration policy for the
Board of Management
The Supervisory Board has concluded
that the remuneration policy for the
Board of Management – appr
oved at
the AGM on April 22, 2021 – is in line
with the company’
s objectives. The
remuneration it pr
ovides is balanced and
adequate and will remain unchanged.
The disclosure on the policy has been
extended to provide additional insight to
comply with SRD II.
For implementation in 2022, the
Supervisory Board has decided that:
• The base salaries of the Board of
Management will be increased in line
with the salary adjustments applied
for AkzoNobel employees in the
Nether
-lands, including those who are
covered by a collective agr
eement.
Increases
to the value of 2.5% of base salary will
be effective as of January 1, 2022:
-
Thierry V
anlancker
, CEO:
€1,178,750
-
Maarten de V
ries, CFO: €727,750
• Metrics applied for STI in 2021 were
adjusted OPI and OCF
, as per the
remuneration policy
, to support the
company’
s strategy
. Going forward,
it is being proposed to r
eplace OCF
by free cash flow (FCF) as a metric
for STI. The reason is that OCF is an
internal metric and focuses only on
adjusted EBITDA, Capex and working
capital. FCF
, on the other hand, is
externally published and therefore
very well recognized by investors.
Ultimately
, the Board of Management
is expected to steer on FCF
, as it also
includes elements such as interest,
tax and cash out from pr
ovisions. This
suggested change will be submitted
to shareholders for their appr
oval
• Metrics applied for L
TI will remain
the same, in line with the strategic
direction of the company
, and will
continue to include ESG
Remuneration policy for the
Supervisory Board
The Supervisory Board has concluded
that the remuneration policy for the
Supervisory Board – appr
oved at the
AGM on April 22, 2021 – is in line with
the objectives of the company
. The
remuneration it pr
ovides is balanced and
adequate and will remain unchanged.
The disclosure on the policy has been
extended to provide additional insight in
compliance with SRD II.
7
As of November 30, 2017.
8
From May 1, 2016, until December 1, 2017.
9
As of May 1, 2019.
Leadership and governance
|
AkzoNobel Report 2021
88
CAPIT
AL MARKETS
AkzoNobel and the
capital markets
Shares
AkzoNobel’
s common shares are listed
on Euronext Amster
dam. We’re 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. During 2021, 136 million
AkzoNobel shares wer
e traded on
Euronext Amster
dam (2020: 203 million).
We have a sponsor
ed level 1 American
Depositary Receipt (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.
AkzoNobel has 100% free float and a
broad base of international shareholders.
Based on an independent shareholder
analysis, the “Distribution of shares”
chart (see opposite page) shows the
geographical spread of institutional
shareholders, of which the majority
are based in the US (50%) and the UK
(19%). Around 4% of the company’
s
share capital is held by private investors,
many of whom are r
esident in the
Netherlands. Approximately 42% of
the company’
s share capital was held
by ESG investors* at year
-end 2021,
compared with 41% in 2020.
*As calculated by Nasdaq, according to their
methodology
, which is to include the sum of:
•
Core sustainable and responsible investor firms
where 100% of equity assets are managed
with an environmental, social and governance
(ESG) approach
•
Sustainable and responsible investor
themed funds managed by a broad range of
sustainable and responsible investors
Following 2021 reviews, we wer
e
included in a number of leading
sustainability indices and continue to be
the refer
ence in the paints and coatings
industry
. For example, we achieved
the highest possible rating (AAA)
from MSCI for the sixth consecutive
year
. Please refer to the Sustainability
statements for a full overview of external
sustainability ratings.
Key share data
1
2019
2020
2021
Y
ear-end (shar
e price in €)
90.69
87.86
96.50
Y
ear-high (shar
e price in €)
2
91.86
91.60
107.80
Y
ear-low (shar
e price in €)
2
69.12
48.50
83.50
Number of shares outstanding at year
-end (in millions)
3
200
191
182
Market capitalization at year
-end (in € billions)
18.1
16.7
17.5
Dividend per share (in €)
1.90
1.95
1.98
Dividend yield (in %)
4
2.1
2.2
2.1
1
Based on Bloomberg share data.
2
Based on close value.
3
Including treasury shares.
4
Based on year
-end share price. Excluding special dividend of €4.50 in 2019.
Dec 31, 20
Jan 21
Feb 21
Mar 21
Apr 21
May 21
Jun 21
Jul 21
Aug 21
Sept 21
Oct 21
Nov 21
Dec 31, 21
Euronext ticker symbol
AKZA
ISIN common share
NL0013267909
OTC ticker symbol
AKZOY
ISIN ADR
US0101995035
80
90
100
110
120
Share price performance 2021
AkzoNobel shar
e price in €
AkzoNobel
AEX index
Bloomberg Europe Chemicals Index
Bloomberg Global Chemicals Index
AkzoNobel achieved the highest possible
rating (AAA) from MSCI for the sixth
consecutive year
.
For further information please visit
our website: akzonobel.com
89
AkzoNobel Report 2021
|
Leadership and governance
The AkzoNobel share price was up
9.8% at year
-end 2021, compared
with year
-end 2020 (see Share
price performance graph on the
opposite page).
At year
-end 2021, AkzoNobel was
covered by 25 equity br
okers, of
which the majority had a “Buy”
recommendation. An overview of
analyst recommendations is shown
in the graph above.
Credit rating and bonds
We’r
e committed to maintaining a strong
investment grade credit rating. Regular
review meetings ar
e held between
rating agencies and AkzoNobel senior
management. See the table below for
the current cr
edit ratings and outlook.
The maturity schedule of outstanding
bonds is shown below
.
Dividend
The dividend policy is to pay a stable
to rising dividend. In 2021, an interim
dividend of €0.44 per share (2020:
€0.43) was paid. The Board of
Management proposes a 2021 final
dividend of €1.54 per share, which
would equal a total 2021 dividend of
€1.98 (2020: €1.95) per share.
The dividend proposed to the 2022
Annual General Meeting of shareholders,
following adoption, will be payable as
of May 4, 2022. AkzoNobel’
s shares
will be trading ex-dividend as of April
26, 2022. In compliance with the listing
requir
ements of Euronext Amsterdam,
the recor
d date for the final dividend will
be April 27, 2022.
A
B
C
A
Buy
14
B
Hold
9
C
Sell
2
Analyst recommendations
Distribution of shares 2021
in %
A
US
50
B
UK
19
C
Rest of Europe
25
D
Rest of world
6
D
C
B
A
D
A
B
C
1
Per year
-end 2021.
Rating agency
Long-term rating
Outlook
Moody’
s*
Baa1
Stable
Standard & Poor’
s*
BBB+
Stable
* Rating affirmed December 2020.
Dividend paid
in € per share
Interim dividend
Final dividend
In the latter part of the year
, we opened a new EMEA Planning Hub in the
Barcelona Free Zone in Spain to centrally plan and manage the pr
oduction of
coatings for 30 factories and 125 warehouses in Europe. The opening of the
new logistics center created 65 jobs in addition to the existing workforce of
560 employed at the location, where AkzoNobel has its Spanish headquarters.
* Proposed.
2021
2020
2019
2018
1.52
0.43
1.43
0.37
1.49
0.41
1.54*
0.44
T
otal
1.90
1.95
1.98
Debt maturity
1
in € millions (nominal amounts)
2030
2029
2028
2027
2026
2025
2024
2023
2022
500
500
750
750
500
90
AkzoNobel Report 2021
|
Financial statements
FINANCIAL INFORMA
TION
Financial statements
Consolidated statement of income
91
Consolidated statement of comprehensive income
91
Consolidated balance sheet
92
Consolidated statement of cash flows
93
Consolidated statement of changes in equity
94
Notes to the Consolidated financial statements
Note 1
Summary of significant accounting policies
95
Note 2
Scope of consolidation
100
Note 3
Segment information
101
Note 4
Alternative performance measures
103
Note 5
Revenue
105
Note 6
Operating income
106
Note 7
Employee benefits
106
Note 8
Financing income and expenses
108
Note 9
Income tax
108
Note 10
Ear
nings per share
111
Note 11
Intangible assets
112
Note 12
Property
, plant and equipment
113
Note 13
Leases
115
Note 14
Investments in associates and joint ventures
115
Note 15
Financial non-current assets
116
Note 16
Inventories
116
Note 17
T
rade and other receivables
116
Note 18
Group equity
117
Note 19
Post-retir
ement benefit provisions
118
Note 20
Other provisions and contingent liabilities
122
Note 21
Net debt
124
Note 22
T
rade and other payables
125
Note 23
Cash flow
125
Note 24
Commitments
125
Note 25
Related party transactions
125
Note 26
Remuneration of the Supervisory Board
126
and the Board of Management
Note 27
Financial risk management
126
Note 28 Subsequent events
129
Company financial statements
Statement of income
130
Balance sheet
130
Note A
General information
131
Note B
Financing income and expenses
131
Note C
Intangible assets
131
Note D
Financial non-current assets
132
Note E Short-term receivables
132
Note F
Shareholders’ equity
132
Note G
Net debt
134
Note H
Other current liabilities
134
Note I
Financial instruments
135
Note J
Contingent liabilities
135
Note K
Auditor’
s fees
135
Other information
Other information
136
Profit allocation and distributions
136
Independent auditor’
s report
137
Assurance report of the independent auditor
144
Financial summary
146
Glossary
150
Index
152
Appendix
153
91
AkzoNobel Report 2021
|
Financial statements
CONSOLIDA
TED ST
A
TEMENT
OF INCOME
CONSOLIDA
TED ST
A
TEMENT OF
COMPREHENSIVE INCOME
In € millions, for the year ended December 31
Note
2020
2021
Continuing operations
Revenue
5
8,530
9,587
Cost of sales
6
(4,745)
(5,732)
Gross profit
3,785
3,855
Selling expenses
6
(1,916)
(1,992)
General and administrative expenses
6
(663)
(582)
Research and development expenses
6
(238)
(230)
Other results
6
(5)
67
(2,822)
(2,737)
Operating income
963
1,118
Financing income and expenses
8
(69)
(39)
Results from associates and joint ventures
14
25
26
Profit before tax
919
1,105
Income tax
9
(241)
(246)
Profit for the period from continuing
operations
678
859
Discontinued operations
Profit / (loss) for the period from discontinued
operations
(7)
6
Profit for the period
671
865
Attributable to
Shareholders of the company
630
829
Non-controlling interests
41
36
Profit for the period
671
865
Earnings per share, in €
Continuing operations
Basic
10
3.33
4.45
Diluted
10
3.32
4.43
Discontinued operations
Basic
10
(0.04)
0.03
Diluted
10
(0.04)
0.03
T
otal operations
Basic
10
3.29
4.48
Diluted
10
3.28
4.46
In € millions, for the year ended December 31
2020
2021
Profit for the period
671
865
Other comprehensive income / (expense)
Items that will not be reclassified to the statement of income:
Post-retirement benefits
115
(13)
Income tax
(18)
(13)
Net effect
97
(26)
Items that may be reclassified subsequently to the statement of
income:
Exchange differences arising on translation of for
eign operations
(430)
373
Cash flow hedges
—
(19)
Income tax
5
6
Net effect
(425)
360
Other comprehensive expense for the period
(328)
334
Comprehensive income for the period
343
1,199
Comprehensive income attributable to
Shareholders of the company
323
1,164
Non-controlling interests
20
35
Comprehensive income for the period
343
1,199
 
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|
Financial statements
CONSOLIDA
TED BALANCE SHEET
, BEFORE
ALLOCA
TION OF PROFIT
In € millions, at December 31
Note
2020
2021
Assets
Non-current assets
Intangible assets
11
3,554
3,690
Property
, plant and equipment
12
1,621
1,800
Right-of-use assets
13
324
304
Deferred tax assets
9
497
482
Investments in associates and joint ventures
14
166
178
Financial non-current assets
15
1,951
2,076
T
otal non-current assets
8,113
8,530
Current assets
Inventories
16
1,159
1,650
Current tax assets
9
55
149
T
rade and other receivables
17
1,994
2,339
Short-term investments
21
250
58
Cash and cash equivalents
21
1,606
1,152
T
otal current assets
5,064
5,348
T
otal assets
13,177
13,878
Equity and liabilities
Equity
Shareholders' equity
18
5,746
5,425
Non-controlling interests
18
204
211
Group equity
5,950
5,636
Non-current liabilities
Post-retirement benefit pr
ovisions
19
664
578
Other provisions
20
232
234
Deferred tax liabilities
9
467
567
Long-term borrowings
21
2,771
1,994
T
otal non-current liabilities
4,134
3,373
Current liabilities
Short-term borrowings
21
119
1,556
Current tax liabilities
9
162
216
T
rade and other payables
22
2,580
2,948
Current portion of provisions
19, 20
232
149
T
otal current liabilities
3,093
4,869
T
otal equity and liabilities
13,177
13,878
 
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|
Financial statements
CONSOLIDA
TED ST
A
TEMENT OF CASH FLOWS
*
Capital expenditures include investments in intangible assets (refer to Note 11) and investments in pr
operty
, plant and equipment (refer to Note 12).
In € millions, for the year ended December 31
Note
2020
2021
Profit for the period from continuing operations
678
859
Adjustments to reconcile profit for the period to net cash generated fr
om operating activities
Amortization and depreciation
11, 12, 13
361
351
Impairment losses
11, 12, 13
10
3
Financing income and expenses
8
69
39
Results from associates and joint ventures
14
(25)
(26)
Pre-tax result on acquisitions and divestments
2
(27)
(14)
Income tax
9
241
246
Changes in working capital
23
184
(405)
Pension pre-funding
19, 23
—
23
Changes in post-retirement benefit pr
ovisions
19
(46)
(55)
Changes in other provisions
20, 23
(22)
(94)
Interest paid
(47)
(77)
Income tax paid
(165)
(222)
Other changes
9
(23)
Net cash generated from / (used for) operating activities
1,220
605
Capital expenditures*
11, 12
(258)
(288)
Interest received
8
10
Dividends from associates and joint ventures
17
5
Acquisition of consolidated companies
2
(113)
(73)
Investments in short-term investments
21
(248)
(56)
Repayments of short-term investments
21
136
247
Proceeds from divestments
31
22
Other changes
—
(1)
Net cash generated from / (used for) investing activities
(427)
(134)
Proceeds from borr
owings
21
970
1,143
Borrowings repaid
21
(339)
(590)
Share buyback
18
(555)
(1,135)
Dividends paid
18
(385)
(391)
Buy-out of non-controlling interests
2
(44)
(1)
Net cash generated from / (used for) financing activities
(353)
(974)
Net cash generated from / (used for) continuing operations
440
(503)
Net cash generated from / (used for) discontinued operations
(3)
(1)
Net change in cash and cash equivalents from continued and discontinued operations
437
(504)
Net cash and cash equivalents at January 1
21
1,210
1,581
Effect of exchange rate changes on cash and cash equivalents
(66)
35
Net cash and cash equivalents at December 31
1,581
1,112
 
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AkzoNobel Report 2021
|
Financial statements
*
Includes a tax credit of €nil million (2020: €3 million).
**
Includes a tax charge of €2 million (2020: €1 million tax charge).
CONSOLIDA
TED ST
A
TEMENT OF CHANGES IN EQUITY
Attributable to shareholders of the company
In € millions
Subscribed share
capital
Cash flow
hedge reserve
Cumulative
translation reserve
Other (legal) reserves
and undistributed
profit
Shareholders’
equity
Non-controlling
interests
Group equity
Balance at January 1, 2020
100
—
(469)
6,719
6,350
218
6,568
Profit for the period
—
—
—
630
630
41
671
Other comprehensive income / (expense)
—
—
(409)
115
(294)
(21)
(315)
T
ax on other comprehensive income
—
—
5
(18)
(13)
—
(13)
Comprehensive income for the period
—
—
(404)
727
323
20
343
Dividend
—
—
—
(366)
(366)
(19)
(385)
Share buyback*
(5)
—
—
(540)
(545)
—
(545)
Equity-settled transactions**
—
—
—
13
13
—
13
Acquisition of non-controlling interest
—
—
—
(29)
(29)
(15)
(44)
Balance at December 31, 2020
95
—
(873)
6,524
5,746
204
5,950
Profit for the period
—
—
—
829
829
36
865
Other comprehensive income / (expense)
—
(19)
374
(13)
342
(1)
341
T
ax on other comprehensive income
—
—
6
(13)
(7)
—
(7)
Comprehensive income for the period
—
(19)
380
803
1,164
35
1,199
Dividend
—
—
—
(365)
(365)
(27)
(392)
Share buyback*
(4)
—
—
(1,131)
(1,135)
—
(1,135)
Equity-settled transactions**
—
—
—
16
16
—
16
Acquisition of non-controlling interests
—
—
—
(1)
(1)
(1)
(2)
Balance at December 31, 2021
91
(19)
(493)
5,846
5,425
211
5,636
 
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AkzoNobel Report 2021
|
Financial statements
NOTES TO THE CON-
SOLIDA
TED FINANCIAL
ST
A
TEMENTS
GENERAL INFORMA
TION
Akzo Nobel N.V
. is a public limited liability company
headquartered in the Netherlands. The addr
ess of our
register
ed office is Christian Neefestraat 2, Amsterdam; the
Chamber of Commerce number is 09007809. W
e have
attached a list of subsidiaries, associated companies and
joint ventures, drawn up in conformity with Articles 379
and 414 of Book 2 of the Dutch Civil Code, as an appendix
to our annual report. The principal activity of AkzoNobel
is the production and selling of paints and coatings.
We have pr
epared 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 r
equirements included in Title 9 of Book 2 of the
Dutch Civil Code. The Consolidated financial statements
have been prepar
ed on a going concer
n basis, resulting
from management’
s assessment of the ability of AkzoNo-
bel to continue its operations for the foreseeable futur
e.
This assessment includes, among others, an evaluation
of our financial position, expected future cash flows and
market developments. The Management report within the
meaning of Article 391 of Book 2 of the Dutch Civil Code
consists of the following parts of the annual report:
• 2021 results at a glance
• CEO statement
• How we created value
• Strategy and operations
• Leadership and governance: Our Board of Management
and Executive Committee
• Leadership and governance: Statement of the Board of
Management
• Leadership and governance: Corporate gover
nance
statement
• Leadership and governance: Risk management
• Leadership and governance: Integrity and compliance
management
• Leadership and governance: Remuneration report
• Financial information: Note 6 Operating income
•
Financial information: Note 27 Financial risk management
The section ‘How we created value’ pr
ovides informa-
tion on the developments during 2021 and the results.
This section also provides information on cash flows and
net debt, capital expenditures, innovation activities and
employees.
On February 28, 2022, the Board of Management autho-
rized the financial statements for issue. The financial
statements as presented in this r
eport are subject to adop-
tion by the Annual General Meeting of shareholders on
April 22, 2022.
CONSOLIDA
TION
The Consolidated financial statements include the
accounts of Akzo Nobel N.V
. and its subsidiaries. Subsid-
iaries 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 r
etur
ns through its power over the
subsidiary
. Non-controlling inter
ests in equity and in results
are pr
esented separately
.
CHANGE IN ACCOUNTING POLICIES
AND FIRST TIME APPLICA
TION
Accounting pronouncements, which became ef
fective
for 2021 (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16 ‘Interest Rate Benchmark Reform – Phase 2’
and the amendment to IFRS 16 ‘COVID-19-Related Rent
Concessions beyond June 30, 2021’) had no material
impact on our Consolidated financial statements.
DISCONTINUED OPERA
TIONS
A discontinued operation is a component of our busi-
ness that repr
esents 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 ar
e classified as
held for sale if it is highly probable that the carrying value
will be recover
ed through a sale transaction within one
year rather than through continuing use. When r
eclassify-
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 costs to sell. Assets held for sale are not
depreciated and amortized but tested for impairment. In
case of discontinued operations, the comparative figures
in the Consolidated statement of income and Consolidated
statement of cash flows are r
epresented. The balance
sheet comparative figures ar
e not represented.
AL
TERNA
TIVE PERFORMANCE
MEASURES (NOTE 4)
Our Alternative Performance Measures (APM) are based
on IFRS measures and exclude so-called identified items.
Identified items are special charges and benefits, r
esults
on acquisitions and divestments, major restructuring and
impairment charges, and charges and benefits related to
major legal, environmental and tax cases.
USE OF ESTIMA
TES
The preparation of the financial statements in compliance
with IFRS requir
es management to make judgments, esti-
mates and assumptions that affect amounts r
eported in
the financial statements. The estimates and assumptions
are based on experience and various other factors that
are believed to be r
easonable under the circumstances
and are used to judge the carrying values of assets and
liabilities that are not r
eadily apparent from other sour
ces.
The estimates and underlying assumptions are r
eviewed
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
differ
ent results than those recor
ded in the financial state-
ments are the following:
• Scope of consolidation (Note 2)
• Income tax and deferred tax assets, including uncertain
tax positions (Note 9)
• Impairment of intangible assets, property
, plant and
equipment and right-of-use assets (Note 11, 12, 13)
Note 1
SUMMARY OF SIGNIFIC
ANT
ACCOUNTING POLICIES
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• Post-retirement benefit pr
ovisions (Note 19)
• Provisions and contingent liabilities (Note 20)
COVID-19 IMP
ACT ON FINANCIAL
ST
A
TEMENTS
The ongoing pandemic situation in 2021 has been closely
monitored and appr
opriate measures have been taken
to continue serving our customers and control spend,
while at the same time keeping the organization intact
and able to respond quickly to changes in end market
demand. The pandemic has not impacted our going
concern assumption.
AkzoNobel has a strong balance sheet and solid cash
position. At December 31, 2021, cash and cash equiva-
lents were €1.2 billion and financial leverage (net debt/
EBITDA) was 1.6. AkzoNobel is committed to retain a
strong investment grade cr
edit rating. In 2021 and 2020, a
detailed assessment was performed of potential valuation
adjustments to the overall asset base, either due to the
direct impact of COVID-19 or due to its impact on futur
e
profitability
, which did not lead to significant valuation
adjustments. Goodwill and intangible asset impairment
tests in both years have been performed based on adjust-
ed forecasts. Recoverability of deferr
ed tax assets has
also been reassessed based on these adjusted for
ecasts.
Furthermore, an assessment was performed with r
egard
to the allowance for impairment of trade receivables,
also taking into account potential additional risk associated
with COVID-19.
The impact of the pandemic on the Financial Statements
has been considered for each of the r
elevant notes, and
additional disclosures have been pr
ovided in case COVID-
19 had a material impact on a specific Financial State-
ments section in 2020 or 2021. The Financial Statements
sections for which this is relevant include:
• Government support received and recorded as cr
edit to
employee benefits (Note 7)
• Income tax and the valuation of deferred tax assets
(Note 9)
• Intangible assets and the annual impairment testing
process (Note 11)
In our 2021 and 2020 figures, all COVID-19 r
elated
impacts have been treated as normal operations; none of
these impacts has been included in identified items.
ST
A
TEMENT OF CASH FLOWS
We have used the indir
ect method to prepare the state-
ment of cash flows. Cash flows in foreign curr
encies have
been translated at transaction rates. Acquisitions or divest-
ments of subsidiaries are pr
esented net of cash and cash
equivalents acquired or disposed of, r
espectively
. Cash
flows from derivatives ar
e recognized in the statement
of cash flows in the same category as those of the
hedged items.
OPERA
TING SEGMENTS
We determine and pr
esent operating segments based on
the information that is provided to the Executive Commit-
tee, our chief operating decision-maker during 2021, to
make decisions about resour
ces to be allocated to the
segments and assess their performance. Segment results
reported to the Executive Committee include items dir
ectly
attributable to a segment as well as those items that can
be allocated on a reasonable basis. Unallocated items
mainly comprise of corporate assets and corporate costs
and are r
eported in “Corporate and other”.
FOREIGN CURRENCIES
T
ransactions in foreign curr
encies are translated into the
functional currency using the for
eign exchange rate at
transaction date. Monetary assets and liabilities denomi-
nated in foreign curr
encies are translated into the function-
al currency using the exchange rates at the balance sheet
date. Resulting foreign curr
ency differences ar
e included
in the statement of income in financing income and
expenses. Non-monetary assets and liabilities denominat-
ed in foreign curr
encies are translated into the functional
currency at the exchange rate at acquisition date.
The assets and liabilities of entities with other functional
currencies ar
e translated into euros, the functional curren-
cy of the parent entity
, using the exchange rates at the
balance sheet date. The income and expenses of entities
with other functional currencies ar
e translated into
the functional currency
, using the exchange rates at trans-
action date.
When a subsidiary is operating in a hyperinflationary
country
, the financial statements of this entity are r
estated
into the current pur
chasing power at the end of the
reporting period. Hyperinflation accounting is applied
for Argentina.
Foreign exchange rate dif
ferences resulting fr
om trans-
lation into the functional currency of investments in
subsidiaries and of intercompany loans of a permanent
nature with other functional curr
encies are recor
ded as a
separate component (cumulative translation reserve) within
other comprehensive income. These cumulative translation
adjustments are r
eclassified (either fully or partly) to the
statement of income upon disposal (either fully or partly) or
liquidation of the foreign subsidiary to which the invest-
ment or the intercompany loan with a permanent natur
e
relates. For
eign currency differ
ences arising on the
translation of a financial liability designated as an effec-
tive hedge of a net investment in a foreign operation ar
e
recognized in the cumulative translation r
eserve (in other
comprehensive income).
EXCHANGE RA
TES OF KEY
CURRENCIES
The principal exchange rates against the euro used
in preparing the balance sheet and the statement of
income are:
REVENUE RECOGNITION (NOTE 5)
Sale of goods
AkzoNobel’
s main business consists of straightforward
selling of goods (paints and coatings) to customers at
contractually determined prices and conditions without
any additional services. Although the transfer of risks
Balance sheet
Statement of income
2020
2021
%
2020
2021
%
US dollar
1.229
1.131
(8.0)
1.143
1.182
3.4
Pound sterling
0.900
0.837
(7.0)
0.889
0.860
(3.3)
Chinese yuan
7.992
7.197
(9.9)
7.875
7.626
(3.2)
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Most of our defined benefit pension plans are funded
with plan assets that have been segregated in a trust or
foundation. We also pr
ovide post-retirement benefits other
than pensions to certain employees, which are gener
-
ally not funded. V
aluations of both funded and unfunded
plans are carried out by independent actuaries based on
the projected unit cr
edit method. Postretirement costs
primarily repr
esent the increase in the actuarial present
value of the obligation for projected benefits based on
employee service during the year and interest on the net
defined benefit liability/asset. 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 r
efunds 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 settlement of the plan liabilities. The effect of these
so-called asset ceiling restrictions and any changes ther
ein
are r
ecognized in other comprehensive income. Remea-
surement gains and losses, which arise in calculating
our obligations, are r
ecognized in other comprehensive
income. When the benefits of a plan improve, the portion
of the increased benefits r
elated to past service by
employees is recognized as an expense in the statement
of income immediately
. We r
ecognize gains and losses
on the curtailment or settlement of a defined benefit plan
when the curtailment or settlement occurs.
Interest on the net defined benefit liability/asset is included
in financing expenses related to post-r
etirement benefits.
Other charges and benefits recognized ar
e reported in
operating income, unless recor
ded in other comprehensive
income.
OTHER EMPLOYEE BENEFITS
(NOTE 7, 20)
Provisions for other long-term employee benefits ar
e
measured at pr
esent value, using actuarial assumptions
and methods. Any actuarial gains and losses are r
ecog-
nized in the statement of income in the period in which
they arise.
SHARE-BASED COMPENSA
TION
(NOTE 7)
AkzoNobel has a performance-related and a r
estricted
share plan as well as a shar
e-matching plan, under which
shares ar
e 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 shares with a corr
e-
sponding increase in shar
eholders’ equity
. Amortization is
accelerated in the event of earlier vesting or settlement.
INCOME T
AX (NOTE 9)
Income tax expense comprises both current and deferr
ed
tax, including effects of changes in tax rates. In determin-
ing the amount of current and deferr
ed tax we also take
into account the impact of uncertain tax positions and
whether additional taxes may be due. Income tax is recog-
nized in the statement of income, unless it relates to items
recognized in other compr
ehensive income or equity
.
Current tax includes the expected tax payable and r
eceiv-
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 payables and receivables with
respect to pr
evious years.
Deferred tax is r
ecognized using the liability method on
temporary differ
ences arising between the tax bases of
assets and liabilities and their carrying amounts in the
Consolidated financial statements. We do not r
ecognize
deferred tax for the initial r
ecognition of goodwill, the
initial recognition of assets or liabilities that af
fect neither
accounting nor taxable profit, and dif
ferences related to
investments in subsidiaries to the extent that they will
probably not r
everse in the foreseeable future and we can
control the timing of the r
eversal of the temporary differ
-
ence. Deferred tax assets ar
e recognized for unused tax
losses, tax credits and deductible temporary dif
ferences,
to the extent that it is probable that futur
e taxable profits
will be available against which they can be utilized.
Measurement of deferr
ed 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 differ
ences are expected to be reversed.
and rewar
ds is not the only criterion to be considered to
determine whether control over the goods has transferr
ed,
it is in most situations considered to be the main indicator
of the customer’
s ability to direct the use of and obtain the
benefits from the asset and largely also coincides with the
physical transfer of the goods and the obligation of the
customer to pay
.
V
ariable considerations, including among others rebates,
bonuses, discounts and payments to customers, are
accrued for as performance obligations are satisfied and
revenue is r
ecognized. V
ariable considerations are only
recognized when it is highly pr
obable that these are not
subject to significant reversal. In case of expected r
etur
ns,
no revenue is r
ecognized for such products, but a refund
liability and an asset for the right to recover the to be
returned products ar
e recorded. A pr
ovision for warranties
is recognized when the underlying pr
oducts or services are
sold, generally based on historical warranty data.
Revenue is recognized net of r
ebates, discounts and
similar allowances, and net of sales tax.
Equipment provided to customers
AkzoNobel regularly pr
ovides mixing machines, store
interior and other assets to its customers at the start of a
paints or coatings delivery contract. The delivery of such
assets qualifies as a separate performance obligation.
Revenue can only be recognized at the moment of transfer
of such assets, when there is an agr
eed sales price or
when there is a binding take-or
-pay commitment for a
minimum quantity of paints or coatings to be acquired by
the customer
.
Services
AkzoNobel provides certain training, technical or support
services to customers as well as shipping and handling
activities for its customers. Service revenue is r
ecognized
over time when the related services ar
e being provided.
When not separately invoiced, part of the sales price of
paints or coatings is allocated to such services.
POST
-RETIREMENT BENEFITS
(NOTE 7, 19)
Contributions to defined contribution plans are r
ecognized
in the statement of income as incurred.
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Financial statements
Income tax consequences are taken into account in
the determination of deferred tax liabilities to the extent
earnings are expected to be distributed by subsidiar
-
ies in the foreseeable futur
e and AkzoNobel has control
over dividend distribution. Deferred tax positions ar
e not
discounted.
EARNINGS PER SHARE
(NOTE 10)
Basic earnings per share is calculated by dividing the
profit for the period attributable to shar
eholders of the
company by the weighted average number of common
shares outstanding during the year
, adjusted for any repur
-
chased shares. Diluted earnings per share is calculated
by adjusting the weighted average number of common
shares outstanding during the year for the diluting ef
fect
of the shares of the performance-r
elated share plan, the
restricted shar
e plan and the share-matching plan.
Adjusted earnings per share repr
esents the basic ear
nings
per share fr
om continuing operations excluding identified
items, after taxes.
GOVERNMENT GRANTS
Government grants related to costs (including grants
related to COVID-19) ar
e deducted from the relevant
costs to be compensated in the same period. Govern-
ment grants to compensate for the cost of an asset are
deducted from the cost of the r
elated asset. Emission
rights granted by the government are recor
ded at cost. A
provision is r
ecorded if the actual emission is higher than
the emission rights granted.
INT
ANGIBLE ASSETS (NOTE 11)
Intangible assets are valued at cost less accumulated
amortization and impairment charges. Intangible assets
with an indefinite useful life, such as goodwill and certain
brands, are not amortized, but tested for impairment annu
-
ally using the value-in-use method. Goodwill in a business
combination repr
esents the excess of the consideration
paid over the net fair value of the acquired identifiable
assets, liabilities and contingent liabilities. If the cost of
LEASES (NOTE 13, 21)
We assess whether a contract is, or contains, a lease at
inception. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for a consideration.
As a lessee
At commencement or on modification of a contract that
contains a lease component, we allocate the consideration
in the contract to each lease component on the basis of its
relative standalone prices. However
, for the leases of cars
we have elected not to separate non-lease components
and account for the lease and non-lease components as a
single lease component.
We r
ecognize a right-of-use asset and a lease liability at
the lease commencement date. The right-of-use asset is
initially measured at the pr
esent value of the lease liability
.
The right-of-use asset value contains lease prepayments,
lease incentives received, the initial dir
ect costs and an
estimate of restoration, r
emoval and dismantling costs.
For deferred taxes associated with lease accounting under
IFRS 16, AkzoNobel determines the temporary differ
ences
between the book basis and tax basis of the right-of-
use asset and the lease liability on a net basis. It is the
company’
s view that these are integrally linked. As a result,
a deferred tax position is r
eported on the net temporary
differ
ences of the right-of-use assets and lease liabilities.
The right-of-use assets are depr
eciated using the straight-
line method from the commencement date to the end
of the lease term or shorter economic life. In addition,
the value of right-ofuse assets is reduced by impairment
losses, if any
, and adjusted for certain remeasur
ements of
the lease liability
.
The net present value of the lease liability is measur
ed at
the discounted value of the lease payments. The liability
includes payments to be made in optional periods if
the lessee is reasonably certain to exer
cise an option to
extend the lease, or not to exercise an option to terminate
the lease. The lease payments comprise the following:
• Fixed payments (including in substance fixed payments),
less any lease incentives
•
Variable lease payments that depend on an index or a rate
• The exercise price of a purchase option if it is
reasonably certain that the option will be exer
cised
an acquisition is less than the fair value of the net assets
of the subsidiary acquired, the dif
ference is recognized
directly in the statement of income.
Intangible assets with a finite useful life, such as licenses,
know-how
, certain brands, customer relationships, intel-
lectual property rights, emission rights, softwar
e expen-
ditures (in as far as AkzoNobel contr
ols the software
configured or customized) and capitalized development
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 5 to 40 years for
brands with finite useful lives, 5 to 25 years for customer
lists and 3 to 15 years for other intangibles. Amortization
methods, useful lives and residual values ar
e reassessed
annually
. Research expenditur
es are recognized as an
expense as incurred.
PROPERTY
, PLANT AND EQUIPMENT
(NOTE 12)
Property
, plant and equipment are valued at cost less
accumulated depreciation and impairment charges. Costs
include expenditures that ar
e directly attributable to the
acquisition of the asset, including borrowing cost 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.The useful life of plant equipment and machinery
generally ranges from 10 to 25 years, and for buildings
ranges from 20 to 50 years. Land is not depr
eciated. In
the majority of cases, residual value is assumed to be not
significant. Depreciation methods, useful lives and r
esidual
values are r
eassessed 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 r
ecognize conditional asset
retir
ement obligations in the periods in which sufficient
information becomes available to reasonably estimate the
cash outflow
.
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• Payments of penalties for terminating the lease, if the
lease term reflects the lessee exer
cising an option to
terminate the lease; and
• Amounts expected to be payable under residual value
guarantees
These lease payments are discounted using the inter
est
rate implicit in the lease contract, if that rate can be readily
determined. If that rate cannot be readily determined, the
incremental borr
owing rate is used. We determine our
incremental borr
owing rates by obtaining interest rates
from various external financing sources and make certain
adjustments to reflect the term of the lease and type of
the asset leased. At the lease commencement dates, we
assess whether it is reasonably certain to exer
cise the
extension options. We r
eassess whether it is reasonably
certain to exercise the options, if ther
e is a significant event
or significant change in circumstances within our contr
ol.
At the commencement date, we assess whether it is
reasonably certain that:
• An option to extend is exercised; or
• An option to purchase is exercised; or
• An option to terminate the lease is not exercised
In making these assessments, all relevant facts and
circumstances that cr
eate an economic incentive for us
to exercise, or not to exer
cise, the option, including any
expected changes in facts and circumstances fr
om the
commencement date until the exercise date of the option
are consider
ed.
Short-term leases and leases of low-value assets
We do not r
ecord right-of-use assets and lease liabilities
on the balance sheet for leases of low-value assets and
short-term leases. We r
ecognize the lease payments asso-
ciated with these leases as an expense on a straight-line
basis over the lease term.
IMP
AIRMENTS (NOTE 11, 12, 13)
We assess the carrying value of intangible assets, pr
operty
,
plant and equipment and right-of-use assets whenever
events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable as a
result of e.g. changes in cash flow for
ecasts, damages,
market developments or environmental and climate
change risks. In addition, for goodwill and other intangible
assets with an indefinite useful life, the carrying value is
reviewed at least annually or when cir
cumstances indicate
the carrying amount may be impaired. If the carrying value
of an asset or its cash-generating unit exceeds its estimat-
ed recoverable amount, an impairment loss is r
ecognized in
the statement of income on the function level of the asset
impaired. 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 operating 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.
ASSOCIA
TES AND JOINT VENTURES
(NOTE 14)
Associates and joint ventures ar
e accounted for using the
equity method and are initially r
ecognized at cost. The
Consolidated financial statements include our share of the
income and expenses of the associates and joint ventures,
whereby the r
esult is determined using our accounting
principles. When the share of losses exceeds the inter
est
in the investee, the carrying amount is reduced to nil and
recognition of further losses is discontinued, unless we
have further legal or constructive obligations.
INVENTORIES (NOTE 16)
Inventories are measur
ed at the lower of cost and net
realizable value. Costs of inventories comprise all costs of
purchase, costs of conversion and other costs incurr
ed
in bringing the inventories to the present location and
condition. The costs of inventories are determined using
weighted average cost.
PROVISIONS (NOTE 20)
We r
ecognize 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 r
equired
to settle the obligation and the amount can be reliably esti-
mated. Provisions ar
e measured at net present value. The
increase of pr
ovisions as a result of the passage of time
is recognized in the statement of income under financing
income and expenses.
Provisions for r
estructuring of activities are recognized
when a detailed and formal restructuring plan has been
approved, and the r
estructuring has either commenced or
has been announced publicly
. We do not pr
ovide for future
operating costs.
FINANCIAL INSTRUMENTS
Classification
All assets are measur
ed at amortized cost, fair value
through pr
ofit or loss or fair value through other compre-
hensive income. Financial assets are classified accor
ding
to a model based on:
• A contractual cash flow characteristics test
• A business model dictating how the reporting entity
manages its financial assets in order to generate cash
flows as either:
1. Hold to collect contractual cash flows
2. Collect contractual cash flows and sell
3. Neither 1 or 2
• Election of the fair value option in some specific cases in
order to eliminate an accounting mismatch
The classification of a financial asset is determined at initial
recognition, but if certain conditions ar
e met, an asset
might be subject to reclassification.
V
aluation and impairment
Financial assets are assessed for impairment either accor
d-
ing to the general approach or a simplified appr
oach.
The calculation of impairment under the general approach
uses the following stages:
• 12-month expected credit losses; taking in account
possible default events within one year
• Lifetime expected credit losses in case of an increase in
credit risk; thr
ough recognition of expected credit losses
over the remaining life of the exposur
e
• Lifetime expected credit losses, where inter
est is
calculated on the net amount of the receivables less
impairment loss
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In all above stages, the impairment calculation used at
AkzoNobel is based on external credit ratings of involved
parties or default rates published by well-known credit
risk agencies.
The financial assets included in the general impairment
approach ar
e long-term loans and other long-term
receivables.
The calculation of impairment under the simplified
approach r
equires recognition of lifetime expected cr
edit
loss (no tracking of changes in credit risk). The financial
assets included in the simplified impairment approach ar
e
trade receivables and the r
emaining financial assets.
Measurement
Regular purchases and sales of financial assets and
liabilities are r
ecognized on trade date. The initial measure-
ment of all financial instruments is at fair value. Except
for derivatives and cash and cash equivalents, the initial
measurement of financial instruments is adjusted for
directly attributable transaction costs.
Derivative financial instruments (Note 27)
Derivative financial instruments are r
ecognized at fair value
on the balance sheet. Fair values are derived fr
om market
prices and quotes from dealers and br
okers or are esti-
mated 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 r
ecognized 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 deferr
ed in
other comprehensive income and r
eleased to the related
specific lines in the statement of income or balance sheet
at the same time as the hedged item.
Financial non-current assets (Note 15) and T
rade
and other receivables (Note 17)
Loans and receivables ar
e measured at amortized cost, using
the effective inter
est method, less any impairment losses.
Cash and cash equivalents and Short-term
investments (Note 21)
Cash and cash equivalents and short-term investments are
measured at fair value. Cash and cash equivalents include
all cash balances and other investments that are dir
ectly
convertible into known amounts of cash. Changes in fair
values are included in financing income and expenses.
Long-term and Short-term borrowings (Note 21,
27) and T
rade and other payables (Note 22)
Long-term and short-term borrowings, as well as trade
and other payables, are measur
ed at amortized cost, using
the effective inter
est rate method. The interest expense on
borrowings is included in financing income and expenses.
The fair value of borrowings, used for disclosur
e purposes,
is determined based on listed market price, if available. If a
listed market price is not available, the fair value is calcu-
lated based on the present value of principal and inter
est
cash flows, discounted at the interest rate at the r
eporting
date, considering AkzoNobel’
s credit risk.
NEW IFRS ACCOUNTING
ST
ANDARDS
IFRS standards and interpr
etations thereof not yet in force,
which may apply to our Consolidated financial state-
ments for 2022 and beyond, have been assessed for their
potential impact.
These include among others amendments to IFRS 3
‘References to the Conceptual Framework’, amendments
to IAS 16 ‘Property
, Plant and Equipment: Proceeds
before Intended Use’, amendments to IAS 37 ‘Oner
ous
Contracts – Costs of Fulfilling a Contract’, AIP IFRS 9
‘Financial instruments – Fees in the ‘10 percent’ test
for derecognition of financial liabilities’, IFRS 17 ‘Insur
-
ance contracts’, amendments to IAS 1 ‘Classification of
Liabilities as Current or Non-curr
ent’, amendments to IAS
8 ‘Definition of Accounting Estimates’, amendments to
IAS 12 ‘Deferred T
ax related to Assets and Liabilities
arising from a Single T
ransaction’, amendments to IAS 1
and IFRS Practice Statement 2 ‘Disclosure of Accounting
Policies’ and amendments to IFRS 10 and IAS 28 ‘Sale or
Contribution of Assets between an Investor and its Associ-
ate or Joint V
enture’. These changes ar
e not expected
to have a material effect on AkzoNobel’
s Consolidated
financial statements.
Material subsidiaries
The Consolidated financial statements comprise the
assets, liabilities, income and expenses of 261 legal enti-
ties. We consider legal entities material when they r
epre-
sent, for at least two subsequent years, more than 5% of
either revenue or adjusted operating income or based on
qualitative aspects. Material subsidiaries included in the
table in this Note are fully owned at year
-end 2021.
Acquisitions
On March 1, 2021, we acquir
ed 100% of the shares of
Industrias Titan S.A.U. (T
itan Paints) in Spain, for
€83 million. The acquisition strengthens our paints busi-
ness and footprint in Spain. The transaction included three
production facilities and seven logistics and service centr
es
for decorative paints. Titan Paints generated revenues of
around €80 million in 2020. The transaction r
esulted in
€15 million of goodwill (non-deductible for tax purposes),
€20 million of other intangible assets and €47 million of
property
, plant and equipment. The goodwill is mainly
attributable to synergies expected to be achieved from
integrating the company into the group.
On June 29, 2021, AkzoNobel announced to further
expand its long-term position in South and Central
America after reaching an agr
eement to acquire 100%
of the Colombia-based paints and coatings company
Grupo Orbis, with consolidated revenues of appr
oximately
€260 million (in 2020). Completion is subject to regulatory
approvals and is expected in the first quarter of 2022.
Material subsidiaries related to continuing
operations
Legal entity
Principal place of
business/country of
incorporation
Akzo Nobel Coatings Inc.
US
Akzo Nobel Paints (Shanghai) Co Ltd.
China
Imperial Chemical Industries Limited
UK
Akzo Nobel Decorative Coatings B.V
.
Netherlands
Akzo Nobel Coatings SP
A
Italy
Note 2
SCOPE OF CONSOLID
A
TION
101
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Financial statements
Divestments
In 2021 and 2020, no significant divestments occurred.
Decorative Paints
We pr
ovide decorative paints to both the professional and
the do-it-yourself markets. We supply a 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 renova-
tion industry
.
The business units (one level below segment level) in the
operating segment Decorative Paints are pr
esented per
region.
Performance Coatings
We ar
e a supplier of performance coatings that protect
and enhance ships, cars, aircraft, yachts and ar
chitectural
components (structural steel, building products, flooring),
consumer goods (mobile devices, appliances, beverage
cans, furniture) and oil and gas facilities.
The business units in the operating segment Performance
Coatings are pr
esented per market.
The tables in this Note include Alternative Performance
Measures (APM’
s). Refer to Note 4 for further information
on these APM’
s.
*
Other includes the purchase price adjustments with regar
d to the
2020 New Nautical Coatings acquisition.
Recognized fair values at acquisition
In € millions
Titan S.A.U.
Spain
Other*
T
otal 2021
Other intangibles
20
(1)
19
Property
. plant and equipment
47
—
47
Inventories
19
—
19
T
rade and other receivables
15
—
15
Cash and cash equivalents
10
—
10
Long-term debt
(1)
—
(1)
Provisions
(2)
—
(2)
Deferred tax assets/(liabilities)
(7)
—
(7)
T
rade and other payables
(33)
—
(33)
Net identifiable assets and liabilities
68
(1)
67
Goodwill
15
2
17
Purchase consideration
83
1
84
Cash and cash equivalents acquired
(10)
—
(10)
T
o be paid in 2022 and later years
—
(1)
(1)
Net cash outflow
73
—
73
Note 3
SEGMENT INFORMA
TION
102
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Financial statements
1
ldentified items are special charges and benefits, results on acquisitions and divestments, major r
estructuring and impairment charges, and charges and benefits related to major legal,
environmental and tax cases. The identified items in this Note exclude the items outside operating income.
2
Adjusted operating income is operating income excluding identified items.
3
EBITDA is operating income excluding depreciation and amortization.
4
Adjusted EBITDA is operating income excluding amortization, depreciation and identified items.
5
ROS% is calculated as adjusted operating income (operating income excluding identified items) as a percentage of revenues fr
om third parties. ROS% for Corporate and other is not shown,
as this is not meaningful.
6
OPI margin is calculated as operating income as a percentage of revenues fr
om third parties. OPI margin for Corporate and other is not shown, as this is not meaningful.
1
Capital expenditures include investments in intangible assets (refer to Note 11) and investments in pr
operty
, plant and equipment (refer to Note 12).
2
ROI% is calculated as adjusted operating income (operating income excluding identified items) of the last 12 months as a percentage of average invested capital of the last 12 months.
Invested capital is calculated as total assets (excluding cash and cash equivalents, short-term investments, investments in associates, the receivable from pension funds in an asset position
and assets held for sale) less current tax liabilities, deferred tax liabilities and trade and other payables. ROI% for Corporate and other is not shown, as this is not meaningful.
1
The regional split has been changed compared to pr
evious year to align to our new internal regional structure.
2
Capital expenditures include investments in intangible assets (refer to Note 11) and investments in pr
operty
, plant and equipment (refer to Note 12).
Information per reportable segment
Revenue (third
parties)
Amortization
and
depreciation
Operating
income
Identified
items
1
Adjusted
operating income
2
EBITDA
3
Adjusted
EBITDA
4
ROS%
5
OPI margin
6
In € millions
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
Decorative Paints
3,558
3,979
(153)
(154)
551
640
(22)
42
573
598
704
794
714
745
16.1
15.0
15.5
16.1
Performance Coatings
4,957
5,603
(159)
(160)
665
650
(35)
2
700
648
824
810
854
807
14.1
11.6
13.4
11.6
Corporate and other
15
5
(49)
(37)
(253)
(172)
(79)
(18)
(174)
(154)
(204)
(135)
(126)
(116)
T
otal
8,530
9,587
(361)
(351)
963
1,118
(136)
26
1,099
1,092
1,324
1,469
1,442
1,436
12.9
11.4
11.3
11.7
Information per reportable segment
Invested capital
T
otal assets
T
otal liabilities
Capital expenditures
1
ROI%
2
In € millions
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
Decorative Paints
2,567
3,022
5,882
6,179
3,273
3,347
77
108
20.5
20.8
Performance Coatings
3,384
3,671
6,519
7,139
2,586
2,665
146
147
20.7
18.4
Corporate and other
452
428
776
560
1,368
2,230
35
33
T
otal
6,403
7,121
13,177
13,878
7,227
8,242
258
288
16.1
16.0
Regional information
1
Revenue by region ofdestination
Intangible assets and property
,
plant and equipment
Invested capital
Capital expenditur
es
2
In € millions
2020
2021
2020
2021
2020
2021
2020
2021
The Netherlands
342
335
1,188
1,206
1,616
1,787
46
45
Other EMEA countries
3,986
4,473
1,702
1,777
2,384
2,555
90
100
North Asia
1,515
1,735
1,093
1,203
911
969
35
45
South Asia Pacific
972
1,137
479
516
529
639
33
46
North America
1,114
1,163
543
602
727
809
43
37
South America
601
744
170
186
236
362
11
15
T
otal
8,530
9,587
5,175
5,490
6,403
7,121
258
288
103
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Financial statements
In presenting and discussing AkzoNobel’
s segmental
operating results, management uses certain alterna-
tive performance measures not defined by IFRS, which
exclude the so-called identified items. ldentified items are
special charges and benefits, results on acquisitions and
divestments, major restructuring and impairment charges,
and charges and benefits related to major legal, envi-
ronmental and tax cases. These alternative performance
measures should not be viewed in isolation as alternatives
to the equivalent IFRS measures and should be used as
supplementary information in conjunction with the most
directly comparable IFRS measur
es. Alter
native perfor
-
mance measures do not have a standar
dized meaning
under IFRS and therefor
e may not be comparable to
similar measures pr
esented by other companies. Where a
non-financial measure is used to calculate an operational
or statistical ratio, this is also considered an alternative
performance measure. The following tables r
econcile the
alternative performance measures used in the segment
information (Note 3) to the nearest IFRS measur
e.
T
ransformation costs
T
ransformation costs include costs related to the strategy
to create a focused high-performing Paints and Coatings
business and primarily relate to costs for r
estructuring
activities.
Brazil ICMS case
In May 2021, the Brazilian Supreme Court (STF) r
ecog-
nized the right to deduct state tax on goods and services
(ICMS) from the calculation basis of the Social Integration
Program-PIS (Pr
ograma de Integração Social) and the
Financing of Social Security-COFINS (Contribuição para
Financiamento da Seguridade Social). This STF decision
covers a multi-year period prior to 2018. As a result, a full-
year net gain of €64 million was recognized in net income,
of which €42 million in Other results (in operating income),
€28 million in interest income, €14 million in income tax
(loss) and (net) €8 million in discontinued operations.
UK pensions past service credit
Following a court decision in April 2021, which allows the
amendment of the scheme documentation of one of the
company’
s UK pension funds, a past service credit (gain)
was recognized.
APM adjustments to interest
Adjustments on interest includes an inter
est gain of €28
million from the Brazil ICMS case.
APM adjustments to income tax
UK ACT case
APM adjustments to income tax include a €29 million net
tax benefit for the UK Advanced Corporation T
ax (ACT)
case. In July 2021 the UK Supreme Court issued a further
decision in a group litigation case the company partici-
pates in (“Franked Investment Income”; filed in 2003). The
company assessed the consequences of this judgement
and performed a further file review which, taking into
account legal advice, resulted in the r
ecognition of a net
tax benefit of €29 million.
APM adjustments to income tax
Other items
Furthermore, APM adjustments to income tax include a
gain of €12 million for the (net) re-r
ecognition of deferred
tax assets, as well as €8 million of tax benefits related
to transformation costs. These gains were partly of
fset by
the income tax (loss) related to the Brazil ICMS case
(€14 million) and the impact from tax rate changes
(€19 million).
Alternative performance measures
2020
2021
In € millions
Continuing
operations
Discontinued
operations
T
otal
Continuing
operations
Discontinued
operations
T
otal
Operating income
963
—
963
1,118
—
1,118
APM adjustments to operating income
- T
ransformation costs
121
—
121
28
—
28
-
Brazil ICMS case
—
—
—
(42)
—
(42)
- UK pensions past service credit
—
—
—
(23)
—
(23)
- Acquisition related costs
4
—
4
11
—
11
- Other
11
—
11
—
—
—
T
otal APM adjustments (identified
items) to operating income
136
—
136
(26)
—
(26)
Adjusted operating income
1,099
—
1,099
1,092
—
1,092
Profit for the period attributable to
shareholders of the company
637
(7)
630
823
6
829
Adjustments to operating income
136
—
136
(26)
—
(26)
Adjustments to interest
(3)
—
(3)
(29)
—
(29)
Adjustments to income tax
(28)
—
(28)
(15)
—
(15)
Adjustments to discontinued operations
—
—
—
—
(8)
(8)
T
otal APM adjustments
105
—
105
(70)
(8)
(78)
Adjusted profit for the period
attributable to shareholders of the
company
742
(7)
735
753
(2)
751
Note 4
AL
TERNA
TIVE PERFORMANCE
MEASURES
104
AkzoNobel Report 2021
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Financial statements
1
Adjustments for identified items to the extent these are included in operating income.
2
Adjusted operating income is operating income excluding identified items.
3
OPI margin is calculated as operating income as a percentage of revenues fr
om
third parties.
4
ROS% is calculated as adjusted operating income (operating income excluding
identified items) as a percentage of revenues fr
om third parties.
5
OPI margin and ROS% for Other activities/eliminations is not shown, as this is not
meaningful.
*
EBITDA is operating income excluding depreciation and amortization.
*
Adjusted EBITDA is operating income excluding depreciation, amortization and identified items.
*
For the reconciliation to IFRS measures please r
efer to the first table in this Note.
1
For reconciliation to IFRS measures please r
efer to the first table in this Note.
2
ROI% is calculated as adjusted operating income (operating income excluding
identified items) of the last 12 months as a percentage of average invested capital of
the last 12 months. Invested capital is calculated as total assets (excluding cash and
cash equivalents, short-term investments, investments in associates, the receivable
from pension funds in an asset position and assets held for sale) less current tax
liabilities, deferred tax liabilities and trade and other payables.
3
ROI% for Other activities/eliminations is not shown, as this is not meaningful.
Leverage ratio is calculated as net debt/EBITDA. For the
calculation of net debt, refer to Note 21. Leverage ratio
is included in Note 27 in the paragraph on capital risk
management.
Adjusted operating income, OPI margin and ROS%
In € millions
2020
2021
Revenue from third parties
Decorative Paints
3,558
3,979
Performance Coatings
4,957
5,603
Other
15
5
T
otal
8,530
9,587
Operating income
Decorative Paints
551
640
Performance Coatings
665
650
Other
(253)
(172)
T
otal
963
1,118
T
otal APM adjustments (identified items)
1
Decorative Paints
(22)
42
Performance Coatings
(35)
2
Other
(79)
(18)
T
otal
(136)
26
Adjusted operating income
2
Decorative Paints
573
598
Performance Coatings
700
648
Other
(174)
(154)
T
otal
1,099
1,092
OPI margin%
3
Decorative Paints
15.5
16.1
Performance Coatings
13.4
11.6
Other
5
T
otal
11.3
11.7
ROS%
4
Decorative Paints
16.1
15.0
Performance Coatings
14.1
11.6
Other
5
T
otal
12.9
11.4
EBITDA
*
2020
2021
In € millions
Operating
income
Depreciation and
amortization
EBITDA
Operating
income
Depreciation and
amortization
EBITDA
Decorative Paints
551
(153)
704
640
(154)
794
Performance Coatings
665
(159)
824
650
(160)
810
Other
(253)
(49)
(204)
(172)
(37)
(135)
T
otal
963
(361)
1,324
1,118
(351)
1,469
Adjusted EBITDA
*
2020
2021
In € millions
Adjusted
operating
income
Depreciation and
amortization exclu-
ding identified items
Adjusted
EBITDA
Adjusted
operating
income
Depreciation and
amortization exclu-
ding identified items
Adjusted
EBITDA
Decorative Paints
573
(141)
714
598
(147)
745
Performance Coatings
700
(154)
854
648
(159)
807
Other
(174)
(48)
(126)
(154)
(38)
(116)
T
otal
1,099
(343)
1,442
1,092
(344)
1,436
Adjusted earnings per share
In € millions
2020
2021
Profit for the period attributable to
shareholders of the company from
continuing operations
637
823
APM adjustments to operating income
136
(26)
APM adjustment to interest
(3)
(29)
APM adjustment to income tax
(28)
(15)
Adjusted profit from continuing
operations attributable to share
-
holders of the company*
742
753
Weighted average number of shares
(in millions)
191.4
185.0
Earnings per share from continuing
operations (in €)
3.33
4.45
Adjusted earnings per share from
continuing operations (in €)
3.88
4.07
ROI%
In € millions
2020
2021
Average invested capital
Decorative Paints
2,799
2,872
Performance Coatings
3,388
3,520
Other
647
437
T
otal
6,834
6,829
Adjusted operating income
1
Decorative Paints
573
598
Performance Coatings
700
648
Other
(174)
(154)
T
otal
1,099
1,092
ROI%
2
Decorative Paints
20.5
20.8
Performance Coatings
20.7
18.4
Other
3
T
otal
16.1
16.0
105
AkzoNobel Report 2021
|
Financial statements
*
The regional split has been changed compared to pr
evious year to align to our new internal regional structure.
AkzoNobel derives revenue fr
om the transfer of goods
and services at a point in time and over time in the major
product lines and geographical r
egions as disclosed in the
table in this Note.
For the receivables, which ar
e included in T
rade and other
receivables, r
eference is made to Note 17.
As at December 31, 2021, and at December 31, 2020, no
significant contract assets were r
ecognized.
As at December 31, 2021, the amount of contract liabilities
deferred to be r
ecognized over time in 2022 is
€3 million. These contract liabilities primarily relate to
shipping, training and certain technical services, for which
revenue is r
ecognized over time. The amount of €3 million
included in contract liabilities at the beginning of the period
has been recognized as r
evenue during the year 2021
(2020: €3 million).
Revenue disaggregation
Decorative Paints
Performance Coatings
Other
T
otal
In € millions
2020
2021
2020
2021
2020
2021
2020
2021
Primary geographical markets - revenue from thir
d parties
*
The Netherlands
233
231
94
99
15
5
342
335
Other EMEA countries
2,013
2,198
1,971
2,275
—
—
3,984
4,473
North Asia
484
560
1,032
1,175
—
—
1,516
1,735
South Asia Pacific
432
513
540
624
—
—
972
1,137
North America
—
—
1,112
1,163
—
—
1,112
1,163
South America
396
477
208
267
—
—
604
744
T
otal
3,558
3,979
4,957
5,603
15
5
8,530
9,587
Major goods/service lines - revenue from thir
d parties
Decorative Paints Europe, Middle East and Africa
2,246
2,429
—
—
—
—
2,246
2,429
Decorative Paints South America
396
477
—
—
—
—
396
477
Decorative Paints Asia
916
1,073
—
—
—
—
916
1,073
Powder Coatings
—
—
1,128
1,315
—
—
1,128
1,315
Marine and Protective Coatings
—
—
1,068
1,164
—
—
1,068
1,164
Automotive and Specialty Coatings
—
—
1,127
1,231
—
—
1,127
1,231
Industrial Coatings
—
—
1,634
1,893
—
—
1,634
1,893
Other
—
—
—
—
15
5
15
5
T
otal
3,558
3,979
4,957
5,603
15
5
8,530
9,587
Timing of revenue recognition
Goods transferred at a point in time
3,512
3,923
4,772
5,405
—
—
8,284
9,328
Services transferred over time
46
56
185
198
15
5
246
259
T
otal
3,558
3,979
4,957
5,603
15
5
8,530
9,587
Note 5
REVENUE
106
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Financial statements
In 2021, operating income was up 16% at
€1,118 million (2020: €963 million). Significant price
increases and volume incr
eases contributed to offset raw
material cost inflation and supply constraints. Operating
The average number of employees working outside the
Netherlands was 30,300 (2020: 30,700).
In 2021, the number of employees increased by 2% to
32,800 people (year
-end 2020: 32,200 people). Acquisi-
tions in 2021 added around 400 people.
Employee benefit costs in 2020 included €33 million
compensation related to government support measures
for COVID-19. For 2021, this number is not material.
income further includes net positive identified items of €26
million, mainly related to gains fr
om the Brazil ICMS case
and UK ACT case (refer to Note 4 for further details on
identified items), partly offset by transformation initiatives
(2020: €136 million negative identified items, mainly relat-
ing to transformation initiatives). OPI margin improved to
11.7% (2020: 11.3%).
Costs by nature 2021
In € millions
Employee
benefits
Amortization
Depreciation
Purchases and
other costs
T
otal
Cost of sales
(529)
—
(155)
(5,048)
(5,732)
Selling expenses
(832)
(50)
(90)
(1,020)
(1,992)
General and administrative expenses
(267)
(16)
(23)
(276)
(582)
Research and development expenses
(168)
(4)
(13)
(45)
(230)
Other results
23
—
—
44
67
T
otal
(1,773)
(70)
(281)
(6,345)
(8,469)
Costs by nature 2020
In € millions
Employee
benefits
Amortization
Depreciation
Purchases and
other costs
T
otal
Cost of sales
(524)
—
(160)
(4,061)
(4,745)
Selling expenses
(832)
(48)
(83)
(953)
(1,916)
General and administrative expenses
(319)
(12)
(40)
(292)
(663)
Research and development expenses
(175)
(4)
(14)
(45)
(238)
Other results
—
—
—
(5)
(5)
T
otal
(1,850)
(64)
(297)
(5,356)
(7,567)
Salaries, wages and other employee benefits in
operating income
In € millions
2020
2021
Salaries and wages
(1,449)
(1,395)
Post-retirement cost
(138)
(115)
Other social charges
(263)
(263)
T
otal
(1,850)
(1,773)
Average number of employees of total AkzoNobel
Average number during the year
2020
2021
Decorative Paints
12,100
12,500
Performance Coatings
17,500
17,000
Corporate and other
3,400
3,200
T
otal
33,000
32,700
Average number of employees in the Netherlands
Average number during the year
2020
2021
Decorative Paints
600
600
Performance Coatings
1,000
1,100
Corporate and other
700
700
T
otal
2,300
2,400
Employees
At year
-end
2020
2021
Decorative Paints
11,900
12,500
Performance Coatings
17,100
17,200
Corporate and other
3,200
3,100
T
otal
32,200
32,800
Note 6
OPERA
TING INCOME
Note 7
EMPLO
YEE BENEFITS
107
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Financial statements
SHARE-BASED COMPENSA
TION
Share-based compensation r
elates to the equity-settled
performance-related shar
e plan and the restricted share
plans, as well as the share-matching plan. Charges r
ecog-
nized in the 2021 statement of income for share-based
compensation amounted to €18 million and are included in
salaries and wages (2020: €14 million).
Performance-related and r
estricted share plan
Under the performance-related shar
e plan and the
restricted shar
e plan, a number of conditional shares are
granted to the members of the Board of Management,
members of the Executive Committee, executives and
certain other employee categories each year
. The number
of participants of the performance-related shar
e plan and
the restricted shar
e plan at year
-end 2021 was 479 (2020:
335). The shares of the performance-r
elated share plan
series 2018-2020 have vested and were deliver
ed to the
participants in 2021.
In 2021, Mr
. V
anlancker was granted a special grant of
17,500 shares to compensate for the loss of shar
es due
to the two-year re-appointment and the fact that shar
es
granted as from 2021 will only vest on a pr
o-rated basis.
The special grant was not subject to performance condi-
tions, but a restriction date of April 20, 2023 applies.
The performance targets for the conditional grant of
performance-related shar
es of the 2019-2021 and
2020-2022 plans for the Board of Management and the
Executive Committee are linked for 50% to the r
elative
TSR performance of the company compared with the
peer group and for 50% to the ROI performance of the
company
. The targets for the 2021-2023 performance
related shar
e grant are for 20% linked to Revenue
Growth, for 40% to Adjusted EBITDA, for 20% to ROI
and for 20% to performance against Environmental,
Social and Governance (ESG) KPI’
s. A two-year holding
restriction applies.
1
Date of the AGM at which the new L
TI performance criteria for the Board of Management were approved.
2
Date on which the Supervisory Board approved the use of the average shar
e price calculation method to determine the number of shares granted.
3
50% for the 2018-2020, 2019-2021 and 2020-2022 grants, no longer applicable for the 2021-2023 grant.
4
50% for the 2018-2020, 2019-2021 and 2020-2022 grants, 100% for the 2021-2023 grant.
The plan for the executives and certain other employee
categories is a restricted shar
e plan without any perfor
-
mance conditions, whereby the conditional grant of shar
es
will vest upon the condition that they remain in service with
the company during the three-year vesting period. A one-
year holding restriction applies for the executives.
The conditional shares of the 2019-2021 performance
share plan vested for 58.33% (series 2018-2020: 78%),
including a dividend yield of 13.14% (series 2018-2020:
14.37%), the final vesting percentage amounted to
66.00% (series 2018-2020: 89.21%).
* Or the actual date of the AGM in which Mr
. Vanlancker will relinquish his position as CEO.
Share plans of AkzoNobel executives
Plan
Performance/
V
esting
period
Award
date
V
esting
date
End of
holding
period
Balance at
January 1,
2021
Awarded
in 2021
V
ested in
2021
Forfeited
in 2021
Dividend in
2021
Subject
to per
-
formance
condition
Unvested in
2021
Subject
to holding
period
Balance at
December
31, 2021
2018-2020 Restricted Share Plan
3 years
1/1/2018
1/1/2021
1/1/2022
167,020
—
(167,020)
—
—
NA
—
167,020
—
2018-2020 Performance Share Plan
3 years
1/1/2018
1/1/2021
1/1/2023
70,034
—
(70,034)
—
—
—
—
70,034
—
2019-2021 Restricted Share Plan
3 years
1/1/2019
1/1/2022
1/1/2023
186,870
1,883
(22,390)
(8,908)
NA
157,455
157,455
157,455
2019-2021 Performance Share Plan
3 years
1/1/2019
1/1/2022
1/1/2024
75,531
—
—
(31,151)
1,450
45,830
45,830
45,830
45,830
2020-2022 Restricted Share Plan
3 years
1/1/2020
1/1/2023
1/1/2024
176,686
2,843
(6,083)
(16,351)
—
NA
157,095
157,095
157,095
2020-2022 Performance Share Plan
3 years
1/1/2020
1/1/2023
1/1/2025
58,247
4,520
—
(3,252)
1,177
60,692
60,692
60,692
60,692
2020-2022 Restricted Share Plan
3 years
4/1/2020
4/1/2023
NA
6,590
—
—
(700)
—
NA
5,890
—
5,890
2021-2023 Restricted Share Plan
3 years
4/1/2021
4/1/2024
4/1/2025
—
187,123
(373)
(9,803)
—
NA
176,947
176,947
176,947
2021-2023 Performance Share Plan
3 years
1/1/2021
1/1/2024
1/1/2026
—
67,974
—
(5,764)
1,194
63,404
63,404
63,404
63,404
2021-2023 Restricted Share Plan
3 years
4/1/2021
4/1/2024
NA
—
27,620
—
(480)
—
NA
27,140
—
27,140
2021-2023 Reappointment Award*
NA
4/22/2021
NA
4/20/2023
—
17,500
(17,500)
—
—
—
—
17,500
—
T
otal
740,978
309,463
(283,400)
(76,409)
3,821
196,926
694,453
915,977
694,453
Fair value performance-related shar
es in €
Series
Opening share
price per:
Fair V
alue
Market condi-
tion (TSR)
3
Non-market
based
performance
conditions
4
Share price
Expected
volatility
Risk free
interest rate
2018-2020
1
April 26, 2018
71.65
67.51
75.78
75.78
22.66%
(0.04)%
2019-2021
January 2, 2019
61.09
52.57
69.60
69.60
20.12%
(0.04)%
2020-2022
2
April 21, 2020
53.42
42.95
63.88
63.88
21.42%
(0.33)%
2021-2023
1
April 22, 2021
103.20
NA
103.20
103.20
NA
NA
108
AkzoNobel Report 2021
|
Financial statements
The share price of a common AkzoNobel shar
e at year
end 2021 amounted to €96.50 (2020: €87.86).
Fair value of restricted and performance-r
elated
shares
The fair value of the restricted shar
es of the 2021-2023
grant, amounting to €80.63, is based on the share
price on March 3, 2021 of €87.40 and the expected
dividend yield of 2.65%. As for the 2021-2023 grant of
performance-related shar
es all conditions are non-market
based performance conditions, the fair value of the
performance related shar
es is based on the share price
as per April 22, 2021, the date of the AGM at which the
new L
TI performance criteria for the Board of Management
were appr
oved. In the same meeting, the special grant
to Mr
. V
anlancker was also approved, ther
efore the same
fair value applies for these shares. The fair value of the
performance-related shar
es of the 2018-2020, 2019-2021
and 2020-2022 grant is for 50% based on a market condi-
tion (TSR) and for 50% based on a non-market-based
performance condition (ROI).
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. The parameters applied
for the fair value calculations are: shar
e price at grant date
(opening of first trading date from grant date), expected
volatility (based on the share price development over the
past three years of AkzoNobel), and risk-fr
ee interest rate
(based on a Dutch zero-coupon government bond).
Share-matching plan
The members of the Board of Management and the
members of the Executive Committee are eligible to partic-
ipate in the share-matching plan. However
, they will not
be eligible for matching shares for the years 2019, 2020
and 2021. Under certain conditions, members who invest
part of their short-term incentive in AkzoNobel shares may
have such shares matched by the company
. During 2021,
1,720 potential matching shares wer
e matched based on
the conditional share matching grants of the 2018 series,
leading to no potential matching shares on December 31,
2021. In 2022, the members of the Board of Management
and the members of the Executive Committee will
become eligible for matching shares by investing part
of their 2021 short-term incentive that is paid in 2022 in
AkzoNobel shares.
Pre-tax income fr
om continuing operations amounted
to a profit of €1,105 million (2020: €919 million). The net
tax charges related to continuing operations ar
e included
in the statement of income as shown in this Note and
amount to €246 million (2020: €241 million), leading to an
effective tax rate of 22.3% (2020: 26.2%).
Classification of current and deferr
ed tax result
In 2021, the income tax expense was €246 million
(2020: €241 million). A breakdown into curr
ent and
deferred tax expenses and a split of the main categories
is provided in the table below
. For comparative reasons,
this table presents the income tax expense excluding the
impact from r
esults on discontinued operations.The total
deferred tax charge including discontinued operations
was €77 million (2020: €108 million). The total tax charge
including discontinued operations was €248 million
(2020: €249 million).
Adjustments for prior years in 2021 is mainly related to a
net tax benefit of €29 million for the UK Advanced Corpora-
tion T
ax (ACT) case, which is further described in Note 4
on Alternative Performance Measures due to its identified
nature. Origination and r
eversal of temporary differences
and tax losses is driven, amongst others, by timing differ
-
ences between recognition and payments for pr
ovisions,
timing differ
ences on depreciation and amortization for tax
Net financing expenses for the year were €39 million
(2020: €69 million). Significant variances are:
• Net interest on net debt increased by €10 million to
€62 million (2020: €52 million) mainly as a result of
higher interest cost on debt
• Interest on provisions changed fr
om a €10 million
charge in 2020 to an income of €3 million in 2021 due
to discounting at higher discount rates
• Other items in 2021 include €28 million interest income
from the Brazil ICMS case (r
efer to Note 4 for further
details on the Brazil ICMS case) and foreign curr
ency
results.
The average interest rate used for capitalized inter
est in
2021 and 2020 was 1.9%. Capitalized interest was negli-
gible in both 2021 and 2020.
The average interest rate on total debt was 2.3%
(2020: 2.4%).
Financing income and expenses
In € millions
2020
2021
Financing income
14
12
Financing expenses
(66)
(74)
Net interest on net debt
(52)
(62)
Other interest
Financing income related to post-
retirement benefits
14
13
Interest charges on provisions
(10)
3
Other items
(21)
7
Net other financing credit/(charges)
(17)
23
T
otal financing income and
expenses
(69)
(39)
Classification of current and deferr
ed tax result
In € millions
2020
2021
Current tax (expense)/income for
The year
(131)
(205)
Adjustments for previous years
(2)
36
T
otal current tax expense
(133)
(169)
Deferred tax (expense)/income for
Origination and reversal oftemporary
differences and tax losses
(106)
(75)
De/re-recognition of deferr
ed tax
assets
1
18
Changes in tax rates
(3)
(20)
T
otal deferred tax expense
(108)
(77)
T
otal
(241)
(246)
Note 8
FINANCING INCOME
AND EXPENSES
Note 9
INCOME T
AX
109
AkzoNobel Report 2021
|
Financial statements
purposes versus the consolidated financial statements, and
tax loss carryforwards utilized against pr
ofits of the year
or new tax losses incurred. Changes in tax rates in 2021
mainly relate to the changes in the UK and Dutch
tax rates.
Effective tax rate r
econciliation
In 2021, the effective income tax rate based on the state-
ment of income is 22.3% (2020: 26.2%). A reconciliation
between the effective tax rate and the weighted average
statutory income tax rate is provided in the table below
.
For comparative reasons, this table pr
esents the effective
consolidated tax rate excluding the impact from r
esults
on discontinued operations. Including these results, the
effective consolidated tax rate is 22.3% (2020: 27.1%)
Non-taxable income is mainly related to inter
est on tax
credits in Brazil, the Innovation box in the Netherlands,
R&D credits and the tax exemption for investments. Non-
deductible expenses are mainly r
elated to base erosion
and the effects of Argentina hyperinflation accounting.
Adjustments for prior years in 2021 is mainly related to
the UK Advanced Corporation T
ax (ACT) case, which is
further described in Note 4 on Alternative Performance
Measures due to its identified natur
e. Changes in tax rates
in 2021 mainly relate to the changes in the UK and Dutch
tax rates.
The impact of non-refundable withholding tax on the
tax rate is dependent on our relative shar
e in the profit
of subsidiaries in countries that levy withholding tax on
dividends and on the timing of the remittance of such divi-
dends. Based on the Dutch tax system there is a limited
credit for such taxes.
Origination of deferred tax assets and liabilities
Deferred tax assets and liabilities originate fr
om temporary
differ
ences in various balance sheet line items, as well as
from tax cr
edits and tax loss carryforwards.
The below tables show the origination of deferred tax
assets and liabilities, and the movements thereof, for the
financial years 2021 and 2020.
Origination of deferred tax assets and liabilities 2021
In € millions
Balance at
January 1, 2021
Changes in
exchange rate
Recognized in
income
Recognized in
equity/Other
comprehensive
income
Acquisitions
Balance at
December 31,
2021
Intangible assets
(417)
(23)
(17)
—
(4)
(461)
Property
, plant and equipment
60
6
20
—
(8)
78
Financial non-current assets
(267)
(24)
(138)
23
—
(406)
Post-retirement benefit pr
ovisions
156
4
(2)
(20)
—
138
Other provisions
29
2
(3)
—
—
28
Other items
68
3
25
(2)
3
97
T
ax credits
184
—
20
—
—
204
T
ax loss carryforwards
217
12
18
(12)
2
237
Deferred tax assets (liabilities)
30
(20)
(77)
(11)
(7)
(85)
Origination of deferred tax assets and liabilities 2020
In € millions
Balance at
January 1, 2020
Changes in
exchange rate
Recognized in
income
Recognized in
equity/Other
comprehensive
income
Acquisitions
Balance at
December 31,
2020
Intangible assets
(410)
24
(31)
—
—
(417)
Property
, plant and equipment
49
(6)
17
—
—
60
Financial non-current assets
(200)
13
(79)
(1)
—
(267)
Post-retirement benefit pr
ovisions
158
(9)
23
(16)
—
156
Other provisions
35
(3)
(3)
—
—
29
Other items
102
—
(37)
3
—
68
T
ax credits
173
—
11
—
—
184
T
ax loss carryforwards
231
(7)
(9)
2
—
217
Deferred tax assets (liabilities)
138
12
(108)
(12)
—
30
Effective tax rate
in%
2020
2021
Corporate tax rate in the Netherlands
25.0
25.0
Effect of tax rates in other countries
(0.4)
0.2
Weighted average statutory income
tax rate
24.6
25.2
Non-taxable income
(1.8)
(3.0)
Non-deductible expenses
2.4
2.3
De/re-recognition of deferr
ed tax assets
(0.1)
(1.6)
Non-refundable withholding taxes
0.6
0.9
Adjustment for prior years
0.2
(3.3)
Deferred tax adjustment due to changes
in tax rates
0.3
1.8
Effective tax rate
26.2
22.3
110
AkzoNobel Report 2021
|
Financial statements
In 2020 and 2021, deferred tax asset r
ecoverability has
been assessed using taxable profit for
ecasts, which take
the potential impact of the COVID-19 pandemic on future
results into account. These assessments showed suf
ficient
taxable profit to r
ecover deferred tax assets in most
jurisdictions, whilst in some jurisdictions this resulted in
derecognitions or r
e-recognitions. In 2021, these assess-
ments resulted in a net r
e-recognition of deferred
tax assets of €18 million (2020: net re-r
ecognition of
€4 million).
Deferred tax assets not r
ecognized fully relate to tax loss
carryforwards in 2021. The losses in the tables on tax
losses carried forward ar
e gross amounts, with the tax
impact included in the last column of the table.
From the total amount of r
ecognized net deferred tax
assets, €151 million (2020: €196 million) is related to
entities that have suffer
ed a loss in either the current of
the previous year and wher
e utilization is dependent on
future taxable pr
ofit in excess of the profit arising from
the reversal of existing taxable temporary dif
ferences.This
assessment is based on management’
s long-term projec-
tions and tax planning strategies.
A deferred tax liability is r
ecognized for taxable temporary
differ
ences related to investments in subsidiaries, branches
and associates and interests in joint arrangements, to
the extent that it is probable that these will r
everse in the
foreseeable futur
e. The expected net tax impact of the
remaining dif
ferences for which no deferred tax liabilities
have been recognized is €31 million (2020: €33 million).
Reconciliation deferred tax assets and liabilities to
the balance sheet
The above table provides a r
econciliation of the total
deferred tax amounts for each of the originating items to
the deferred tax asset and liability positions as included in
the balance sheet.
Deferred tax asset r
ecoverability assessment
In assessing the recognition of the deferr
ed tax assets,
management considers whether it is probable that some
portion or all of the deferred tax assets will be r
ealized. The
ultimate realization of the deferr
ed tax assets is dependent
upon the generation of future taxable income during the
periods in which those temporary differ
ences, losses,
and credits become deductible. Management considers
the scheduled reversal of deferr
ed tax liabilities, projected
future taxable income, and tax planning strategies in
making this assessment. The amount of deferred tax
assets considered r
ealizable, however
, could change in the
near term if future estimates of pr
ojected taxable income
during the carryforward period ar
e revised. The majority
of the amount of the non-current portion of deferr
ed or
current taxes will be r
ecovered or settled after more than
12 months.
Expiration year of loss carryforwards 2021
In € millions
2022
2023
2024
2025
2026
Later
Unlimited
T
otal
Deferred
tax
T
otal loss carryforwards
1
—
1
—
3
17
3,131
3,153
795
Loss carryforwards not recognized in
deferred tax assets
(1)
—
(1)
—
—
(9)
(2,204)
(2,215)
(558)
T
otal loss carryforwards recognized
—
—
—
—
3
8
927
938
237
Expiration year of loss carryforwards 2020
In € millions
2021
2022
2023
2024
2025
Later
Unlimited
T
otal
Deferred
tax
T
otal loss carryforwards
2
6
1
108
–
124
2,898
3,139
645
Loss carryforwards not recognized in
deferred tax assets
–
(6)
–
–
–
(2)
(2,134)
(2,142)
(428)
T
otal loss carryforwards recognized
2
–
1
108
–
122
764
997
217
Reconciliation deferred tax assets and liabilities to the balance sheet
December 31, 2020
December 31, 2021
In € millions
Net balance
Assets
Liabilities
Net balance
Assets
Liabilities
Intangible assets
(417)
18
435
(461)
12
473
Property
, plant and equipment
60
85
25
78
123
45
Financial non-current assets
(267)
36
303
(406)
25
431
Post-retirement benefit pr
ovisions
156
157
1
138
141
3
Other provisions
29
37
8
28
38
10
Other items
68
129
61
97
113
16
T
ax credits
184
184
—
204
204
—
T
ax loss carryforwards
217
217
—
237
237
—
T
ax assets/liabilities
30
863
833
(85)
893
978
Set-off of tax
—
(366)
(366)
—
(411)
(411)
Net deferred tax positions
30
497
467
(85)
482
567
111
AkzoNobel Report 2021
|
Financial statements
Earnings per share (and adjusted earnings per share)
increased in 2021, mainly due to the incr
eased profit
before tax fr
om continuing operations and the impact of
the share buyback pr
ograms.
Profit for the period attributable to the shar
eholders of the
company was €829 million (in 2020: €630 million).
The following table shows income tax items recognized in
equity by category
.
The number of shares for the earnings per share calcula-
tion decreased as a r
esult of the share buyback programs
of 2020 and 2021.
Adjusted earnings per share from continuing
operations
In € millions
2020
2021
Profit before tax fr
om continuing
operations
919
1,105
Identified items reported in operating
income
136
(26)
Interest on tax settlement
(3)
(29)
Adjusted income tax
(269)
(261)
Non-controlling interests
(41)
(36)
Adjusted profit from continuing
operations attributable to
shareholders of the company
742
753
Adjusted earnings per share from
continuing operations (in €)
3.88
4.07
Earnings per share
in €
2020
2021
Continuing operations
Basic
3.33
4.45
Diluted
3.32
4.43
Discontinued operations
Basic
(0.04)
0.03
Diluted
(0.04)
0.03
T
otal operations
Basic
3.29
4.48
Diluted
3.28
4.46
Profit for the period
In € millions
2020
2021
Profit before tax fr
om continuing
operations
919
1,105
Income tax
(241)
(246)
Profit from continuing opera
-
tions
678
859
Profit for the period attributable to
non-controlling interests
(41)
(36)
Profit for the period from
continuing operations attribut-
able to shareholders of the
company
637
823
Profit for the period from discon
-
tinued operations attributable to
shareholders of the company
(7)
6
Profit for the period attributable
to shareholders of the company
630
829
W
eighted average number of common shares
Number of shares
2020
2021
Issued common shares at
January 1
199,600,331
190,579,841
Effect of issued common shares
during theyear
264,818
225,806
Effect of share buyback pr
ogram
(8,440,749)
(5,845,781)
Shares for basic earnings per
share for the year
191,424,400
184,959,866
Effect of dilutive shares
For performance-related and
restricted shares
674,365
714,114
For share-matching plan
3,039
–
Shares for diluted earnings
per share
192,101,804
185,673,980
Income tax recognized in equity
In € millions
2020
2021
Currency exchange differ
ences on inter
-
company loans of a permanent nature
5
1
Share-based compensation
(1)
(2)
Share buyback
3
—
Post-retirement benefits
(18)
3
Changes in tax rates
–
(11)
T
otal
(11)
(9)
Current tax
1
2
Deferred tax
(12)
(11)
T
otal
(11)
(9)
Note 10
EARNINGS PER SHARE
112
AkzoNobel Report 2021
|
Financial statements
Brands as included in the table comprise of brands with
indefinite useful lives and brands with finite useful lives.
Brands with indefinite useful lives are almost fully r
elated
to Dulux, which is the major brand, due to its global pres-
ence, high recognition and strategic natur
e. Other intan-
gibles include licenses, know-how
, intellectual property
rights, software and development cost. Both at year
-end
2021 and 2020, there wer
e no material purchase commit-
ments for individual intangible assets. No intangible assets
were r
egistered as security for bank loans.
Annual impairment testing
Goodwill and other intangibles with indefinite useful lives
are tested for impairment per business unit (one level below
segment level) annually or whenever an impairment trigger
exists, applying the value-in-use method. The impair
-
ment test is in principle based on cash flow projections of
the five-year plan. Elements considered to determine if a
differ
ent approach would be more appr
opriate are, among
others, high growth/emerging economies, geo expansion
opportunities, introduction of new pr
oduct ranges and
opportunities from market consolidation. In 2021, the above
exception was applied for Decorative Paints Asia and Deco
-
rative Paints South America, for which the revenue gr
owth
and adjusted EBITDA-margin development projections wer
e
extrapolated beyond the five-year explicit forecast period for
another five years, applying reduced average gr
owth rates.
The situation around COVID-19 is closely monitor
ed; the
impact on the estimated future cash flows is r
eflected in
the models which are used to assess the valuation of the
carrying value of AkzoNobel’
s asset base.
The key assumptions used in the projections for annual
impairment testing are:
• Revenue growth per year: based on actual experience,
analysis of markets and GDP growth and expected
market share developments
• Adjusted EBITDA-margin development per year: based
on actual experience and management’
s long-term
projections
•
Weighted average cost of capital per year: the pretax dis-
count rate determined per business unit, reflecting curr
ent
market assessments of the time value of money and the
risks specifically associated with the business units
For all business units, a terminal value was calculated
based on the long-term inflation expectations of 1.0%.
The estimated pre-tax cash flows ar
e discounted to their
present value using a pr
e-tax weighted average cost of
capital. The discount rates are determined for each
business unit and range from 7.8% to 12.5%
(2020: 8.9% to 14.5%), with a weighted average of
8.4% (2020: 9.6%).
Intangible assets
In € millions
Goodwill
Brands
Customer
lists
Other
intangibles
T
otal
Balance at January 1, 2020
Cost of acquisition
1,121
2,208
940
175
4,444
Cost of internally developed intangibles
—
—
—
191
191
Accumulated amortization/impairment
(28)
(185)
(545)
(252)
(1,010)
Carrying value at January 1, 2020
1,093
2,023
395
114
3,625
Movements in 2020
Acquisitions through business combinations
48
8
23
11
90
Investments - including internally developed intangibles
—
—
—
34
34
Amortization
—
(11)
(33)
(20)
(64)
Changes in exchange rates
(45)
(76)
(10)
—
(131)
T
otal movements
3
(79)
(20)
25
(71)
Balance at December 31, 2020
Cost of acquisition
1,123
2,134
921
178
4,356
Cost of internally developed intangibles
—
—
—
212
212
Accumulated amortization/impairment
(27)
(190)
(546)
(251)
(1,014)
Carrying value at December 31, 2020
1,096
1,944
375
139
3,554
Movements in 2021
Acquisitions through business combinations
18
8
10
—
36
Investments - including internally developed intangibles
—
—
—
35
35
Amortization
—
(12)
(34)
(24)
(70)
Changes in exchange rates
41
90
5
(1)
135
T
otal movements
59
86
(19)
10
136
Balance at December 31, 2021
Cost of acquisition
1,182
2,239
972
171
4,564
Cost of internally developed intangibles
—
—
—
241
241
Accumulated amortization/impairment
(27)
(209)
(616)
(263)
(1,115)
Carrying value at December 31, 2021
1,155
2,030
356
149
3,690
Key assumptions
In% per year
Average revenue
growth 2022-2026
Pre-tax weighted
average cost of
capital 2022-2026
Decorative Paints
1.1-5.9%
8.4-12.5%
Performance Coatings
2.6-4.7%
7.8-8.1%
Note 11
INT
ANGIBLE ASSETS
113
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Financial statements
Investments in property
, plant and equipment
We thor
oughly assess all investment proposals to ensure
the right capital and capacity allotment and take decisions
accordingly
. T
o reinfor
ce our capability to support custom-
ers and enhance our manufacturing and supply chain,
we have invested in our sites to support the Grow and
Deliver objectives. Large investments projects ar
e ongoing
amongst others at our Highpoint, US, Wood Coatings
site, and at our Como, Italy
, Powder Coatings site. Further
investments include the setup of a new powder coatings
manufacturing line at our Hanoi, Vietnam, site, and the
setup of a texture making workshop at our Shanghai site
to support the Deco project business gr
owth in China.
As we strongly believe in the importance of innovation to
keep AkzoNobel at the forefr
ont of the paints and coat-
ings industry
, we have also continued to invest in RD&I,
amongst others in our Deco R&D facility in Slough, UK. We
have furthermore invested in capacity incr
eases to support
the liquid coatings to powder coatings evolution, an
example of our increasing focus on sustainable solutions.
Acquisitions
On March 1, 2021, we acquir
ed Industrias T
itan S.A.U.
(Titan Paints) in Spain. The acquisition strengthens our
paints business and footprint in Spain.
Impairments
In 2021 and 2020, no significant impairments were
recognized.
Sensitivity tests were performed for gr
owth assumptions,
adjusted EBITDA margin development assumptions and
for the weighted average cost of capital. These sensitivity
tests show that reasonably possible changes in these key
assumptions would not cause carrying amounts to exceed
recoverable amounts for any of the business units.
In 2021 and 2020, no impairment charges were r
ecog-
nized in relation to the annual impairment test.
Specific asset impairments
In 2021 and 2020, no impairment charges were r
ecorded
in relation to specific assets.
Goodwill and other intangibles per business unit
Goodwill
Brands with indefinite
useful lives
Other intangibles
with finite useful lives
T
otal intangibles
In € millions, at December 31
2020
2021
2020
2021
2020
2021
2020
2021
Decorative Paints Europe, Middle East
and Africa
97
114
837
837
148
146
1,082
1,097
Decorative Paints South America
—
—
83
87
1
—
84
87
Decorative Paints Asia
10
9
847
928
38
31
895
968
Powder Coatings
149
155
—
—
48
32
197
187
Marine and Protective Coatings
163
174
—
—
78
80
241
254
Automotive and Specialty Coatings
281
288
—
—
180
175
461
463
Industrial Coatings
396
415
—
—
126
120
522
535
Corporate and other
—
—
—
—
72
99
72
99
T
otal
1,096
1,155
1,767
1,852
691
683
3,554
3,690
Note 12
PROPERTY
, PLANT AND
EQUIPMENT
114
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Financial statements
Property
, plant and equipment
In € millions
Buildings and land
Plant equipment and
machinery
Other equipment
Construction in progress
and prepayments on
projects
Assets not used
T
otal
Balance at January 1, 2020
Cost of acquisition
1,528
1,974
906
193
11
4,612
Accumulated depreciation/impairment
(758)
(1,389)
(757)
(1)
(7)
(2,912)
Carrying value at January 1, 2020
770
585
149
192
4
1,700
Movements in 2020
Acquisitions
3
1
1
—
—
5
Divestments
(4)
(1)
(1)
(3)
—
(9)
Investments
8
23
6
187
—
224
T
ransfer between categories
28
83
22
(133)
—
—
Depreciation
(53)
(107)
(38)
—
—
(198)
Impairments, including reversals
—
(2)
(1)
—
—
(3)
Changes in exchange rates
(58)
(31)
(5)
(3)
(1)
(98)
T
otal movements
(76)
(34)
(16)
48
(1)
(79)
Balance at December 31, 2020
Cost of acquisition
1,425
1,937
890
244
10
4,506
Accumulated depreciation/impairment
(731)
(1,386)
(757)
(4)
(7)
(2,885)
Carrying value at December 31, 2020
694
551
133
240
3
1,621
Movements in 2021
Acquisitions
36
11
—
—
—
47
Divestments
(5)
(3)
(1)
(1)
—
(10)
Investments
10
18
8
217
—
253
T
ransfer between categories
30
112
28
(170)
—
–
Depreciation
(44)
(102)
(41)
—
—
(187)
Impairments, including reversals
–
(1)
—
—
—
(1)
Changes in exchange rates
31
29
6
11
—
77
T
otal movements
58
64
—
57
—
179
Balance at December 31, 2021
Cost of acquisition
1,546
2,124
919
300
10
4,899
Accumulated depreciation/impairment
(794)
(1,509)
(786)
(3)
(7)
(3,099)
Carrying value at December 31, 2021
752
615
133
297
3
1,800
115
AkzoNobel Report 2021
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Financial statements
The total value of investments in associates and joint
ventures at December 31, 2021 amounted to €178 million
(2020: €166 million) and consisted of our equity share of
€176 million (2020: €164 million) and loans granted of
€2 million (2020: €2 million).
AkzoNobel mainly leases land, office spaces, stor
es and
cars. Some leases provide for additional r
ent payments
that are based on changes in local price indices.
Some property leases contain extension options exer
cis-
able by AkzoNobel up to one year before the end of the
non-cancellable contract period. We have estimated that
the lease liability would increase by less than 20%, if we
would exercise the extension options which ar
e currently
not included in the valuation of the lease liability
. This
excludes so-called “evergreens” or perpetual leases.
T
otal net cash outflow from financing activities related to
leases recognized on the balance sheet was €100 million
(2020: €105 million). Net cash outflow for leases not
recognized on the balance sheet was €17 million (2020:
€17 million).
Refer to Note 27 ‘Financial risk management’ for the
maturities of lease liabilities.
The table below shows the total impact from leases on our
consolidated statement of income.
Right-of-use assets
In € millions
Land
Buildings
Other
T
otal
Balance at January 1, 2020
Cost of acquisition
57
355
102
514
Accumulated depreciation/impairment
(14)
(88)
(38)
(140)
Carrying value at January 1, 2020
43
267
64
374
Movements in 2020
Additions/modifications
2
39
44
85
Disposals
(1)
(6)
(9)
(16)
Depreciation
(3)
(60)
(36)
(99)
Impairments
—
(7)
—
(7)
Changes in exchange rates
(2)
(8)
(3)
(13)
T
otal movements
(4)
(42)
(4)
(50)
Cost of acquisition
55
353
102
510
Accumulated depreciation/impairment
(16)
(128)
(42)
(186)
Carrying value at December 31, 2020
39
225
60
324
Movements in 2021
Additions/modifications
2
35
32
69
Disposals
—
(5)
(2)
(7)
Depreciation
(3)
(60)
(31)
(94)
Impairments
—
(2)
—
(2)
Changes in exchange rates
4
9
1
14
T
otal movements
3
(23)
—
(20)
Cost of acquisition
61
372
109
542
Accumulated depreciation/impairment
(19)
(170)
(49)
(238)
Carrying value at December 31, 2021
42
202
60
304
Income/(expenses) recognized in the consolidated
statement of income
In € millions
2020
2021
Sub lease income
10
3
Depreciation right-of-use assets
(99)
(94)
Impairments for right-of-use assets
(7)
(2)
Interest expense on lease liabilities
(6)
(6)
Short-term lease expenses
(9)
(7)
Expenses relating to low-value assets
(4)
(5)
V
ariable lease expenses
(4)
(5)
T
otal expenses
(119)
(116)
Balance sheet information of our share in associates
In € millions, at December 31
2020
Associates
2021
Condensed balance sheet
Non-current assets
71
81
Current assets
141
141
T
otal assets
212
222
Shareholders’ equity
164
176
Non-current liabilities
6
5
Current liabilities
42
41
T
otal liabilities and equity
212
222
Note 13
LEASES
Note 14
INVESTMENTS IN ASSOCIA
TES
AND JOINT VENTURES
116
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Financial statements
Pension assets (€1,638 million) relate to pension plans in
an asset position (2020: €1,543 million). For more informa-
tion on post-retir
ement benefit provisions, refer to Note 19.
Loans and receivables include the subor
dinated loan of
€88 million (2020: €87 million) granted to the Pension
Fund APF in the Netherlands. In 2020, this balance also
included the non-current part of an escr
ow account in the
amount of €71 million related to the pr
e-funding of the
Akzo Nobel (CPS) Pension Scheme in the UK; in 2021, the
non-current part is €nil. The total balance of this escr
ow
account at year
-end 2021 amounts to €53 million (£44 mil-
lion) and is reported as other r
eceivables within trade and
other receivables, r
efer to Note 17. Of this amount, €5 million
(£4 million) will be contributed to the CPS pension scheme
and €48 million (£40 million) is expected to be repaid to
AkzoNobel in the first quarter of 2022.
The total carrying value of inventories as per December
31, 2021 has increased compar
ed to December 31, 2020,
mainly as a result of significant incr
eases in raw material
prices throughout 2021.
Of the total carrying value of inventories at year
-end 2021,
€18 million is measured at net r
ealizable value (2020:
€17 million). In 2021, €67 million was recognized in the
statement of income for the write-down of inventories
(2020: €59 million), while €32 million of write-downs were
reversed (2020: €28 million). Ther
e are no inventories
subject to retention of title clauses.
T
rade and other receivables can be br
oken down as per
the previous table.
In 2021, the results fr
om associates amounted to a profit
of €26 million (2020: €25 million). No significant contingent
liabilities exist related to associates. The largest associate
of AkzoNobel is Metlac S.p.a., incorporated in Italy
.
None of the associates are consider
ed individually material
to the group.
T
rade receivables ar
e presented net of an allowance for
impairment of €42 million (2020: €58 million). In 2021,
€11 million of impairment losses were r
ecognized in the
statement of income (2020: €22 million) and €11 million
was reversed (2020: €3 million). Since the total amount of
impairment losses under IFRS 9 is not significant, no sepa-
rate disclosure was made in the statement of income.
Loans and receivables ar
e considered to have low
credit risk, and thus the impairment pr
ovision recognized
during the period was limited to 12 months expected
losses.
Other receivables include the curr
ent portion of €53 million
(£44 million) of the escrow account for the Akzo Nobel
(CPS) Pension Scheme in the UK; refer to Note 15.
Financial non-current assets
In € millions, at December 31
2020
2021
Pension assets
1,543
1,638
Loans and receivables
331
360
Other financial non-current assets
77
78
T
otal
1,951
2,076
T
rade and other receivables
In € millions, at December 31
2020
2021
T
rade receivables
1,751
1,973
Prepaid expenses
30
37
T
ax receivables other than income tax
91
145
FX contracts
10
15
Receivables from associates
—
9
Other receivables
112
160
T
otal
1,994
2,339
Inventories
In € millions, at December 31
2020
2021
Raw materials and supplies
378
611
Work in progr
ess
70
94
Finished products and goods for resale
711
945
T
otal
1,159
1,650
Ageing of trade receivables
In € millions, at December 31
2020
2021
Performing trade receivables
1,644
1,849
Past due trade receivables
< 3 months
99
102
> 3 months
66
64
Allowance for impairment
(58)
(42)
T
otal trade receivables
1,751
1,973
Allowance for impairment of trade receivables
In € millions
2020
2021
Balance at January 1
58
58
Additions charged to income
22
11
Release of unused amounts
(3)
(11)
Utilization
(14)
(17)
Acquisitions
1
—
Currency exchange differ
ences
(6)
1
Balance at December 31
58
42
Profit and loss of our shar
e in associates
In € millions
2020
2021
Condensed statement of income
Revenue
165
194
Profit before tax
37
35
Profit from continuing operations
25
26
Profit for the period
25
26
Note 15
FINANCIAL NON-CURRENT
ASSETS
Note 16
INVENTORIES
Note 17
TRADE AND OTHER
RECEIV
ABLES
117
AkzoNobel Report 2021
|
Financial statements
Subscribed share capital
For further details on subscribed share capital, r
efer to
Note F in the Company financial statements.
Cumulative translation reserves
Cumulative translation reserves comprise all for
eign
exchange differ
ences arising from the translation of the
financial statements of foreign operations, as well as fr
om
the translation of intercompany loans with a permanent
nature and liabilities and derivatives that hedge the net
investments in a foreign subsidiary
.
Equity-settled transactions
Equity-settled transactions consist of the performance
related and r
estricted share plan and share-matching plan,
whereby shar
es are granted to the Board of Management,
Executive Committee, other executives and certain
other employee categories. For details on share-based
compensation, refer to Note 7.
Dividend
Our dividend policy is to pay a stable to rising dividend.
In 2021, an interim dividend of €0.44 (2020: €0.43) per
common share was paid. W
e propose a 2021 final dividend
of €1.54 (2020: €1.52) per common share, which would
equal a total 2021 dividend of €1.98 (2020: €1.95).
Share buybacks
On October 23, 2019, a €500 million share buyback
program was announced, for which 0.4 million common
shares wer
e acquired in 2019 and 6.2 million shares in
2020, which have all been cancelled. On October 21,
2020, a €300 million share buyback pr
ogram was announ-
ced which was completed in 2021. On February 16, 2021,
a €1 billion share buyback pr
ogram was announced,
which was completed in January 2022. This program
started in April 2021. As at December 31, 2021, a total of
8.6 million shares had been acquir
ed under this program,
of which 5.9 million were cancelled.
During 2021, 11,992,059 common shares wer
e repur
-
chased, of which 9,247,849 shares (2020: 9,331,481)
were cancelled. For further details on weighted average
number of shares, r
efer to Note 10.
Non-controlling inter
ests
None of the non-controlling inter
ests are considered
individually material to the group. The ef
fects of all trans-
actions with non-controlling inter
est shareholders are
recor
ded in equity if there is no change in control.
Outstanding common shares
Number of shares
2020
2021
Outstanding at January 1
199,600,331
190,579,841
Issued in connection to perfor
-
mance-related share plan and shar
e-
matching plan
310,991
277,517
Capital repayment and share
consolidation
—
—
Stock dividend
—
—
Share buyback
(10,027,257)
(11,992,059)
Shares bought back not yet
cancelled
695,776
2,744,210
Outstanding at December 31
190,579,841
181,609,509
W
eighted average number of common shares
Number of shares
2020
2021
Weighted average number of
common shares
191,424,400
184,959,866
Non-controlling inter
ests
Group entity
Partner at year
-end 2021
%
2020
Equity stake
in € millions
%
2021
Equity stake
in € millions
Akzo Nobel India Limited, Kolkata, India
Privately held, India
25.24
50
25.24
56
PT ICI Paints Indonesia, Jakarta, Indonesia
PT DWI Satrya Utama, Indonesia
45.00
29
45.00
34
Akzo Nobel Paints (Malaysia) Sdn Bhd, Kuala
Lumpur
, Malaysia
Privately held, Malaysia
40.05
21
40.05
21
Akzo Nobel Kemipol A.S., Izmir
, T
urkey
Privately held, T
urkey
49.00
20
49.00
19
International Paint of Shanghai Co. Ltd,
Shanghai, China
Huayi Fine Chemical Co. Ltd, China: China Natio-
nal Shipbuilding Equipment & Materials Corp.
49.00
14
49.00
15
Akzo Nobel Saudi Arabia Ltd, Saudi Arabia
Y
ousuf Bin Ahmed Kanoo Co. Ltd, Saudi Arabia
40.00
12
40.00
12
International Paint (Korea) Ltd, Busan, South-Korea
Noroo Holdings, South Korea
40.00
16
40.00
11
Akzo Nobel Oman SAOC, Muscat, Oman
Omar Zawawi establishment LLC, Oman
50.00
11
50.00
11
Akzo Nobel UAE Paints L.L.C., United Arab Emirates
Kanoo Group, United Arab Emirates
40.00
8
40.00
8
Akzo Nobel Paints (Guangzhou) Co., Ltd.,
Guangzhou, China
Industrial Development Co. Ltd of Guanzhou,
China
10.00
4
10.00
5
Akzo Nobel Pakistan Limited, Karachi, Pakistan
Privately held, Pakistan
2.99
1
1.97
1
Others
18
18
T
otal
204
211
Composition of share capital at year
-end 2021
In €
Authorized
share capital
Subscribed
share capital
Priority shares (48 with nominal value
of €400)
19,200
19,200
Cumulative preferred shar
es (200
million with nominal value of €0.50)
100,000,000
–
Common shares (500 million with
nominal value of €0.50)
250,000,000
90,804,755
T
otal
350,019,200
90,823,955
Composition of share capital at year
-end 2020
In €
Authorized
share capital
Subscribed
share capital
Priority shares (48 with nominal value
of €400)
19,200
19,200
Cumulative preferred shar
es (200
million with nominal value of €0.50)
100,000,000
—
Common shares (500 million with
nominal value of €0.50)
250,000,000
95,289,921
T
otal
350,019,200
95,309,121
Note 18
GROUP EQUITY
118
AkzoNobel Report 2021
|
Financial statements
Post-retir
ement benefit provisions relate to defined benefit
pension and other post-retir
ement benefit plans, includ
-
ing healthcare or welfar
e plans. The largest defined benefit
pension plans are the ICI Pension Fund (ICIPF) and the
Akzo Nobel (CPS) Pension Scheme in the UK which
together account for 87% of defined benefit obligations
(DBO) and 91% of plan assets. Other pension plans include
among others 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 requir
ements
in the countries of establishment. We also pr
ovide certain
healthcare and life insurance benefits to r
etired employees,
mainly in the US and the Netherlands.
V
aluations of the obligations under the plans are carried out
regularly by independent qualified actuaries. W
e accrue for
the expected costs of providing such post-r
etirement bene
-
fits during the service years of the employees. Governance
of the benefit plans is the responsibility of the Executive
Committee Pensions. This committee provides oversight of
the costs and risks of the plans including oversight of the
impact of the plans on the company in terms of cash flow
,
pension expenses and the balance sheet. The committee
develops and maintains 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 wher
e plans are closed,
new employees are eligible to join a defined contribution
arrangement. In countries in high growth markets, pension
schemes currently ar
e not material. Unless mandated by
law
, it is our policy that any new plans are established as
defined contribution plans.
The most significant risks that we run in relation to
defined benefit plans are investment r
etur
ns falling short
of expectations, low discount rates, inflation exceeding
expectations, retir
ees living longer than expected and
legislation changes. 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 regards
to the investment of pension plan assets is to ensure
that each individual plan has sufficient funds available to
satisfy future benefit obligations in accor
dance with local
legal and legislative requir
ements. For this purpose, we
work closely with plan trustees or fiduciaries to develop
investment strategies. Studies are carried out periodically
to analyze and understand the trade-off between expected
investment returns, volatility of outcomes and the impact
on cash contributions. We aim to strike a cautious balance
between these factors in order to agr
ee affordable contri-
bution schedules with plan fiduciaries.
Plan assets principally consist of insurance (annuity)
policies, long-term interest-earning investments and
(investment funds with holdings primarily in) quoted equity
securities. Our largest plans use derivatives (such as index
futures, curr
ency forward contracts and swaps) to reduce
volatility of underlying variables, for efficient portfolio
management and to improve the liability matching char
-
acteristics of the assets. Limits have been set on the use
of derivatives which are periodically subject to r
eview for
compliance with the pension fund’
s investment strategy
.
In line with our proactive pension risk management
strategy
, we seek to reduce risk in our pension plans over
time. We evaluate potential de-risking opportunities on an
ongoing basis. Future de-risking transactions may have
both cash flow and balance sheet impacts which may be
substantial, as had some of the de-risking actions already
taken. The cost of fully removing risk would exceed esti-
mated funding deficits.
Between 2014 and 2021, ICIPF and a smaller UK plan,
the ICI Specialty Chemicals Pension Fund (ISCPF), have
invested in annuity buy-in contracts that aim to hedge all
key risks related to their pensioner populations. In 2021,
the T
rustee of the ICIPF entered into a further annuity
buy-in agreement with Legal and General Assurance
Society Limited. It covers, in aggregate, £127 million (€150
million) of pensioner liabilities (insurer valuation). The buy-in
involved the purchase of a bulk annuity policy under which
the insurer will pay to ICIPF amounts equivalent to the
benefits payable to members who have recently become
pensioners. The pension liabilities remain with, 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 compr
ehensive
income of £25 million (€30 million). By purchasing bulk
annuities, the ICIPF and ISCPF T
rustees have both taken
significant steps in actively de-risking liabilities and reduc-
ing the risk that AkzoNobel will be requir
ed to contribute
additional cash in the future.
CPS has an insurance contract to hedge longevity risk in
respect of a portion of its pensioners.
In October 2018, the UK High Court provided clarity
for trustees and employers on providing equal pension
benefits for men and women where they ar
e in receipt of
Guaranteed Minimum Pensions (‘GMPs’) as a result of the
Lloyds Banking Group judgment. Accor
ding to this judg-
ment, pension schemes were r
equired to retr
ospectively
equalize GMPs by uplifting pensions to the same level, as
far as needed, for men and women. On November 20,
2020, the High Court ruled that pension schemes will need
to revisit individual transfer payments made since May 17,
1990, to check if any additional value is due as a result
of GMP equalization. As a result, in 2020 a past service
cost of £5 million (€6 million) has been charged across the
AkzoNobel pension schemes in the UK.
In setting the discount rate assumption for calculating the
DBO of each plan, the so called Willis T
owers Watson
(WTW) RA
TE:Link model is used for the majority of the
plans in the group. RA
TE:Link had previously been using
a Bloomberg fixed income securities Bloomberg Industry
Classification Standard (BICS) framework to pr
ovide the
relevant inputs. However
, due to a change in the Bloom-
berg BICS framework in 2020, this framework was no
longer deemed suitable and RA
TE:Link now uses the
Bloomberg Classification System (BCLASS) framework.
Although the curve-fitting methodology had not changed
in 2020, the change in Bloomberg framework used by
RA
TE:Link resulted in an estimated net €170 million
remeasur
ement gain included in Other comprehensive
income in 2020. The impact of the change in accounting
estimate in relation to bond inclusion in 2020 is included
in the reconciliation balance sheet table as a €270 million
gain within the overall actuarial loss due to liability financial
assumption changes in the DBO, partially offset by a
Note 19
POST
-RETIREMENT BENEFIT
PROVISIONS
119
AkzoNobel Report 2021
|
Financial statements
€100 million reduction in the experience gain in plan assets
in respect of the UK buy-in annuity policies in 2020.
On November 25, 2020, correspondence between the
Chancellor of the Exchequer and the UK Statistics Author
-
ity (UKSA) was published regar
ding the future of the Retail
Price Index (RPI) measurement of inflation. With effect
from February 2030 onwar
ds, increases in the RPI will be
aligned with those under the Consumer Prices Index (CPI)
with owner occupiers’ housing costs (CPIH). Broadly this
is expected to result in RPI inflation being 1% lower in the
longer term than under the existing methodology
. The infla
-
tion assumption continues to be calculated using a market
breakeven inflation rate and the CPI inflation assumption,
on which the benefits of some plans are based, is set with
refer
ence to RPI. Until 2030, the CPI inflation assumption
is calculated as 1% below RPI and from 2030 onwar
ds as
0.1% below RPI. The impact has been recognized within
remeasur
ements in Other comprehensive income in 2020.
The impact on the actuarial loss due to liability financial
assumption changes in the DBO is partially offset by an
impact on the experience gain in plan assets in respect of
the UK buy-in annuity policies and is not material.
On April 22, 2021, a court ruling resulted in a £20 million
(€23 million) past service credit in one of the UK pension
plans, the J.P
. McDougall & Co Limited Staf
f Pension &
Life Assurance Scheme. The court ruling rectified a deed
change with respect to the r
etirement ages from which
members will receive benefits. This past service cr
edit was
booked as an identified item and included in Note 4 on
Alternative Performance Measures.
The remaining pension plans primarily r
epresent plans
accounted for as 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 Tjänstepen-
sion Ömsesidigt (i.e. “Alecta pension insurance, mutual”)
(Alecta) insurance company and is classified as a multi-
employer defined benefit plan. As AkzoNobel does not
have access to sufficient information fr
om Alecta to enable
defined benefit accounting treatment, it is accounted
for as a defined contribution plan. Contributions in 2021
were €2 million (2020: €1 million). Alecta’
s funding ratio is
normally allowed to vary between 125% and 175%. The
most recently quoted ratio at December 2021 stood at
172%. The expenses of all plans accounted for as defined
contribution plans in AkzoNobel totaled €83 million in 2021
(2020: €82 million).
* Excludes other post-retirement benefit plans.
Reconciliation balance sheet
2020
2021
In € millions
DBO
Plan
assets
T
otal
DBO
Plan
assets
T
otal
Balance at the beginning of the period
(14,616)
15,287
671
(14,184)
15,014
830
Statement of income
Current service cost
(33)
—
(33)
(32)
—
(32)
Past service cost
(5)
—
(5)
22
—
22
Net interest (charge)/income on net defined benefit (liability)/asset
(262)
276
14
(193)
206
13
Cost recognized in statement of income
(300)
276
(24)
(203)
206
3
Remeasurements recognized in Other compr
ehensive income
Actuarial (loss)/gain due to liability experience
148
—
148
(123)
—
(123)
Actuarial (loss)/gain due to liability financial assumption changes
(915)
—
(915)
289
—
289
Actuarial (loss)/gain due to liability demographic assumption changes
(74)
—
(74)
56
—
56
Actuarial loss due to buy-in
—
(23)
(23)
—
(30)
(30)
Return on plan assets (less than)/greater than discount rate
—
981
981
—
(202)
(202)
Remeasurement effects r
ecognized in Other comprehensive income
(841)
958
117
222
(232)
(10)
Cash flow
Employer contributions
—
114
114
—
94
94
Employee contributions
(2)
2
—
(2)
2
—
Benefits and administration costs paid from plan assets
859
(859)
—
852
(852)
—
Net cash flow
857
(743)
114
850
(756)
94
Other
Acquisitions/divestments/transfers
(2)
2
—
1
(1)
—
Changes in exchange rates
718
(766)
(48)
(996)
1,099
103
T
otal other
716
(764)
(48)
(995)
1,098
103
Balance at the end of the period
(14,184)
15,014
830
(14,310)
15,330
1,020
Asset restriction
(3)
(3)
Net balance sheet position
827
1,017
Presentation of Net balance sheet position
Other financial non-current assets
1,543
1,638
Post-retirement benefit pr
ovisions
(664)
(578)
Current portion of provisions
(52)
(43)
Net balance sheet position
827
1,017
DBO at funded and unfunded pension plans*
In € millions, at December 31
2020
2021
Wholly or partly funded plans
13,854
14,005
Unfunded plans
194
179
T
otal
14,048
14,184
120
AkzoNobel Report 2021
|
Financial statements
Other post-retir
ement benefit plans
AkzoNobel provides certain healthcar
e and life insurance
benefits to retir
ed employees, mainly in the US and the
Netherlands. The risks to which the US healthcare plans
expose AkzoNobel include the risk of future incr
eases in
the cost of healthcare which would incr
ease the cost of
maintaining the plans. The benefit payments to retir
ees
under the Dutch plan are fr
ozen. 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.
Reconciliation balance sheet
The closing net balance sheet position of €1,017 million
(2020: €827 million) includes the pension plans (€1,143
million net asset; 2020: €963 million net asset) and other
post-retir
ement plans (€126 million liability; 2020: €136
million liability).
Administrative expenses
In addition to the expenses borne by the funds them-
selves, some expenses are borne directly by AkzoNobel.
Administrative expenses are incurr
ed, especially for the UK
pension funds, of €22 million (2020: €18 million), which
are included in operating income. In addition, we dir
ectly
incurred asset management expenses of €3 million (2020:
€2 million), which have been included in other compre-
hensive income.
Interest costs
Interest costs on the DBO for both pensions and other
post-retir
ement benefits, together with the interest income
on plan assets, comprise the net financing income related
to postretir
ement benefits of €13 million (2020: €14
million), refer to Note 8.
Pension plans in asset position
Pension balances recor
ded under Financial non-current
assets totaled €1,638 million (2020: €1,543 million). The
€95 million increase in 2021 was due to €117 million of
exchange rate translation gains, €48 million of employer
contributions and net income of €14 million, partially
offset by €84 million of net actuarial losses in the r
elevant
plans. These assets could be recognized under IFRIC 14
because economic benefits are available in the form of
future r
efunds from the plan or reductions in futur
e contri-
butions to the plan, either during the life of the plan or on
the (final) settlement of the plan liabilities.
*
The sensitivity to price inflation assumption includes corresponding changes to all inflation-related compensation incr
eases,
pensions in payment and pensions in deferment.
Plan assets
The equities and government bond debt assets have
quoted prices in active markets, although most are held
through funds comprised of such instruments which
are not actively traded themselves. The total value of plan
assets not quoted in active markets is €8,420 million
(2020: €8,354 million), including the UK buy-in annuity
policies totaling €7,698 million (2020: €7,595 million),
investments in real estate, totaling €469 million (2020:
€381 million) and other investments in infrastructure,
catastrophe bonds, insurance policies and high-
yield credit strategies. The UK buy-in annuity policies
have a value that is equal to the DBO of the pensioners
covered by the policies. Plan assets did not dir
ectly include
any of AkzoNobel’
s own transferable financial instruments,
nor any property occupied by or assets used by the
company
.
Cash flows
In 2022, we expect to contribute €56 million (2021: €88
million) to our defined benefit pension plans, including
£4 million (€5 million) of top-up contributions to the CPS
plan, paid from an escr
ow account, in line with the agreed
recovery plan following the Mar
ch 31, 2020 triennial valu-
ation. We expect to pay a further €11 million (2021: €11
million) to our other post-retir
ement benefit plans.
Cash flows
Pensions
Other post-retirement benefits
In € millions
2021
2022
2021
2022
Regular contributions
43
43
10
11
T
op-ups
41
13
—
—
T
otal
84
56
10
11
Plan assets
2020
2021
In € millions, at December 31
T
otal
Percentage of total
T
otal
Percentage of total
Equities
366
2
332
2
Debt - fixed interest government bonds
1,315
9
1,444
9
Debt - index-linked government bonds
3,121
21
3,221
21
Debt - corporate and other bonds
1,798
12
1,770
12
UK buy-in annuity policies
7,595
51
7,698
50
Cash and cash equivalents
215
1
204
1
Other
604
4
661
5
T
otal
15,014
100
15,330
100
Sensitivity of DBO to change in assumptions
In € millions
ICIPF
UK
CPS
UK
Other
pension plans
Other post-
retirement
benefits
T
otal
Discount rate: 0.5% decrease
542
300
140
6
988
Price inflation: 0.5% increase*
291
169
73
—
533
Life expectancy: one year increase from age 60
705
135
75
6
921
Maturity information
Weighted average duration of DBO (years)
11.8
15.3
14.8
9.3
13.1
121
AkzoNobel Report 2021
|
Financial statements
No allowance is made for any special one-off contributions
that may arise in relation to new de-risking opportunities.
Sensitivity of DBO
The sensitivity effect on DBO shown allows for an alterna-
tive 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 alternative assumptions may differ between the
differ
ent plans that comprise the total DBO. In particular
,
the plans differ in benefit design, curr
ency and average
term, meaning that differ
ent assumptions have differ
-
ent levels of significance 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 r
esults 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 repr
esent our view
of expected future changes in DBO. Any management
actions that may be taken to mitigate the inherent risks in
the post-retir
ement defined benefit plans are not reflected
in this analysis, as they would normally be reflected in plan
asset changes rather than DBO changes.
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 r
esulting
from changes in the given assumptions. At ICIPF
, the
annuity buy-in contracts cover 99% of pensioner liabilities
(2020: 99%) and 84% of total liabilities (2020: 83%).
At CPS, the longevity hedge contract covers 48% of
pensioner liabilities (2020: 49%) and 30% of total liabilities
(2020: 30%).
Key figures and assumptions by plan
2020
2021
In € millions or %
ICIPF
UK
CPS
UK
Other pension
plans
Other post-
retirement
benefits
T
otal
ICIPF
UK
CPS
UK
Other
pension plans
Other post-
retirement
benefits
T
otal
Percentage of total DBO
61%
25%
13%
1%
100%
61%
26%
12%
1%
100%
Defined Benefit Obligation at year
-end
(8,716)
(3,503)
(1,829)
(136)
(14,184)
(8,702)
(3,686)
(1,796)
(126)
(14,310)
Fair value of plan assets at year
-end
9,579
4,101
1,334
—
15,014
9,563
4,353
1,414
—
15,330
Plan funded status
863
598
(495)
(136)
830
861
667
(382)
(126)
1,020
Restriction on asset recognition
—
—
(3)
—
(3)
—
—
(3)
—
(3)
Amounts recognized on the balance sheet
863
598
(498)
(136)
827
861
667
(385)
(126)
1,017
Percentage of total current service cost
9%
24%
67%
—%
100%
9%
28%
63%
—
100%
Current service cost
(3)
(8)
(22)
—
(33)
(3)
(9)
(20)
—
(32)
Employer contributions
4
37
60
13
114
3
37
44
10
94
Discount rate
1.3%
1.4%
1.4%
2.6%
1.3%
1.8%
1.9%
1.8%
3.3%
1.9%
Rate of compensation increase
1.5%
1.3%
1.9%
—
1.5%
1.5%
1.4%
2.0%
—
1.5%
Inflation
2.9%
2.9%
2.0%
—
2.8%
3.5%
3.4%
2.3%
—
3.3%
Pension increases
2.8%
2.4%
2.0%
—
2.6%
3.2%
2.8%
2.3%
—
3.0%
Life expectancy (in years)
Currently aged 60
Males
26.4
26.2
26.1
25.7
26.3
26.2
26.2
26.2
25.8
26.2
Females
28.0
29.0
28.5
27.6
28.3
27.7
29.0
28.8
27.8
28.2
Currently aged 45, from age 60
Males
27.5
27.3
27.4
26.8
27.4
27.3
27.3
27.6
26.9
27.3
Females
29.2
30.1
29.9
28.6
29.5
28.9
30.2
30.0
28.8
29.4
122
AkzoNobel Report 2021
|
Financial statements
General
Provisions ar
e 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 r
elated costs.
At this point in time, we cannot estimate any additional
amount of loss or range of loss in excess of the recor
ded
amounts with sufficient certainty to allow such amount or
range of amounts to be meaningful. 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 not
materially affect our consolidated financial position but
could be material to our results of operations or cash flows
in any one accounting period.
Provisions for r
estructuring of activities
Provisions for r
estructuring of activities comprise of accru-
als 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-
mentation of the plan has started or the plan has been
announced before the balance sheet date. Most r
estruc-
Future benefit payments
The figures in the table below ar
e the estimated future
benefit payments to be paid from the plans to beneficia-
ries over the next ten years.
Key plan details for the two largest pension plans
1
ICI Pension Fund, UK
Akzo Nobel (CPS) Pension Scheme, UK
T
ype of plan
Defined benefit, based upon years of service and final
salary
Defined benefit, based upon years of service and final
salary
Benefits
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%
Annually linked to UK CPI with a maximum of 5%
Plan structure
Plans are set up under a trust and are tax appr
oved
Plans are set up under a trust and are tax approved
Governance
T
rustee directors:
Four member
-nominated
Five appointed with the agreement of Law Debenture
One independent (Law Debenture)
T
rustee directors:
Four member
-nominated
Three company-nominated
One independent (Law Debenture)
Regulatory framework
The plans are tax approved and assets ar
e 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
Funding basis
A plan specific basis must be agreed with each trustee board in accor
dance with UK regulations. The basis is not
the same as the IFRS calculation as it uses more prudent assumptions about the life expectancy and the discount
rates reflect prudent estimates of the expected return on assets actually held, thus the trustees’ investment strate-
gies will impact the discounted value of liabilities
Frequency of funding reviews
Normally every three years
Normally every thr
ee years
Latest completed valuation
March 31, 2020
March 31, 2020
Funding deficit at latest completed
valuation
1,2
£23 million (€27 million) surplus
£62 million (€74 million) deficit
Recovery plan
As there were suf
ficient assets to cover the Fund’
s tech-
nical provisions, a recovery plan is not r
equired
£26 million (€31 million) in 2021 and £4 million
(€5 million) in 2022, paid in March in each year from an
escrow account, originally pre-funded with
£142 million (€161 million)³ in February 2019
Next funding review
March 31, 2023 (due to be completed before
June 30, 2024)
March 31, 2023 (due to be completed before
June 30, 2024)
Asset allocation at March 31, 2021
Matching:
Return seeking:
99.8%
0.2%
Buy-in annuity contracts cover 99% of pensioner liabili-
ties and 84% of total liabilities
84%
16%
The longevity hedge contract covers 48% of pensioner
liabilities and 30% of total liabilities
Membership at March 31, 2021
Active
Deferred
Pensioner
T
otal
95
5,783
36,456
42,334
304
5,993
16,989
23,286
1
Amounts in euro are a convenience translation using the December 31, 2021, exchange rate, unless indicated otherwise.
2
Based on local valuation regulations.
3
Actual rate at time of transfer
.
Future benefit payments
In € millions
Pensions
Other post-
retirement benefits
2022
872
11
2023
882
11
2024
888
10
2025
894
10
2026
901
9
2027 - 2031
4,628
41
Note 20
OTHER PROVISIONS AND
AND CONTINGENT LIABILITIES
123
AkzoNobel Report 2021
|
Financial statements
turing plans are expected to be completed within one year
from the balance sheet date.
Environmental liabilities
We ar
e confronted with costs arising out of environmental
laws and regulations, which include obligations to eliminate
or limit the effects on the envir
onment of the disposal or
release of certain wastes or substances at various sites.
Proceedings involving envir
onmental matters, such as the
alleged discharge of chemicals or waste materials into the
air
, water
, or soil, are pending against us in various coun-
tries. In some cases, this concerns sites divested in prior
years or derelict sites belonging to companies acquir
ed in
the past.
The provision has been discounted using an average
pre-tax discount rate of 1.0% (2020: 0.3%).
Liabilities to (former) employees
Liabilities to (former) employees consist of employer liability
plans, jubilee plans and other long-term compensation
plans. The majority of the cash outflows related to liabilities
to (former) employees is expected to be after five years.
In calculating the liabilities to (former) employees, a pre-
tax discount rate of on average 1.5% (2020: 0.6%)
has been used.
Sundry provisions
Sundry provisions r
elate to a variety of provisions, including
provisions for (customer) claims, sales r
etur
ns, guarantees
and other operational provisions. The majority of the cash
outflows related to sundry pr
ovisions is expected to be
within one to five years. In calculating the sundry provi-
sions, a pre-tax discount rate of on average negative 1.0%
(2020: 0.2% negative) has been used.
Contingent liabilities
Environmental liabilities can change substantially due to
the emergence of additional information on the nature
or extent of the contamination, the geological circum-
stances, the necessity of employing particular methods of
remediation, actions by governmental agencies or private
parties, or other factors. While it is not feasible to predict
the outcome of all pending environmental exposur
es, it
is reasonably possible that ther
e will be a need for future
provisions for envir
onmental 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.
A number of claims against AkzoNobel are pending, many
of which are contested. W
e are also involved in legal
disputes and disputes with tax authorities in several juris-
dictions. AkzoNobel has provided various indemnities and
guarantees in respect of past divestments to the r
elevant
purchasers and their permitted assigns (if applicable),
which in general are capped in time and/or amount (in
proportion to the value r
eceived). The provided guarantees
and indemnities have varying maturity periods. AkzoNo-
bel has received various claims under such indemnities
and guarantees. In some instances, AkzoNobel has been
named as a direct defendant despite the divestments.
Akzo Nobel N.V
. has withdrawn its declarations of joint and
several liability under Article 403 of Book 2 of the Dutch
Civil Code for certain Dutch former Specialty Chemicals
subsidiaries divested as per October 1, 2018, and is
following the procedur
es to terminate its residual liability
under those declarations under Article 404 of Book 2
of the Dutch Civil Code. One objection against the termi-
nation of residual liability is still pending and AkzoNobel,
Nouryon and Nobian continue to cooperate to get
this resolved.
Current portion of pr
ovisions
The current portion of post-r
etirement benefit provisions
(€43 million) and the current portion of other pr
ovisions
(€106 million) add up to €149 million (2020: €232 million),
as reflected in the balance sheet.
Discount rates
The discount rates used in calculating the provisions
recognized at December 31, 2021 ar
e mentioned in the
paragraphs on provisions for envir
onmental costs, liabilities
to (former) employees and sundry provisions. Changes in
discount rates will affect our consolidated financial posi-
tion. A sensitivity test showed that a one percentage point
increase or decr
ease of discount rates will have an impact
down or up, respectively
, of €8 million on the provisions
recognized at December 31, 2021.
Movements in other provisions
In € millions
Restructuring
ofactivities
Environmental
costs
Liabilities to
(former)
employees
Sundry
T
otal
Balance at January 1, 2021
74
63
178
97
412
Additions made during the year
27
13
12
36
88
Utilization
(43)
(9)
(59)
(21)
(132)
Amounts reversed during the year
(16)
(2)
(8)
(16)
(42)
Unwind of discount
—
(3)
—
—
(3)
Acquisitions
—
—
2
—
2
Changes in exchange rates
1
4
7
3
15
Balance at December 31, 2021
43
66
132
99
340
Non-current portion of provisions
3
54
113
64
234
Current portion of provisions
40
12
19
35
106
Balance at December 31, 2021
43
66
132
99
340
124
AkzoNobel Report 2021
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Financial statements
AkzoNobel’
s net debt is mainly denominated in euro.
Long-term borrowings
We have a multi-curr
ency revolving credit facility of
€1.3 billion which was extended in 2021 to 2026. This
facility does not contain financial covenants or acceleration
provisions that ar
e based on adverse changes in ratings
or material adverse change. At year
-end 2021 and 2020,
this facility has not been drawn.
The part of long-term borrowings that is due within one
year is presented under short-term borr
owings. For details
on the exposure to inter
est rate and foreign currency risk,
refer to Note 27.
The average effective inter
est rate of the bonds included
in long-term and short-term borrowings at year
-end 2021
was 1.9% (year
-end 2020: 1.9%).
Net debt
in € millions
Long-term
borrowings
Short-term
borrowings
Short-term
investments
Cash and cash
equivalents
Net debt
Net debt equivalents at January 1, 2020
2,042
169
(138)
(1,271)
802
Net cash from operating activities
—
—
—
(1,220)
(1,220)
Acquisitions
7
—
—
112
119
Investments in short-term investments
—
—
(248)
248
—
Repayments of short-term investments
—
—
136
(136)
—
Net cash from other investing activities
—
—
—
202
202
Buy-out of non-controlling interests
—
—
—
44
44
Unwind of discount and amortized cost
12
—
—
—
12
Proceeds from borr
owings
756
214
—
(970)
—
Borrowings repaid
—
(339)
—
339
—
New/modification of lease contracts
82
—
—
—
82
T
ransfers from long-term to short-term
(117)
117
—
—
—
Movement bankoverdrafts and short-term bank loans
—
(29)
—
29
—
Dividends
—
—
—
385
385
Share buyback
—
—
—
555
555
Net cash from discontinued operations
—
—
—
3
3
Changes in exchange rates
(11)
(13)
—
74
50
Net debt at December 31, 2020
2,771
119
(250)
(1,606)
1,034
Net debt at January 1, 2021
2,771
119
(250)
(1,606)
1,034
Net cash from operating activities
—
—
—
(605)
(605)
Acquisitions
2
13
—
73
88
Investments in short-term investments
—
—
(56)
56
—
Repayments of short-term investments
—
—
247
(247)
—
Net cash from other investing activities
—
—
—
252
252
Buy-out of non-controlling interests
—
—
—
1
1
Unwind of discount and amortized cost
8
—
1
—
9
Proceeds from borr
owings
—
1,143
—
(1,143)
—
Borrowings repaid
—
(590)
—
590
—
New/modification/disposal of lease contracts
62
(1)
—
—
61
T
ransfers from long-term to short-term
(855)
855
—
—
—
Movement bank overdrafts and short-term bank loans
—
19
—
(19)
—
Dividends
—
—
—
391
391
Share buyback
—
—
—
1,135
1,135
Net cash from discontinued operations
—
—
—
1
1
Changes in exchange rates
6
(2)
—
(31)
(27)
Net debt at December 31, 2021
1,994
1,556
(58)
(1,152)
2,340
Analysis of net debt by category
In € millions, at December 31
2020
2021
Bonds issued
2,486
1,740
Lease liabilities
238
212
Other borrowings
47
42
Long-term borrowings
2,771
1,994
Current portion of long-term borrowings
5
754
Current portion of lease liabilities
86
87
Debt to credit institutions
25
711
Other
3
4
Short-term borrowings
119
1,556
T
otal borrowings
2,890
3,550
Short-term investments
(250)
(58)
Cash and cash equivalents
(1,606)
(1,152)
Net debt
1,034
2,340
Bonds issued
In € millions, at December 31
2020
2021
2 5/8% 2012/22 (€750million)
748
—
1 3/4% 2014/24 (€500million)
498
499
1 1/8% 2016/26 (€500million)
497
497
1 5/8% 2020/30 (€750million)
743
744
T
otal
2,486
1,740
Note 21
NET DEBT
125
AkzoNobel Report 2021
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Financial statements
The blended incremental borr
owing rate applied to the
lease liabilities at year
-end 2021 was 1.8% (2020: 1.9%).
At year
-end 2021 and 2020, none of the borrowings was
secured by collateral.
Short-term borrowings
In July 2022, a bond of €750 million will mature. This bond
is classified as a short-term borrowing. W
e have US dollar
and euro commer
cial paper programs in place, which can
be used to the extent that the equivalent portion of the
€1.3 billion multi-currency r
evolving credit facility is not
used. We had €371 million commer
cial paper outstanding
at year
-end 2021 (2020: €nil) against an average nega-
tive interest rate of 0.5%. At year
-end 2021, we had a
€300 million short-term bank loan outstanding (2020: €nil)
against a negative interest rate of 0.6%. Neither of these
facilities contains financial covenants.
Short-term investments
Short-term investments almost entirely consist of time
deposits, money market funds and other marketable secu-
rities with a life time at investment date longer than three
months but shorter than twelve months. For more informa-
tion on credit risk management, r
efer to Note 27.
Cash and cash equivalents
Deposits and money market funds within cash and cash
equivalents almost entirely consist of time deposits imme-
diately convertible into known amounts of cash and with a
maturity of three months or less fr
om the date of purchase
and marketable securities that can be redeemed immedi-
ately when called.
At December 31, 2021, an amount of €14 million in cash
and cash equivalents was restricted (2020: €14 million).
Restricted cash is defined as cash that cannot be
accessed centrally due to regulatory or contractual
restrictions.
Operating activities in 2021 resulted in a cash inflow of
€605 million (2020: cash inflow of €1,220 million).
Purchase commitments for pr
operty
, plant and equipment
aggregated €35 million (2020: €24 million).
We pur
chased and sold goods and services to various
related parties in which we hold a 50% or less equity inter
-
est (associates and joint ventures). Such transactions wer
e
conducted at terms comparable with transactions with
third parties.
During 2021, we considered the members of the Execu-
tive 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 held by members of the Supervisory Boar
d or
Board of Management, r
efer to Note 26. In the ordinary
course of business, we also have transactions with various
organizations with which certain members of the Supervi-
sory Board or Executive Committee ar
e associated.
For related party transactions with pension funds, r
efer to
Notes 15 and 19.
The amounts cannot be reconciled dir
ectly to the respec-
tive balance sheet positions. They reflect changes in
balance sheet positions only to the extent these have a
cash flow impact, or they reverse the non-cash impact as
included in profit for the period. These amounts exclude
non-cash movements such as unwinding of discount,
movements through other compr
ehensive income, acqui-
sitions and divestments, and changes in exchange rates.
Cash and cash equivalents
In € millions, at December 31
2020
2021
Cash on hand and in banks
1,103
877
Deposits and money market funds with
a life up to three months
503
275
Included under cash and cash
equivalents in the balance sheet
1,606
1,152
Debt to credit institutions
(25)
(40)
T
otal per statement of cash flows
1,581
1,112
T
rade and other payables
In € millions, at December 31
2020
2021
T
rade payables to suppliers
1,703
2,028
T
rade payables to customers
329
348
T
axes and social security contributions
186
191
Amounts payable to employees
265
264
Interest
53
42
FX contracts
8
27
Dividends
6
6
Other liabilities
30
42
T
otal
2,580
2,948
Changes in working capital as per consolidated
statement of cash flows
In € millions
2020
2021
T
rade and other receivables
(14)
(240)
Inventories
(84)
(439)
T
rade and other payables
282
274
T
otal
184
(405)
Aggregated maturities of long-term borr
owings
In € millions
2023-2026
After 2026
Bonds issued
996
744
Lease liabilities
165
47
Other borrowings
10
32
T
otal
1,171
823
Note 22
TRADE AND OTHER P
A
Y
ABLES
Note 23
CASH FLOW
Note 24
COMMITMENTS
Note 25
RELA
TED P
ARTY TRANSACTIONS
126
AkzoNobel Report 2021
|
Financial statements
T
otal compensation for key management personnel
expensed during the period amounted to €14.4 million
(2020: €21.7 million). An amount of €6.6 million relates to
short-term employee benefits (2020: €8.2 million); €0.6
million relates to post contract benefits and other post
contract compensation (2020: €0.6 million); €7.2 million
relates to shar
e-based compensation (2020: €4.5 million),
of which €1.8 million relates to the special r
e-appointment
grant for the CEO; no payments relate to other long-term
incentives (2020: €7.7 million); no payments relate to
payments upon termination of employment (2020: €0.7
million). No additional charges were accrued which r
elate
to taxation on excessive pay (“Belasting heffing excessieve
beloningsbestanddelen”) (2020: €1.4 million).
This compensation includes total remuneration for the
members of the Supervisory Board of €0.8 million (2020:
€0.8 million) and for the members of the Board of Manage-
ment of €8.9 million (2020: €9.1 million). For more details
on the remuneration of the individual members of the
Supervisory Board and the Boar
d of Management refer
-
ence is made to the Remuneration report.
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
. We do not grant share-based
compensation to our Supervisory Board members.
* In the form of ADRs.
FINANCIAL RISK MANAGEMENT
FRAMEWORK
Our activities expose us to a variety of financial risks:
liquidity risk, credit risk and market risk (including for
eign
exchange risk, interest rate risk and capital risk). These
risks are inher
ent 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 mini
mize potential adverse effects on our financial
performance.
Our risk mitigating activities include the use of derivative
financial instruments to hedge certain risk exposures. The
Board of Management is ultimately r
esponsible for risk
management. We centrally identify
, evaluate and hedge
financial risks, and monitor compliance with the corporate
policies approved by the Boar
d of Management, except for
commodity risks, which are subject to identification, evalu-
ation, hedging and monitoring in the businesses. We have
treasury hubs located in Brazil and China that ar
e primarily
responsible for r
egional cash management and short-term
financing. We do not allow extensive tr
easury 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-spr
ead maturity schedule of
our long-term borrowings and a str
ong liquidity position.
At year
-end 2021, we had €1.2 billion available as cash
and cash equivalents (2020: €1.6 billion) and €58 million
available as short-term investments (2020: €250 million),
refer to Note 21.
In addition, we have a multi-currency r
evolving credit
facility of €1.3 billion which was extended in 2021 to
2026. This facility does not contain financial covenants or
acceleration provisions that ar
e based on adverse changes
in ratings or on other material adverse changes. At year
-
end 2021 and 2020, this facility had not been drawn. We
have US dollar and euro commer
cial paper programs in
place, which can be used to the extent that the equivalent
portion of the €1.3 billion multi-currency r
evolving credit
An overview of shares held by the Supervisory Boar
d
members is provided on this page. A similar overview is
provided of the shar
es held by the Board of Management.
Loans
The company does not grant loans, advance payments
or guarantees to members of the Supervisory Board,
members of the Executive Committee or any family
members of such persons.
Shares held by the members of the
Supervisory Board
Number of shares at year
-end
2020
2021
Nils Smedegaard Andersen, Chairman
4,500
4,500
Byron Grote*
6,667
7,394
Pamela Kirby
—
—
Dick Sluimers
—
—
Patrick Thomas
—
—
Jolanda Poots-Bijl
—
—
Shares held by the Boar
d of Management
Number of shares at year
-end
2020
2021
Thierry V
anlancker
43,518
74,598
Maarten de Vries
5,678
14,643
Maturity of liabilities and cash outflows
In € millions
Less than
1year
Between
1and5years
Over 5
years
At December 31, 2020
Borrowings
33
1,259
1,274
Interest on borrowings
64
152
54
Lease liabilities
86
180
58
T
rade and other payables
2,572
—
—
FX contracts (hedges)
Outflow
1,570
—
—
Inflow
(1,572)
—
—
T
otal
2,753
1,591
1,386
At December 31, 2021
Borrowings
1,469
1,006
776
Interest on borrowings
60
134
40
Lease liabilities
87
165
47
T
rade and other payables
2,921
—
—
FX contracts (hedges)
Outflow
2,819
—
—
Inflow
(2,806)
—
—
T
otal
4,550
1,305
863
Note 26
REMUNERA
TION OF THE SUPER-
VISORY BO
ARD AND THE BOARD
OF MANAGEMENT
Note 27
FINANCIAL RISK MANAGEMENT
127
AkzoNobel Report 2021
|
Financial statements
facility is not used. We had €371 million commer
cial paper
outstanding at year end 2021 (2020: €nil) against an
average negative interest rate of 0.5%. At year
-end 2021,
we had a €300 million short-term bank loan outstand-
ing (2020: €nil) against a negative interest rate of 0.6%.
Both facilities have a maturity of less than a year
. Neither
of these facilities contains financial covenants. The table
on maturity of liabilities and cash outflows in this Note
shows our cash outflows per maturity group. The amounts
disclosed in the table are the contractual undiscounted
cash flows.
CREDIT RISK MANAGEMENT
Credit risk arises fr
om financial assets such as cash and
cash equivalents, deposits with financial institutions,
money market funds, trade receivables and derivative
financial instruments with a positive fair value. We have a
credit risk management policy in place to limit cr
edit losses
due to non-performance of financial counterparties and
customers. We monitor our exposur
e to credit risk on an
ongoing basis at various levels. We only deal with financial
counterparties that have a sufficiently high cr
edit rating.
Generally
, we do not requir
e collateral in respect
of financial assets. Investments in cash and cash equiva-
lents, short-term investments and transactions involv-
ing derivative financial instruments are enter
ed into with
counterparties that have sound credit ratings and a good
reputation. Derivative transactions ar
e concluded mostly
with parties with whom we have contractual netting agree-
ments and ISDA agreements in place. W
e set limits per
counterparty for the differ
ent types of financial instruments
we use. We closely monitor the acceptable financial coun-
terparty credit ratings and cr
edit limits and revise where
requir
ed 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 customers, we were not subject
to any significant concentration of credit risks at balance
sheet date.
The credit risk fr
om trade receivables is measured and
analyzed at a local operating entity level, mainly by means
of ageing analysis, refer to Note 17. Additionally
, trade
receivables and financial assets measur
ed at amortized
cost are subject to the expected cr
edit loss impairment
model either using the general or the simplified approach.
For more information on the applied impairment appr
oach-
es per financial asset type, refer to Note 1.
Generally
, the maximum exposure to cr
edit risk is repre-
sented by the carrying value of financial assets in the
balance sheet.
At year
-end 2021, the credit risk on consolidated level was
€3.9 billion (2020: €4.2 billion) for cash and cash equiva-
lents, short-term investments, loans, trade and other
receivables. Our cr
edit risk is well spread among both
global and local counterparties. Our largest counterparty
risk amounted to €301 million at year
-end 2021 (2020:
€450 million).
FOREIGN EXCHANGE RISK
MANAGEMENT
T
rade and financing transactions
We operate in a large number of countries, wher
e we have
clients and suppliers, many of whom are outside of the
local functional currency envir
onment. This creates curren-
cy exposure which ar
e partly netted out on group level.
The purpose of our foreign curr
ency hedging activities is
to protect us fr
om the risk that the functional currency net
cash flows resulting fr
om trade or financing transactions
are adversely af
fected by changes in exchange rates. Our
policy is to hedge our transactional foreign exchange rate
exposures above pr
edefined thresholds from r
ecognized
assets and liabilities. Hedge accounting is generally not
applied for foreign curr
ency hedging activities, except for
certain specific forecast transactions. In 2021, we applied
cash flow hedge accounting on a COP 1.600 billion hedge
of the foreign curr
ency risk related to the intended acquisi-
tion of Grupo Orbis. The fair value of the hedge at year
-end
2021 was €19 million negative and the spot result r
elated
to this hedge was recognized in other compr
ehensive
income and accumulated in the cash flow hedge reserve.
The hedge will mature mid-Mar
ch 2022. During 2021, the
hedge was fully effective.
In general, our forward exchange contracts have a maturity
of less than one year
. When necessary
, forward exchange
contracts are r
olled over at maturity
.
Currency derivatives ar
e not used for speculative
purposes.
Investments in foreign subsidiaries, associates
and joint ventures
During 2021 and 2020, net investment hedge account-
ing was applied on hedges of certain net investments in
foreign operations, which wer
e partly hedged. The main
net investments included were r
elated to Brazilian real,
Chinese yuan, Indonesian rupiah and Vietnamese dong
(2020: Chinese yuan and Vietnamese dong), which were
hedged with forward exchange contracts for the same
currencies. The spot r
esults related to these hedges
were r
ecognized in other comprehensive income and
accumulated in the cumulative translation reserves. At
year
-end 2021, hedges of net investments Chinese yuan
were outstanding, which wer
e not material to the financial
statements. During 2021 and 2020, these hedges were
fully effective.
INTEREST RA
TE RISK MANAGEMENT
We ar
e partly financed with debt in order to obtain more
efficient leverage. Fixed rate debt r
esults in fair value inter
-
est rate risk. Floating rate debt results in cash flow inter
est
rate risk. We tr
eat fixed rate debt maturing within one year
as floating rate debt for debt portfolio purposes. At the
end of 2021, the fixed/floating ratio of our outstanding
bonds was 70 percent fixed as we have one outstanding
bond maturing within one year (2020: 100 percent fixed).
During 2021 and 2020, we have not used any interest
rate derivatives.
*
No individually significant position is included in ‘Other’, the amounts per currency
are highly disaggregated.
Hedged notional amounts at year
-end
Buy
Sell
Buy
Sell
In € millions
2020
2020
2021
2021
US dollar
174
379
263
413
Pound sterling
485
31
601
45
Chinese yuan
31
—
179
145
Colombian peso
1
2
348
1
Other*
204
491
391
745
T
otal
895
903
1,782
1,349
128
AkzoNobel Report 2021
|
Financial statements
IBOR reform r
efers to the global reform of interest rate
benchmarks, which includes the replacement of some
interbank offer
ed rates (IBOR) with alter
native benchmark
rates. Our long-term borrowings have fixed inter
est rates
and we currently do not have any inter
est related hedging
instruments. Fallback language has been added to our
contracts while preparing for the transition to new rates.
Based on this and following an internal assessment of the
impact of the IBOR reform, we conclude that the inter
est
rate benchmark reform does not have a material impact on
the company’
s financial statements.
CAPIT
AL RISK MANAGEMENT
Our objectives when managing capital are to safeguar
d
our ability to satisfy our capital providers and to maintain a
capital structure that optimizes our cost of capital. For this
we maintain an adequate financial strategy
, with the objec-
tive to retain a str
ong investment grade credit rating as
assigned by the rating agencies Moody’
s and Standard &
Poor’
s. The capital structure can be altered, among others,
by adjusting the amounts of dividends paid to sharehold-
ers, return of capital to capital providers, or issuance of
new debt or shares. Consistent with other companies in
the industry
, we monitor capital headroom based on the
leverage ratio net debt/EBITDA, for which we have set a
target range of 1 to 2. The ratio was 1.6 in 2021 (2020:
0.8). EBITDA is the sum of operating income, depreciation
and amortization; for 2021 amounting to €1,469 million
(2020: €1,324 million). Net debt is calculated as the total
of long and short-term borrowings less cash and cash
equivalents and short-term investments; for 2021 amount-
ing to €2,340 million (2020: €1,034 million).
The part of long-term borrowings that is due within one
year is presented under short-term borr
owings. Short-
term borrowings include the €750 million bond maturing
in 2022.
Fair value of financial instruments and
IFRS 9 categories
In the table “Fair value per financial instrument category”
insight is provided in the r
ecognition of the respective
financial instruments per IFRS 9 category
. The total carrying
value is based on the accounting principles as outlined in
Note 1. Financial instruments are r
ecognized at fair value
and subsequently recognized either at fair value or at
amortized cost, using the effective inter
est method. The
financial instruments accounted for at fair value through
profit or loss ar
e derivative financial instruments and securi-
ties included in financial non-current assets, cash and cash
equivalents and short-term investments. The remaining
financial instruments are accounted for at amortized cost.
The following valuation methods for financial instruments
carried at fair value through pr
ofit 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 indir
ectly (i.e. derived from
prices)
• Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable)
For the purpose of determining the fair value per financial
instrument category
, shown in the column ‘fair value’, the
following valuation methods were used:
1
Mainly includes pension assets (refer to Note 15), (non) income tax related r
eceivables (refer to Note 17), payables to employees and
(non) income taxes payables (refer to Note 22).
2
€302 million relates to loans and receivables (r
efer to Note 15), €8 million relates to other than financial instruments (refer to Note
15).
3
€2,089 million relates to the remainder of trade and other r
eceivables (refer to Note 17), €68 million relates to FX contracts and the
current portion of the escrow account for the Akzo Nobel (CPS) Pension Scheme in the UK.
4
€2,466 million relates to the remainder of trade and other payables (r
efer to Note 22), €27 million relates to FX contracts.
Fair value per financial instrument category
Carrying value per IFRS 9
category
In € millions
Carrying
amount
Out of scope
of IFRS 7
1
Measured at
amortized
cost
Measured
at fair value
through profit
or loss
T
otal
carrying value
Fair value
of items
measured at
amortized cost
2020 year
-end
Financial non-current assets
1,951
1,669
202
80
282
237
T
rade and other receivables
1,994
121
1,863
10
1,873
1,863
Short-term investments
250
—
—
250
250
—
Cash and cash equivalents
1,606
—
—
1,606
1,606
—
T
otal financial assets
5,801
1,790
2,065
1,946
4,011
2,100
Long-term borrowings
2,771
—
2,771
—
2,771
2,995
Short-term borrowings
119
—
119
—
119
119
T
rade and other payables
2,580
451
2,121
8
2,129
2,121
T
otal financial liabilities
5,470
451
5,011
8
5,019
5,235
2021 year
-end
Financial non-current assets
2
2,076
1,766
302
8
310
330
T
rade and other receivables
3
2,339
182
2,089
68
2,157
2,089
Short-term investments
58
—
—
58
58
—
Cash and cash equivalents
1,152
—
—
1,152
1,152
—
T
otal financial assets
5,625
1,948
2,391
1,286
3,677
2,419
Long-term borrowings
1,994
—
1,994
—
1,994
2,114
Short-term borrowings
1,556
—
1,556
—
1,556
1,570
T
rade and other payables
4
2,948
455
2,466
27
2,493
2,466
T
otal financial liabilities
6,498
455
6,016
27
6,043
6,150
129
AkzoNobel Report 2021
|
Financial statements
On February 9, 2022, AkzoNobel announced a €500 mil-
lion share buyback pr
ogram, to be completed in the first
quarter of 2023.
Recent developments in Ukraine are of concern. These
developments, as well as the related international govern-
ment responses, ar
e being closely monitored. Our first
priority is to safeguard our people and businesses. Due to
the limited size of our business in Ukraine, we expect the
financial impact within the country to be limited. Broader
assessments of the indirect macr
oeconomic effects (such
as supply continuity and the impact on the markets) are
ongoing, and will be updated as the situation unfolds.
Mitigating actions are being put in place.
A level 1 valuation method was used to estimate the
fair value of the bonds issued included in our long-
term and short-term borrowings. The estimate is based
on the quoted market prices for the same or similar
issues or on the current rates of
fered to us for debt with
similar maturities.
A level 2 valuation method was used to determine the fair
value of marketable securities included in cash and cash
equivalents and short-term investments by obtaining the
market price at reporting date. The fair value of for
eign
currency contracts and swap contracts was determined
by level 2 valuation techniques using market observ-
able input (such as foreign curr
ency interest rates based
on Reuters) and by obtaining quotes from dealers and
brokers. A level 2 valuation method was used to deter
-
mine the fair value of time deposits included in cash and
cash equivalents and short-term investments using the
market interest rate. The carrying amounts of cash and
banks, trade receivables less allowance for impairment,
other short-term borrowings and other curr
ent liabilities
approximate fair value due to the short maturity period of
those instruments and were determined using level 2 fair
value methods. A level 3 fair valuation method (discounted
cash flow) was used for the subordinated loan granted to
the Pension Fund APF in the Netherlands, resulting in a fair
value of €116 million.
MASTER NETTING AGREEMENTS
We enter into derivative transactions under International
Swaps and Derivatives Association (ISDA) master netting
agreements. In general, under such agr
eements the
amounts owed by each counterparty on a single day in
respect of transactions outstanding in the same curr
ency
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. We
have evaluated the potential effect of netting agr
eements,
including the effect of rights of set-of
f and concluded
the impact is immaterial. We did not of
fset any amounts
regar
ding derivative transactions.
Sensitivities on financial instruments at year
-end 2021
Sensitivity object
Sensitivity
Hypothetical impact
Foreign currencies:
We perform foreign curr
ency 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 the balance sheet at
year
-end.
A 10% (2020: 10%) strengthening of the euro
versus US dollar
A 10% (2020: 10%) strengthening of the euro
versus the pound sterling
A 10% (2020: 10%) strengthening of the euro
versus Chinese yuan
A 10% (2020: 10%) strengthening of the euro
versus Colombian peso
Profit €6 million (2020: profit €8 million); Other
comprehensive income, profit €1 million (2020:
€nil)
Profit €1 million (2020: €nil)
€nil (2020: loss €1 million). Other comprehensive
income, profit €2 million (2020: €nil)
€nil (2020: €nil). Other comprehensive income,
loss €35 million (2020: €nil)
Interest rate:
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
EUR interest rates
A 100 basis points increase of
USD interest rates
A 100 basis points increase of
GBP interest rates
Loss: €11 million (2020: profit €8 million)
Profit: €nil million (2020: profit €1 million)
Profit: €1 million (2020: profit €1 million)
Note 28
SUBSEQUENT EVENTS
130
AkzoNobel Report 2021
|
Financial statements
COMP
ANY FINANCIAL ST
A
TEMENTS
Balance sheet, before allocation of pr
ofit
In € millions, at December 31
Note
2020
2021
Assets
Non-current assets
Intangible assets
C
71
91
Deferred tax assets
31
30
Financial non-current assets
D
12,225
12,497
T
otal non-current assets
12,327
12,618
Current assets
Short-term receivables
E
182
154
Short-term investments
G
245
—
Cash and cash equivalents
G
736
404
T
otal current assets
1,163
558
T
otal assets
13,490
13,176
Equity and liabilities
Equity
Subscribed share capital
95
91
Cash flow hedge reserve
—
(19)
Other legal reserves
246
275
Cumulative translation reserves
(873)
(493)
Actuarial gains and losses
(2,587)
(2,613)
Other reserves
8,317
7,435
Undistributed results
548
749
Shareholders’ equity
F
5,746
5,425
Provisions
13
4
Non-current liabilities
Long-term borrowings
G
7,515
6,225
T
otal non-current liabilities
7,515
6,225
Current liabilities
Short-term borrowings
G
3
1,425
Other current liabilities
H
213
97
T
otal current liabilities
216
1,522
T
otal equity and liabilities
13,490
13,176
Statement of income
In € millions, for the year ended
December 31
Note
2020
2021
Revenue
A
15
5
Other income
A
58
—
Gross profit
73
5
General and administrative expenses
(24)
(10)
Other results
—
—
(24)
(10)
Operating income
49
(5)
Financing income and expenses
B
50
(25)
Net income from subsidiaries, associates
and joint ventures
536
871
586
846
Profit before tax
635
841
Income tax
(5)
(12)
Net income
630
829
131
AkzoNobel Report 2021
|
Financial statements
Akzo Nobel N.V
. is a company headquartered in the
Netherlands. The address of our r
egistered office is
Christian Neefestraat 2, Amsterdam; the Chamber of
Commerce number is 09007809.
The financial statements of Akzo Nobel N.V
. have been
prepar
ed in accordance with Part 9 of Book 2 of the Dutch
Civil Code, making use of the option of Article 362 of the
Code, meaning that the accounting principles used are
the same as for the Consolidated financial statements.
Foreign curr
ency 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 of the
Consolidated financial statements.
For the Company financial statements, revenue mainly
concerns service contracts and royalty related r
evenue
from thir
d parties; other income mainly concer
ns intercom-
pany royalty income.
Consolidated subsidiaries are all entities (including inter
-
mediate subsidiaries) over which the company has control.
The company controls an entity when it is exposed, or
has rights, to variable returns from its involvement with
the subsidiary and has the ability to affect those r
etur
ns
through its power over the subsidiary
. Subsidiaries are
recognized fr
om the date on which control is transferred to
the company or its intermediate holding entities. They are
derecognized fr
om the date that control ceases.
The company applies the acquisition method to account
for acquiring subsidiaries. The consideration transferred
for the acquisition of a subsidiary is the fair value of assets
transferred by the company
, liabilities incurred to the
former owners of the acquiree and the equity inter
ests
issued by the company
. Identifiable assets acquired and
liabilities and contingent liabilities assumed in an acquisi-
tion are measur
ed initially at their fair values at the acquisi-
tion date, and are subsumed in the net asset value of the
investment in consolidated subsidiaries. Acquisition-related
costs are expensed as incurr
ed.
Investments in consolidated subsidiaries are measur
ed at
net asset value. Net asset value is based on the measure-
Other items in 2021 and 2020 mainly include foreign
currency r
esults related to financing activities.
Intangible assets include (internally developed) software
and other intangibles, mainly licenses.
ment of assets, provisions and liabilities and determination
of profit based on the principles applied in the consoli-
dated financial statements. When an acquisition of an
investment in a consolidated subsidiary is achieved in
stages, any previously held equity inter
est is remeasured
to fair value on the date of acquisition. The remeasur
ement
against the book value is accounted for in the income
statement. When the company ceases to have control
over a subsidiary
, any retained inter
est is remeasured to
its fair value, with the change in carrying amount to be
accounted for in the income statement.
When parts of investments in consolidated subsidiaries are
bought or sold, and such transaction does not result in the
loss of control, the dif
ference between the consideration
paid or received and the carrying amount of the net assets
acquired or sold, is dir
ectly recognized in equity
.
The remuneration paragraph is included in Note 26 of
the Consolidated financial statements. The number of
employees having a contract with the Company at
year
-end 2021 was 6 (2020: 6). All employees are based
in the Netherlands.
Akzo Nobel N.V
. is head of the Dutch fiscal unity for corpo-
rate income tax. Members of the fiscal unity are taxed on
the basis as if they are taxable on a standalone basis.
Financing income and expenses
In € millions
2020
2021
Financing income - third parties
2
2
Financing income - subsidiaries
91
77
Financing expense - third parties
(49)
(94)
Financing expense - subsidiaries
(6)
(6)
Net Interest on net debt
38
(21)
Other items
12
(4)
Net other financing income/(expenses)
12
(4)
T
otal
50
(25)
Intangible assets
In € millions
Other intangibles
Balance at January 1, 2020
Cost of internally developed intangibles
51
Accumulated amortization
(6)
Carrying value at January 1, 2020
45
Movements in 2020
Additions
31
Amortization
(5)
T
otal movements
26
Cost of internally developed intangibles
82
Accumulated amortization
(11)
Balance at December 31, 2020
71
Movements in 2021
Additions
31
Amortization
(11)
T
otal movements
20
Cost of internally developed intangibles
113
Accumulated amortization
(22)
Balance at December 31, 2021
91
Note C
INT
ANGIBLE ASSETS
Note A
GENERAL INFORMA
TION
Note B
FINANCING INCOME AND
EXPENSES
132
AkzoNobel Report 2021
|
Financial statements
The holders of common shares ar
e entitled to receive
dividends as declared fr
om time to time and are entitled
to one vote per share at the Annual General Meeting of
shareholders. The holders of the priority shar
es are entitled
to a dividend of 6% per share or the statutory inter
est in
the Netherlands, whichever is lower
, plus any accrued and
unpaid dividends. They are entitled to 800 votes per shar
e
(in accordance with the 800 times higher nominal value
per share) at the Annual General Meeting of shar
eholders.
In addition, the holders of priority shares have the right
to draw up binding lists of nominees for appointment to
the Supervisory Board and the Boar
d of Management;
amendments to the Articles of Association are subject to
the approval of the Meeting of Holders of Priority Shar
es.
Priority shares may only be transferr
ed 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 per
cent per annum or the statutory
interest in the Netherlands, whichever is lower
, for the
period between the beginning of the year and the date
of transfer
. There ar
e no restrictions on voting rights of
holders of common or priority shares. The Articles of Asso-
ciation set out procedur
es for exercising voting rights. The
Annual General Meeting of shareholders has r
esolved in
2021 to authorize the Board of Management for a period
Investments in subsidiaries are measur
ed using the equity
method of accounting. Due to an intra-group funding
restructuring, several inter
company loans were transferred
in 2020 and 2021 from certain for
eign subsidiaries to Akzo
Nobel N.V
. This intra-group funding r
estructuring has been
finalized in 2021. Intercompany loans ar
e priced at arm’
s
length, taking factors like the credit quality of AkzoNobel
and the counterparty
, country and currency risks into
consideration. The fair value of the loans to subsidiaries
approximates the book value.
Short-term receivables ar
e expected to be settled within a
year
. Receivables from subsidiaries include inter
est to
be received on inter
company loans of €10 million (2020:
€9 million). The fair value of the receivables fr
om subsidiar
-
ies approximates the book value.
Loans to subsidiaries that will mature in 2022 amounted to
€202 million, and €1,481 million will mature between 2023
and 2026 and an amount of €74 million after 2026. The
remainder of the loans to subsidiaries has no fixed r
epay-
ment schedule.
* Part of the loans to these companies has no fixed repayment schedule.
Movements in non-current assets
Subsidiaries
In € millions
Share in capital
Loans*
Other non-
current assets
T
otal
Balance at January 1, 2020
9,159
2,245
91
11,495
Investments/acquisitions/capital contributions
—
—
2
2
Divestments/capital repayments/dividends
(92)
—
(1)
(93)
Impairments
—
—
(2)
(2)
Net income from subsidiaries
536
—
—
536
Equity-settled transactions
10
—
—
10
Loans granted
—
469
—
469
Loans transferred
—
919
—
919
Repayment of loans
—
(775)
—
(775)
Changes in exchange rates
(390)
(7)
—
(397)
Post-retirement benefits
90
—
—
90
Acquisition of non-controlling interests
(29)
—
(29)
Balance at December 31, 2020
9,284
2,851
90
12,225
Investments/acquisitions/capital contributions
41
—
—
41
Divestments/capital repayments/dividends
(61)
—
—
(61)
Net income from subsidiaries
871
—
—
871
Equity-settled transactions
11
—
—
11
Loans granted
—
293
—
293
Loans transferred
—
29
—
29
Repayment of loans
—
(1,298)
—
(1,298)
Changes in exchange rates
337
57
—
394
Post-retirement benefits
(8)
—
—
(8)
Balance at December 31, 2021
10,475
1,932
90
12,497
Short-term receivables
In € millions, at December 31
2020
2021
Receivables from subsidiaries
125
133
FX contracts
10
14
Other receivables
47
7
T
otal
182
154
Note F
SHAREHOLDERS’ EQUITY
Note E
SHORT
-TERM RECEIV
ABLES
Note D
FINANCIAL NON-CURRENT
ASSETS
133
AkzoNobel Report 2021
|
Financial statements
of 18 months (i) to issue shares (or grant rights to shar
es)
in the capital of the company up to a maximum of 10%,
which in case of mergers or acquisitions can be increased
by up to a maximum of 10%, of the total number of shares
outstanding (and to restrict or exclude the pr
e-emptive
rights to those shares) and (ii) to acquir
e shares in the
capital of the company
, provided that the shar
es that will at
any time be held will not exceed 10% of the issued share
capital. The issue or repur
chase of shares requir
es the
approval of the Supervisory Boar
d.
During 2021, 9,247,489 common shares r
epurchased in
2020 and 2021 were cancelled (2020: 9,331,481 common
shares). W
e held 2,744,210 repurchased common
shares to be cancelled at year
-end 2021 (year
-end 2020:
695,776).
On October 23, 2019, a €500 million buyback program
was announced, for which 0.4 million common shares
were acquir
ed in 2019 and 6.2 million shares in 2020,
which have all been cancelled. On October 21, 2020,
a €300 million share buyback pr
ogram was announced
which was completed in 2021. On February 16, 2021, a
€1 billion share buyback pr
ogram was announced, which
was completed in January 2022. This program started in
April 2021. As at December 31, 2021, a total of 8.6 million
shares had been acquir
ed under this program, of which
5.9 million were cancelled.
Of the shareholders’ equity of €5.4 billion (2020:
€5.7 billion), €5.1 billion (2020: €5.4 billion) was unrestric-
ted and available for distribution, subject to the
relevant pr
ovisions of our Articles of Association and
Dutch law
.
Legal reserves include a €174 million r
eserve relating to
earnings retained by subsidiaries, associates and joint
ventures after the year 1983, to the extent that ther
e are
limitations to arrange profit distributions; and the
€101 million reserve for capitalized development costs.
Statement of changes in equity
Legal reserves
In € millions
Subscribed
share capital
Cash flow
hedge reserve
Other
legal reserves
Cumulative trans-
lation reserves
Actuarial
gains & losses
Other reserves
Undistributed
results
Shareholders'
equity
Balance at January 1, 2020
100
—
211
(469)
(2,684)
8,735
457
6,350
Changes in exchange rates in respect of
subsidiaries, associates and joint ventures
—
—
—
(404)
—
—
—
(404)
Post-retirement benefits
—
—
—
—
97
—
97
Net income
—
—
—
—
—
—
630
630
Comprehensive income
—
—
—
(404)
97
—
630
323
Dividend
—
—
—
—
—
—
(366)
(366)
Equity-settled transactions
—
—
—
—
—
13
—
13
Share buyback
(5)
—
—
—
—
(540)
—
(545)
Acquisition of non-controlling interests
—
—
—
—
—
(29)
—
(29)
Addition to other reserves
—
—
35
—
—
138
(173)
—
Balance at December 31, 2020
95
—
246
(873)
(2,587)
8,317
548
5,746
Changes in exchange rates in respect of
subsidiaries, associates and joint ventures
—
—
—
380
—
—
—
380
Other comprehensive income/(expense)
—
(19)
—
—
—
—
—
(19)
Post-retirement benefits
—
—
—
—
(26)
—
—
(26)
Net income
—
—
—
—
—
—
829
829
Comprehensive income
—
(19)
—
380
(26)
—
829
1,164
Dividend
—
—
—
—
—
—
(365)
(365)
Equity-settled transactions
—
—
—
—
—
16
—
16
Share buyback
(4)
—
—
—
—
(1,131)
—
(1,135)
Acquisition of non-controlling interests
—
—
—
—
—
(1)
—
(1)
Addition to other reserves
—
—
29
—
—
234
(263)
—
Balance at December 31, 2021
91
(19)
275
(493)
(2,613)
7,435
749
5,425
Unrestricted r
eserves at year
-end
In € millions
2020
2021
Shareholders' equity at year
-end
5,746
5,425
Subscribed share capital
(95)
(91)
Subsidiaries' restrictions to transfer
funds
(163)
(174)
Reserve for development costs
(83)
(101)
Unrestricted reserves
5,405
5,059
134
AkzoNobel Report 2021
|
Financial statements
Long-term borrowings
The part of long-term borrowings that is due within one
year is presented under short-term borr
owings. Short-
term borrowings include the €750 million bond maturing
in 2022.
For the fair value of the bonds issued, refer to Note 27 of
the Consolidated financial statements. We estimated the
fair value of the bonds issued based on the quoted market
prices (level 1) for the same or similar issues or on the
current rates of
fered to us for debt with similar maturities.
At year
-end 2021, the fair value of the bonds included in
long-term and short-term borrowings was €2,624 million
(2020: €2,710 million).
We have a multi-curr
ency revolving credit facility of €1.3
billion which was extended in 2021 to 2026. This facility
does not contain financial covenants or acceleration
provisions that ar
e based on adverse changes in ratings or
material adverse change. At year
-end 2021 and 2020, this
facility has not been drawn.
At year
-end 2021 and 2020, none of the borrowings was
secured by collateral.
In 2022, an amount of €216 million of debt from subsidiar
-
ies will mature and and amount of €1 million of debt fr
om
subsidiaries will mature after 2026. The r
emainder of the
loans to subsidiaries has no fixed repayment schedule.
Short-term borrowings
In July 2022, a bond of €750 million will mature. This bond
is classified as a short-term borrowing. W
e have US dollar
and euro commer
cial paper programs in place, which can
be used to the extent that the equivalent portion of the
€1.3 billion multi-currency r
evolving credit facility is not
used. We had €371 million commer
cial paper outstanding
at year
-end 2021 (2020: €nil) against an average nega-
tive interest rate of 0.5%. At year
-end 2021, we had a
€300 million short-term bank loan outstanding (2020: €nil)
against a negative interest rate of 0.6%. Neither of these
facilities contains financial convenants.
Short-term investments
Short-term investments almost entirely consist of time
deposits, money market funds and marketable securi-
ties with a life time at investment date longer than three
months but shorter than twelve months. At year
-end 2021,
we had no short-term investments outstanding (2020:
€245 million).
Cash and cash equivalents
Deposits and money market funds within cash and
cash equivalents almost entirely consist of time deposits
immediately convertible into known amounts of cash and
with a maturity of three months or less fr
om the date of
purchase and marketable securities that can be r
edeemed
immediately when called.
Dividend
Our dividend policy is to pay a stable to rising dividend.
In 2021, an interim dividend of €0.44 (2020: €0.43) per
common share was paid. W
e propose a 2021 final divi-
dend of €1.54 (2020: €1.52) per common share, which
would equal a total 2021 dividend of €1.98 (2020: €1.95).
*
Part of the debt from subsidiairies has no fixed repayment schedule. The fair value
of the debt from subsidiaries approximates the book value.
Other current liabilities ar
e expected to fall due in less
than one year
.
Bonds issued
In € millions, at December 31
2020
2021
2 5/8% 2012/22 (€750 million)
748
—
1 3/4% 2014/24 (€500 million)
498
499
1 1/8% 2016/26 (€500 million)
497
497
1 5/8% 2020/30 (€750 million)
743
744
T
otal
2,486
1,740
Analysis of net debt by category
In € millions, at December 31
2020
2021
Bonds issued
2,486
1,740
Debt from subsidiaries*
5,029
4,485
Long-term borrowings
7,515
6,225
Current portion of long-term
borrowings
—
749
Debt to credit institutions
—
672
Short-term loans
3
4
Short-term borrowings
3
1,425
T
otal borrowings
7,518
7,650
Short-term investments
(245)
—
Cash and cash equivalents
(736)
(404)
Net debt
6,537
7,246
Cash and cash equivalents
In € millions, at December 31
2020
2021
Cash on hand and in banks
427
304
Deposits and money markets funds
with a maturity less than three months
309
100
Included in cash and cash equiva-
lents in the balance sheet
736
404
Other current liabilities
In € millions, at December 31
2020
2021
Payables to subsidiairies*
63
30
FX contracts
7
27
Debt related to pensions
3
—
Other suppliers
58
1
Interest payable
22
22
Other liabilities
60
17
T
otal
213
97
* The fair value of the payables to subsidiaries approximates the book value.
Note H
O
THER CURRENT LIABILITIES
Note G
NET DEBT
135
AkzoNobel Report 2021
|
Financial statements
At year
-end 2021, Akzo Nobel N.V
. had outstanding
foreign exchange contracts to buy curr
encies for a total of
€1.7 billion (year
-end 2020: €0.9 billion), while contracts
to sell currencies totaled €1.2 billion (year
-end 2020: €0.9
billion). The contracts mainly related to US dollars, pound
sterling and Colombian peso, and all have maturities within
one year
. These contracts offset the for
eign exchange
contracts concluded by the subsidiaries, and the fair
value changes are r
ecognized in the statement of income
to offset the fair value changes on the contracts with the
subsidiaries, or recognized in other compr
ehensive income
in case hedge accounting is applied. For information on
risk exposure and risk management, see Note 27 of the
Consolidated financial statements.
Akzo Nobel N.V
. is parent of the gr
oup’
s fiscal unity in the
Netherlands, and is therefor
e liable for the liabilities of said
fiscal unity 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 (Article 403 of Book 2 of
the Dutch Civil Code). These debts, at year
-end 2021,
aggregating €0.5 billion (2020: €0.4 billion), ar
e included in
the Consolidated balance sheet.
Akzo Nobel N.V
. has withdrawn its declarations of joint
and several liability under Article 403 of Book 2 of the
Dutch Civil Code for certain Dutch former Specialty
Chemicals subsidiaries divested as per October 1, 2018
and is following the procedur
es to terminate its residual
liability under those declarations under Article 404 of Book
2 of the Dutch Civil Code. One objection against the
termination of residual liability is still pending and
AkzoNobel, Nouryon and Nobian continue to cooperate
to get this resolved.
Additionally
, at year
-end 2021, guarantees were issued
on behalf of consolidated companies for an amount of
€0.3 billion (2020: €0.3 billion). The debts and liabilities of
Our independent auditor
, PricewaterhouseCoopers
Accountants N.V
., has render
ed, for the period to which
the audit of the financial statements relates, in addition
to the audit of the statutory financial statements, mainly
statutory audits of controlled entities.
the consolidated companies underlying these guarantees
are included in the Consolidated balance sheet.
Amsterdam, February 28, 2022
The Board of Management
Thierry V
anlancker
Maarten de V
ries
The Supervisory Board
Nils Smedegaard Andersen
Jolanda Poots-Bijl
Byron Gr
ote
Pamela Kirby
Dick Sluimers
Patrick Thomas
Fees PricewaterhouseCoopers
2021
In € millions
In the
Netherlands
Network
outside the
Netherlands
T
otal
Audit of the financial
statements
4.1
4.3
8.4
Other audit
0.2
0.1
0.3
T
ax services
—
—
—
Other non-audit
services
—
—
—
T
otal
4.3
4.4
8.7
Fees PricewaterhouseCoopers
2020
In € millions
In the
Netherlands
Network
outside the
Netherlands
T
otal
Audit of the financial
statements
4.3
5.3
9.6
Other audit services
0.1
0.2
0.3
T
ax services
—
—
—
Other non-audit
services
—
—
—
T
otal
4.4
5.5
9.9
Note I
FINANCIAL INSTRUMENTS
Note J
CONTINGENT LIABILITIES
Note K
AUDITOR’S FEES
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PROPOSAL FOR PROFIT ALLOCA
TION
With due observance of Dutch law and the Articles of
Association, it is proposed that net income of €474 million
is carried to the other reserves. Furthermor
e, with due
observance of article 43, paragraph 7, it is proposed that
dividend on priority shares of €1,152 and on common
shares of €355 million (to be incr
eased by dividend
on shares issued and r
educed by dividend on shares
repur
chased in 2022 before the ex-dividend date) will be
distributed. Following the acceptance of this proposal, the
holders of common shares will r
eceive a total dividend of
€1.98 per share, of which €0.44 was paid earlier as an
interim dividend. The final dividend of €1.54 per share will
be made available from May 4, 2022.
OTHER INFORMA
TION
PROFIT ALLOCA
TION AND
DISTRIBUTIONS
The following articles of our articles of association govern
profit allocation and distribution:
Article 43
43.6
The Board of Management shall be authorized to deter
-
mine, with the approval of the Supervisory Boar
d, what
share of pr
ofit remaining after application of the provisions
of the foregoing paragraphs shall be carried to r
eserves.
The remaining pr
ofit 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
preferr
ed shares.
43.7
From the r
emaining profit, the following distributions shall,
to the extent possible, be made as follows:
(a)
T
o the holders of priority shares: 6% per share
or the statutory interest r
eferred to in paragraph 1
of article 13, whichever is lower
, plus any accrued
and unpaid dividends
(b)
T
o the holders of common shares: a dividend of such
an amount per share as the r
emaining 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 r
eserves 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 r
eserves only
on the proposal of the Boar
d 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
.
SPECIAL RIGHTS TO HOLDERS OF
PRIORITY
SHARES
The priority shares ar
e held by “Stichting Akzo Nobel”
(Foundation Akzo Nobel), whose board is composed of the
members of the Supervisory Board who ar
e 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 Boar
d of Management.
Amendments to the Articles of Association are subject to
the approval of this meeting.
PROFIT ALLOCA
TION
AND DISTRIBUTIONS
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INDEPENDENT
AUDITOR’S REPORT
T
o: The Annual General Meeting and the Supervisory
Board of Akzo Nobel N.V
.
Report on the Financial statements 2021
Our opinion
In our opinion:
•
The Consolidated financial statements of Akzo Nobel
N.V
. together with its subsidiaries (“the Group”) give a
true and fair view of the financial position of the Group
as at December 31, 2021 and of its result and cash
flows for the year then ended in accordance with
International Financial Reporting Standards, as adopted
by the European Union (EU-IFRS) and with Part 9 of
Book 2 of the Dutch Civil Code
• The Company financial statements of Akzo Nobel N.V
.
(“the company”) give a true and fair view of the financial
position of the company as at December 31, 2021, and
of its result for the year then ended in accor
dance with
Part 9 of Book 2 of the Dutch Civil Code
What we have audited
We have audited the accompanying financial statements
2021 of Akzo Nobel N.V
., Amsterdam, the Netherlands.
The financial statements include the Consolidated
financial statements of the Group and the Company
financial statements.
The Consolidated financial statements comprise:
• The Consolidated balance sheet as at December 31,
2021
• The following statements for 2021: the Consolidated
statement of income; the Consolidated statements of
comprehensive income; of changes in equity and of
cash flows and
• The notes, comprising significant accounting policies
and other explanatory information
The Company financial statements comprise:
• The Balance sheet as at December 31, 2021
• The Statement of income for the year then ended
• The notes, comprising the accounting policies applied
and other explanatory information
The financial reporting framework applied in the pr
epara-
tion of the financial statements is EU-IFRS and the relevant
provisions of Part 9 of Book 2 of the Dutch Civil Code
for the Consolidated financial statements and Part 9
of Book 2 of the Dutch Civil Code for the Company finan-
cial statements.
The basis for our opinion
We conducted our audit in accor
dance with Dutch law
,
including the Dutch Standards on Auditing. W
e have
further described our responsibilities under those stan-
dards in the section “Our r
esponsibilities for the audit of
the financial statements” of our report.
We believe that the audit evidence we have obtained
is sufficient and appr
opriate to provide a basis for
our opinion.
Independence
We ar
e independent of Akzo Nobel N.V
. in accordance
with the European Union “Regulation on specific r
equire-
ments regar
ding statutory audit of public-interest entities”,
the “Wet toezicht accountantsorganisaties” (Wta, Audit
firms supervision act), the “V
eror
dening inzake de onafhan-
kelijkheid van accountants bij assuranceopdrachten” (ViO,
Code of Ethics for Professional Accountants, a r
egulation
with respect to independence) and other r
elevant inde-
pendence regulations in the Netherlands. Furthermor
e, we
have complied with the “V
eror
dening gedrags- en beroep-
sregels accountants” (VGBA, Dutch Code of Ethics).
Our audit approach
We designed our audit pr
ocedures with respect to the
key audit matters, fraud, going concern and the findings
resulting ther
eof in the context of our audit of the financial
statements as a whole and our forming of an opinion
thereon. The information we use in support of our opinion,
such as our findings and observations related to individual
key audit matters, the audit approach to fraud risk and the
audit approach to going concern, was addressed in this
context. We do not pr
ovide a separate opinion or conclu-
sion on these matters.
Overview and context
Akzo Nobel N.V
. is a global paints and coatings company
headquartered in the Netherlands and with operations
in over 150 countries. Our group audit scope and
approach ar
e set out in the section “The scope of our
group audit”. In our audit we paid specific attention to the
areas of focus driven by the operations of the Gr
oup, as
set out below
.
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements. In particular
, we considered wher
e
the Board of Management made important judgments,
for example, in respect of significant accounting estimates
that involved making assumptions and considering future
events that are inher
ently uncertain. In Note 1 of the
Consolidated financial statements, the company describes
areas of judgment in applying accounting policies and the
key sources of estimation uncertainty
. We consider the
valuation of the post-retir
ement benefit provisions and the
valuation of deferred tax assets and uncertain tax positions
to be key audit matters as set out in the section “Key audit
matters” of this report, given the significant estimation
uncertainty
, the judgemental nature and the r
elated higher
inherent risks of material misstatement.
The new “Grow & Deliver” strategy of Akzo Nobel N.V
.
aims to balance growth with further pr
ofitability improve-
ments. Due to the new strategy
, we discontinued the prior
year key audit matter “T
ransformation to deliver towards
the ‘Winning together: 15 by 20’ strategy”. Over the past
years, the company executed a wide range of transfor
-
mational projects impacting the company’
s systems,
processes and contr
ols.
These projects continued in 2021, with the goal to align
to the company’
s evolving operating model, focusing
on end-to-end processes and to incr
ease operational
efficiencies and ef
fectiveness. Inherently
, transforma-
tion processes encompass changes in the organization,
systems, processes and contr
ols. We therefor
e extended
our audit procedur
es to evaluate the impact of the
transformation on our audit. Due to the significance of the
ongoing transformation to the company and the extended
audit procedur
es, we included “Ongoing transformation of
the organization, systems, processes and contr
ols” as a
new key audit matter
, as set out in the section “Key audit
matters” of this report.
The ongoing impact of the COVID-19 pandemic,
combined with several extreme weather events early in the
year
, caused disruption across the company’
s incoming
supply chains. This resulted in shortages of key raw
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Financial statements
Materiality
The scope of our audit was influenced by the applica-
tion of materiality
, which is further explained in the section
“Our responsibilities for the audit of the financial
statements”.
Based on our professional judgment we determined
certain quantitative thresholds for materiality
, including the
overall materiality for the financial statements as a whole,
as set out in the table below
. These, together with qualita-
tive considerations, helped us to determine the nature,
timing and extent of our audit procedur
es on the individual
financial statement line items and disclosures and to evalu-
ate the effect of identified misstatements, both individually
and in aggregate, on the financial statements as a whole
and on our opinion.
The outline of our audit approach was as follows:
Materiality
•
Overall materiality: €55 million
(2020: €45 million)
Audit scope
•
We conducted audit work at 49
components in 18 countries
•
Site reviews were virtually
conducted to 9 countries
(39 components)
•
Audit coverage: 64% of
consolidated revenue, 68% of
consolidated total assets and
60% of consolidated profit
before tax
Key audit matters
•
Ongoing transformation of
the organization, systems,
processes and controls
•
V
aluation of post-retirement
benefit provisions
•
V
aluation of deferred tax assets
and uncertain tax positions
materials and input cost increase compar
ed with
2020. The company responded with pricing initiatives
to compensate for the raw material cost inflation. We
considered the impact of these developments on our
audit approach, including our scoping, materiality and
risk assessment. In particular
, we assessed the impact on
significant management accounting judgments, including
future business and cash flow pr
ojections underpinning
impairment assessments, deferred tax asset r
ecoverability
and the going concern assumption. We concluded
this to be an area of focus, that is not consider
ed as a
key audit matter
.
AkzoNobel N.V
. assessed the possible effects of climate
change and their plans to meet emissions reduction
commitments. The company considered, among others,
physical risks, such as those associated with water
scarcity
, flooding and weather events, as well as transi-
tional risks that can lead to changes in technology
,
market dynamics and regulations. Management also
assessed the resulting impact on the financial position,
including underlying assumptions and estimates. As part
of our audit risk assessment, we gained an understan-
ding of the company’
s strategy and sustainability
targets, evaluated the potential impact on the financial
statements and discussed this with management.
We concluded that the impact of climate change is not
considered a key audit matter
.
Other areas of focus that we do not consider to be key
audit matters were r
elated to the impairment testing of
goodwill and brands with indefinite useful lives, testing of
valuation of the other provisions and information technol-
ogy general controls (ITGCs).
We ensur
ed that the audit teams at both group and
component level included the appropriate skills and
competences which are needed for the audit of the Gr
oup.
We ther
efore included in our team experts in the areas
of pensions, share-based payments and valuations and
specialists in the areas of tax, IT and tr
easury
.
We also take misstatements and/or possible misstate-
ments into account that, in our judgment, are material for
qualitative reasons.
We agr
eed with the Audit Committee and the Supervisory
Board that we would r
eport to them misstatements identi-
fied during our audit above €2 million (2020: €2 million),
as well as misstatements below that amount that, in our
view
, warranted reporting for qualitative r
easons.
The scope of our group audit
Akzo Nobel N.V
. is the parent company of a gr
oup of
entities managed by the Board of Management and
Executive Committee. The financial information of
this Group is included in the Consolidated financial state-
ments of Akzo Nobel N.V
.
We tailor
ed the scope of our audit to ensure that we,
in aggregate, pr
ovide sufficient coverage of the finan-
cial statements for us to be able to give an opinion
on the financial statements as a whole, taking into
account the management structure of the Gr
oup, the
nature of operations of its components, the accounting
Overall group
materiality
€55 million (2020: €45 million).
Basis for
determining
materiality
We used our professional judgment to determine
overall materiality
. As a basis for our judgment
we used 5% of profit before tax.
Rationale for
benchmark
applied
We used profit befor
e tax as the primary
benchmark, a generally accepted auditing
practice, based on our analysis of the common
information needs of the users of the financial
statements. On this basis, we believe that profit
before tax is an important metric for the financial
performance of the company
.
Component
materiality
Based on our judgment, we allocate materiality
to each component in our audit scope that is
less than our overall group materiality
. The range
of materiality allocated across components was
between €8 million and €43 million.
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processes and contr
ols, and the markets in which
the components of the Group operate. In establishing
the overall group audit strategy and plan, we determined
the type of work requir
ed to be performed at compo-
nent level by the group engagement team and by each
component auditor
.
The group audit includes 24 components which wer
e
subjected to audits of their complete financial information,
selected on the basis of the relative size of their opera-
tions. None of the components are individually financially
significant to the group. W
e further subjected 13 compo-
nents to specific focused audit procedur
es on individual
financial statement line items, such as post-retir
ement
benefit provisions, tax, cash and cash equivalents and
short-term investments, based on the relative size or
related higher inher
ent risks of material misstatement.
Additionally
, we selected 12 components for audit proce-
dures to achieve appr
opriate audit coverage on financial
line items in the Consolidated financial statements.
In total, in performing these procedur
es, we achieved the
following coverage on the financial line items:
None of the remaining components r
epresented more
than 3% of total group r
evenue or total group assets
or profit befor
e tax. For those remaining components
we performed, among others, analytical procedur
es to
corroborate our assessment that ther
e were no significant
risks of material misstatement within those components.
For all components we used component auditors who
are familiar with the local laws and r
egulations to perform
the audit work. We collectively performed har
d close
audit procedur
es on the interim October balance sheet
positions and results. These har
d close audit procedures
included substantive audit work on certain material
balances and transactions. Roll-forward pr
ocedures and
top-up testing were performed at year
-end to cover the full
year period.
Where component auditors performed the work, we
determined the level of involvement we needed to have
in their work to be able to conclude whether we had
obtained sufficient and appr
opriate audit evidence as a
basis for our opinion on the Consolidated financial state-
ments as a whole.
We issued instructions to the component audit teams
in our audit scope. These instructions included, among
others, our risk analysis, materiality and the scope of the
work. We explained to the component audit teams the
structure of the Gr
oup, the main developments that are
relevant for the component auditors, the risks identi-
fied, the materiality levels to be applied and our global
audit approach. W
e had individual calls with each of the
in-scope component audit teams throughout the audit.
During these calls, we discussed the significant accounting
and audit matters identified by the component auditors,
their reports, the findings of their pr
ocedures and other
matters that could be of relevance for the Consolidated
financial statements.
The group engagement team virtually attended site r
eview
meetings with a selection of the component teams and
local management. During these meetings we discussed
the strategy and financial performance of the local busi-
nesses, as well as the audit plan and execution, significant
risks and other relevant audit topics. The most significant
components are selected every year and other compo-
nents are selected depending on specific considerations
which include, among others, audit observations, specific
risks identified and other major events. In the current year
,
components in the following countries were selected:
United States, China, Germany
, France, United Kingdom,
Italy
, India, Sweden and the Netherlands. Finally
, for
all in-scope components in Europe we set-up a physical
site visit to the company’
s Regional Accounting Center
(“RAC”) in Poland, to increase our and the component
teams’ understanding of the developments and processes
in the RAC.
The group engagement team performed the audit work on
the group consolidation, financial statement disclosur
es
and a number of more complex items and pr
ocesses
controlled and monitor
ed centrally by Akzo Nobel N.V
.
These include impairment testing of goodwill and other
intangible assets with indefinite useful lives, share-based
payments, valuation of deferred tax assets and uncertain
tax positions, other provisions (i.e. corporate material
claims), treasury
, ITGCs and the Akzo Nobel N.V
. stand-
alone entity
.
By performing the procedur
es outlined above at the
components, combined with additional procedur
es at
group level, we have been able to obtain suf
ficient and
appropriate audit evidence on the Gr
oup’
s financial infor
-
mation, as a whole, to provide a basis for our opinion on
the financial statements.
Audit approach fraud risks
Akzo Nobel N.V
. has an integrity and compliance program,
which includes a governance structure, policies and
procedur
es around risk management, policy management,
communication, training and education, third party
risk management, monitoring, grievance and investigation
and reporting.
Our risk assessment
We identified and assessed the risk of material misstate-
ments to the financial statements due to fraud. During
our audit we obtained an understanding of the entity
and its environment and the elements of the system of
internal control, in particular the fraud risk assessment,
as well as among others, the Code of Conduct, proce-
dures on various anti-bribery and anti-corruption risks, the
SpeakUp! program and incident r
egistration and reporting.
This includes the risk assessment process and manage-
ment’
s process for responding to the risks of fraud and
monitoring the system of internal control and how the
Supervisory Board exer
cises oversight, as well as the
outcomes thereof.
As part of our process of identifying fraud risks, we evalu-
ated fraud risk factors with respect to financial r
eporting
fraud, misappropriation of assets, and bribery and corrup-
tion. T
ogether with our forensic specialists, we evaluated
the risk of material misstatement due to fraud to the
financial statements. We conducted interviews with both
members of the Board of Management, with members of
the Executive Committee, with members of the Super
-
visory Board and others within the company
, including
the Internal Audit and Integrity and Compliance func-
tion, to obtain an understanding of the company’
s fraud
risk assessment and the processes for identifying and
responding to the risks of fraud and the internal control
that management has established to mitigate these risks.
Revenue
64%
T
otal assets
68%
Profit before tax
60%
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As described in the auditing standards, management over
-
ride of controls and risk of fraud in r
evenue recognition are
presumed risks of fraud.
Inherently
, management of a company is in a unique posi-
tion to perpetrate fraud because of management’
s ability
to manipulate accounting recor
ds and prepare fraudulent
financial statements by overriding controls that otherwise
appear to be operating effectively
. We addressed this risk
of management override of controls, including evaluating
whether there was evidence of potential bias by manage-
ment that may repr
esent a risk of material misstatement
due to fraud (for examples of our audit response r
efer to
the key audit matters “V
aluation of post-retir
ement benefit
provisions” and “V
aluation of deferred tax assets and
uncertain tax positions”). The audit procedur
es to respond
to the assessed risks include, among others, evaluation
of the design and the implementation of internal controls
that intend to mitigate fraud risks (such as processing
and review of journal entries). In addition, we performed
retr
ospective review of prior year’
s estimates, and proce-
dures on unexpected journal entries with the support of
data analytics. Furthermore, we, together with our for
ensic
specialists, assessed matters reported on the Gr
oup’
s
whistleblowing and complaints procedur
es and results of
management’
s investigation of such matters, if deemed
applicable, and discussed this with the Audit Committee.
We also paid attention to significant transactions outside
the normal course of business.
With regard to the risk of fraud in revenue r
ecognition,
based on our risk assessment procedur
es, we concluded
that this risk is related to the occurr
ence of revenue trans-
actions. We instructed our components to perform pr
oce-
dures over this risk, including evaluation of the design
and implementation of relevant internal controls, tracing a
sample of revenue transactions to the supporting docu-
ments and validating unusual journal entries. As described
in the section “The scope of our group audit” we r
eviewed
the audit procedur
es performed by our component teams.
We incorporated elements of unpr
edictability in our audit.
We also consider
ed the outcome of our other audit proce-
dures and evaluated whether any findings wer
e indicative
of fraud or non compliance.
Audit approach going concern
As disclosed in Note 1 of the Consolidated financial state-
ments, management performed their assessment of the
company’
s ability to continue as a going concer
n for the
foreseeable futur
e and has not identified events or condi-
tions that may cast significant doubt on the company’
s
ability to continue as a going concern (hereafter: going
concern risks). Our procedures to evaluate management’
s
going concern assessment included, among others:
• Considering whether management’
s going concer
n
assessment includes the relevant information of which
we are awar
e as a result of our audit, inquiring with
management regar
ding management’
s most important
assumptions underlying their going concern assessment
• Analyzing the financial position per balance sheet
date, such as financial leverage and cash positions, in
relation to the financial position per prior year balance
sheet date to assess whether events or circumstances
exist that may lead to a going concern risk, and
liquidity management as disclosed in Note 27 of the
Consolidated financial statements
• Evaluating management’
s current budget, including
expected future cash flows in comparison with last year
,
market developments (for example, development in raw
materials), credit ratings and the r
elevant information of
which we are awar
e as a result of our audit, including,
among others, the cash flow projection of the five-year
plan obtained as part of the goodwill impairment testing
• Performing inquiries of management as to their
knowledge of going concern risks beyond the period of
management’
s assessment
Our procedur
es did not result in outcomes contrary to
management’
s assumptions and judgments used in the
application of the going concern assumption.
Key audit matters
Key audit matters are those matters that, in our pr
ofession-
al judgment, were of most significance in the audit of the
financial statements. We have communicated the key audit
matters to the Supervisory Board. The key audit matters
are not a compr
ehensive reflection of all matters identified
by our audit and that we discussed. In this section, we
described the key audit matters and included a summary of
the audit procedur
es we performed on those matters.
We addr
essed the key audit matters in the context of our
audit of the financial statements as a whole, and in forming
our opinion thereon. W
e do not provide separate opinions
on these matters or on specific elements of the financial
statements. Any comment or observation we made on the
results of our pr
ocedures should be read in this context.
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Key audit matters
Key audit matter
Our audit work and observations
Ongoing transformation of the organization, systems, processes and controls
Over the past years, the company executed a wide range of transformational projects, which included central
-
ization of finance activities in global business service hubs and simplification of the IT environment, impacting
the company’
s systems, processes and controls. These pr
ojects continued in 2021, with the goal to align to the
company’
s evolving operating model, focusing on end-to-end processes and to increase operational ef
ficiencies
and effectiveness.
As disclosed in the “Report of the Supervisory Board”, the company’
s overall approach to governance, risk
management and internal controls, its processes, outcomes, financial reporting and disclosur
es were regularly
reviewed by the Audit Committee throughout the year
.
In its review
, the Audit Committee considered the impact of changes to systems, pr
ocesses and controls, such
as the IT landscape rationalization and the implementation of Regional Accounting Centers (“RAC”) on the
internal controls.
Inherently
, transformation processes encompass changes in the organization, processes and cultur
e and as
such contribute to the risk of management override of internal controls, which is a presumed audit risk in our
audit.
We extended our audit procedur
es to evaluate the impact of the transformation on systems, processes and controls.
During our audit we updated our understanding of the ongoing transformation programs. We held discussions with
group management, global process owners, functional management and with the business service hubs in Poland,
India, China, Brazil and United States, in order to understand the status of the transition, understand the processes and
controls in place to address the changes in the internal controls and evaluate the maturity of the pr
ocesses. In order
to obtain further evidence of the effectiveness of the controls in place, we also performed walkthr
oughs on selected
controls. We used this information as part of our risk assessment pr
ocedures, determination of the scope of our audit
and communication to our component teams.
For the simplification of the IT environment, we involved our IT specialists. We obtained an understanding of the pr
oject
governance and the validation approach and we tested data migration and IT general controls. We used data analytics
to identify unexpected journal entries.
From the procedur
es performed, we did not have material findings with respect to the balance sheet positions and
results recor
ded and disclosed.
V
aluation of post-retirement benefit pr
ovisions
Note 19
The post-retirement benefit pr
ovisions consist of defined benefit obligations (€14.3 billion) more than offset by
plan assets (€15.3 billion). The largest pension plans are the ICI Pension Fund (ICIPF) and the AkzoNobel (CPS)
Pension Scheme in the UK, which together account for 87% of the defined benefit obligation (DBO) and 91% of
the plan assets.
We consider the valuation of these post-retir
ement benefit provisions to be a key audit matter because positions
are significant to the company and the assessment process is complex and involves significant management
judgment, which could be subject to management bias. The actuarial assumptions used include demographic
assumptions (rates of employee turnover
, disability
, early retirement and mortality) and financial assumptions
(discount rate, future salary
, benefit increases/indexation and inflation), as disclosed in Note 19 of the Consoli
-
dated financial statements. T
echnical expertise is required to determine closing positions.
With the assistance of our actuarial experts, we evaluated management’
s actuarial assumptions and the valuation
methodologies applied, as well as the objectivity and competence of the company’
s external pension experts used for
the calculation of the post-retirement benefit positions.
We have challenged management, primarily on their assumptions applied to which the post-retir
ement benefit provi-
sions are the most sensitive, by performing independent testing over the assumptions and methodologies used and
comparing with the published actuarial tables, among others, with support of our actuarial experts. We paid particular
attention to the discount rate changes as described by the company in Note 19, given the significance.
We also tested the participant census data and the valuation of the plan assets through independent price testing (e.g.
by reconciling to independently published market prices).
Furthermore, we tested the transactions as described in Note 19 and we verified the appropriate accounting. W
e also
assessed the adequacy of the company’
s disclosure in Note 19 to the Consolidated financial statements.
Our procedures did not r
esult in material findings with respect to the valuation and disclosure of post-r
etirement benefit
provisions at December 31, 2021.
V
aluation of deferred tax assets and uncertain tax positions
Note 9
The Group operates globally and is therefor
e subject to income taxes in various tax jurisdictions. The assess
-
ment of the valuation of deferred tax assets, resulting fr
om net operating losses, tax credits and temporary
differences, and pr
ovisions for uncertain tax positions is significant to our audit as the positions are significant
to the company
, calculations are complex and involve high estimation uncertainty and judgmental assump
-
tions, which could be subject to management bias. The key assumptions include long-term projected revenue
growth, margin development and local fiscal regulations. The company’
s disclosures concerning income taxes
are included in Note 9 to the Consolidated financial statements.
With respect to the valuation of deferred tax assets and uncertain tax positions we performed the following procedur
es
with the assistance of our tax specialists:
•
We tested management’
s assessment of the recoverability of the deferred tax assets, by challenging their key
assumptions. We specifically focused on the development of the budget compared to the actual r
esults, the impact
of margin management, the completeness of the future cost included in the forecasts compar
ed to the current cost
base and the impact of COVID-19 on the country results
•
We obtained an understanding and assessed completeness of the tax exposures and uncertain tax positions r
ecog-
nized, through discussions with group and local management. W
e evaluated the probability of future cash outflows
related to the uncertain tax positions identified by the company
•
We also assessed the applicable local fiscal regulations and developments, in particular those r
elated to changes
in the statutory income tax rates and the statutes of limitation, since these are key assumptions underlying the
valuation of the deferred tax assets and uncertain tax positions. We analysed the tax positions and evaluated the
assumptions and methodologies used
•
Furthermore, we tested the transactions and positions, including the developments with respect to Advanced
Corporation T
ax (ACT) in the UK and the Brazilian state tax on goods and services (ICMS), as described in Notes 4
and 9 and we verified the appropriate accounting
•
In addition, we assessed the adequacy of the company’
s disclosures on deferred tax assets and uncertain tax posi-
tions and assumptions used
Our procedures did not r
esult in material findings with respect to the valuation of deferred tax assets, the uncertain tax
positions recorded and r
elated disclosures at December 31, 2021.
142
AkzoNobel Report 2021
|
Financial statements
Report on the other information included in the
annual report
The annual report contains other information. This includes
all information in the annual report in addition to the finan-
cial statements and our auditor’
s report thereon.
Based on the procedur
es performed as set out below
, we
conclude that the other information:
• Is consistent with the financial statements and does not
contain material misstatements
• Contains all the information regarding the dir
ectors’
report and the other information that is r
equired by Part
9 of Book 2 and regar
ding the remuneration report
requir
ed by the sections 2:135b and 2:145 subsection
2 of the Dutch Civil Code.
We have r
ead the other information. Based on our
knowledge and the understanding obtained in our audit
of the financial statements or otherwise, we have consid-
ered whether the other information contains material
misstatements.
By performing our procedur
es, we comply with the
requir
ements of Part 9 of Book 2 and section 2:135b
subsection 7 of the Dutch Civil Code and the Dutch Stan-
dard 720. The scope of such pr
ocedures was substantially
less than the scope of those procedur
es performed in our
audit of the financial statements.
The Board of Management is r
esponsible for the prepara-
tion of the Other information, including the Management
report (as defined in Note 1 of the Consolidated financial
statements) and the other information in accordance with
Part 9 of Book 2 of the Dutch Civil Code and the remu-
neration report in accor
dance with sections 2:135b and
2:145 subsection 2 of the Dutch Civil Code.
Report on other legal and regulatory
requir
ements and ESEF
Our appointment
We wer
e appointed as auditors of Akzo Nobel N.V
. on
April 29, 2014, by the Supervisory Board. This followed
the passing of a resolution by the shar
eholders at the
Annual General Meeting held on April 29, 2014, and
effective January 1, 2016. Our engagement has been
renewed annually
.
European Single Electr
onic Format (ESEF)
Akzo Nobel N.V
. has prepar
ed the annual report, including
the financial statements, in ESEF
. The requir
ements for this
format are set out in the Commission Delegated Regula-
tion (EU) 2019/815 with regar
d to regulatory technical
standards on the specification of a single electr
onic report-
ing format (these requir
ements are hereinafter r
eferred to
as: the RTS on ESEF).
In our opinion, the annual report pr
epared in XHTML
format, including the partially tagged Consolidated financial
statements as included in the reporting package by Akzo
Nobel N.V
., has been prepar
ed in all material respects in
accordance with the RTS on ESEF
.
The Board of Management is r
esponsible for preparing
the annual report, including the financial statements, in
accordance with the RTS on ESEF
, whereby the Boar
d
of Management combines the various components into
a single reporting package. Our r
esponsibility is to obtain
reasonable assurance for our opinion whether the annual
report in this r
eporting package, is in accordance with the
RTS on ESEF
.
Our procedur
es, taking into account Alert 43 of the NBA
(Royal Netherlands Institute of Chartered Accountants),
included among others:
• Obtaining an understanding of the company’
s financial
reporting pr
ocess, including the preparation of the
reporting package
• Obtaining the reporting package and performing
validations to determine whether the reporting package,
containing the Inline XBRL instance document and the
XBRL extension taxonomy files, has been prepar
ed, in
all material respects, in accor
dance with the technical
specifications as included in the RTS on ESEF
• Examining the information related to the Consolidated
financial statements in the reporting package to
determine whether all requir
ed taggings have been
applied and whether these are in accor
dance with the
RTS on ESEF
No prohibited non-audit services
T
o the best of our knowledge and belief, we have not
provided pr
ohibited non-audit services as referred to in
article 5(1) of the European Regulation on specific r
equire-
ments regar
ding statutory audit of public-interest entities.
Services render
ed
The services, in addition to the audit, that we have
provided to the company or its contr
olled entities, for the
period to which our statutory audit relates, ar
e disclosed in
Note K to the financial statements.
Responsibilities for the financial statements
and the audit
Responsibilities of the Board of Management
and the Supervisory Board for the financial
statements
The Board of Management is r
esponsible for:
• The preparation and fair presentation of the financial
statements in accordance with EU-IFRS and Part 9 of
Book 2 of the Dutch Civil Code; and for
• Such internal control as the Board of Management
determines is necessary to enable the preparation of
the financial statements that are fr
ee from material
misstatement, whether due to fraud or error
As part of the preparation of the financial statements,
the Board of Management is r
esponsible for assessing
the company’
s ability to continue as a going concer
n.
Based on the financial reporting frameworks mentioned,
the Board of Management should pr
epare 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 Manage-
ment 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 r
esponsible for overseeing the
company’
s financial reporting process.
Our responsibilities for the audit of the financial
statements
Our responsibility is to plan and perform an audit engage-
ment in a manner that allows us to obtain sufficient and
appropriate audit evidence to pr
ovide a basis for our
opinion. Our objectives are to obtain r
easonable assur
-
ance about whether the financial statements as a whole
are fr
ee from material misstatement, whether due to fraud
or error and to issue an auditor’
s report that includes our
opinion. Reasonable assurance is a high, but not absolute,
143
AkzoNobel Report 2021
|
Financial statements
Appendix to our auditor’
s report on the financial
statements 2021 of Akzo Nobel N.V
.
In addition to what is included in our auditor’
s report, we
have further set out in this appendix our responsibilities for
the audit of the financial statements and explained what an
audit involves.
The auditor’
s responsibilities for the audit of the
financial statements
We have exer
cised professional judgment and have
maintained professional scepticism thr
oughout the audit
in accordance with Dutch Standar
ds on Auditing, ethical
requir
ements and independence requirements. Our audit
consisted, among others, of the following:
• Identifying and assessing the risks of material
misstatement of the financial statements, whether
due to fraud or error
, designing and performing audit
procedur
es responsive to those risks, and obtaining
audit evidence that is sufficient and appr
opriate
to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting fr
om fraud
is higher than for one resulting fr
om error
, as fraud
may involve collusion, forgery
, intentional omissions,
misrepr
esentations, or the intentional override of
internal control
• Obtaining an understanding of internal control relevant
to the audit in order to design audit pr
ocedures that
are appr
opriate in the circumstances, but not for the
purpose of expressing an opinion on the ef
fectiveness of
the company’
s inter
nal control
• Evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosur
es made by the Board of
Management
• Concluding on the appropriateness of the Board of
Management’
s use of the going concer
n basis of
accounting, and based on the audit evidence obtained,
concluding whether a material uncertainty exists related
to events and/or conditions that may cast significant
doubt on the company’
s ability to continue as a going
concern. If we conclude that a material uncertainty
exists, we are r
equired to draw attention in our auditor’
s
report to the r
elated disclosures in the financial
statements or
, if such disclosures ar
e inadequate, to
modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’
s
report and ar
e made in the context of our opinion on
the financial statements as a whole. However
, future
events or conditions may cause the company to cease
to continue as a going concern
• Evaluating the overall presentation, structure and
content of the financial statements, including the
disclosures, and evaluating whether the financial
statements repr
esent the underlying transactions and
events in a manner that achieves fair presentation
Considering our ultimate responsibility for the opinion on
the Consolidated financial statements, we are r
esponsible
for the direction, supervision and performance of the gr
oup
audit. In this context, we have determined the nature
and extent of the audit procedur
es for components of
the Group to ensur
e that we performed enough work to
be able to give an opinion on the financial statements as
a whole. Determining factors are the geographic struc-
ture of the Gr
oup, the significance and/or risk profile of
group entities or activities, the accounting pr
ocesses and
controls, and the industry in which the Gr
oup operates. On
this basis, we selected group entities for which an audit
or review of financial information or specific balances was
considered necessary
.
We communicate with the Supervisory Boar
d regarding,
among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our
audit. In this respect, we also issue an additional r
eport to
the Audit Committee in accordance with article 11 of the
EU Regulation on specific requir
ements regarding statutory
audit of public interest entities. The information included in
this additional report is consistent with our audit opinion in
this auditor’
s report.
We pr
ovide the Supervisory Board with a statement that
we have complied with relevant ethical r
equirements
regar
ding independence, and to communicate with them
all relationships and other matters that may r
easonably
be thought to bear on our independence, and where
applicable, related actions taken to eliminate thr
eats or
safeguards applied.
From the matters communicated with the Supervisory
Board, we determine those matters that wer
e of most
significance in the audit of the financial statements of the
current period and ar
e therefore the key audit matters. W
e
describe these matters in our auditor’
s report unless law or
regulation pr
ecludes public disclosure about the matter or
when, in extremely rar
e circumstances, not communicating
the matter is in the public interest.
level of assurance, which makes it possible that we may
not detect all material misstatements. Misstatements may
arise due to fraud or error
. They are considered material
if, individually or in the aggregate, they could r
easonably
be expected to influence the economic decisions of users
taken on the basis of the financial statements.
Materiality affects the natur
e, timing and extent of our audit
procedur
es and the evaluation of the effect of identified
misstatements on our opinion.
A more detailed description of our r
esponsibilities is set out
in the appendix to our report.
Amsterdam, February 28, 2022
PricewaterhouseCoopers Accountants N.V
.
Original has been signed by Fernand Izeboud RA
144
AkzoNobel Report 2021
T
o: The Board of Management and the
Supervisory Board of Akzo Nobel N.V
.
Assurance report on the selected non-financial
performance indicators in the Sustainability
statements of the annual report 2021.
Our conclusion
We have examined the selected non-financial performance
indicators in the Sustainability statements of the annual
report 2021 of Akzo Nobel N.V
. (“AkzoNobel” or “the
company”). Based on the procedur
es performed and
evidence obtained, nothing has come to our attention
that causes us to believe that the selected non-financial
performance indicators in the Sustainability statements
of the annual report 2021 ar
e not prepared, in all material
respects, in accor
dance with the AkzoNobel’
s Reporting
principles Sustainability statements 2021.
What we have examined
The object of our assurance engagement concerns
the selected non-financial performance indicators in
the Sustainability statements of the annual report 2021
marked with the symbol ’
’ (“the Indicators”) for the year
ended December 31, 2021. The Indicators examined are
as follows:
• Organizational health score (score)
• Female executives (%)
• Fatalities employees (number)
•
Fatalities contractors (temporary workers plus
independent) (number)
• Life-changing injuries (number)
• Lost time injury rate employees/temporary workers
(/200,000 hours)
• Lost time injury rate contractors (/200,000 hours)
• Regulatory actions – Level 4 (number)
• T
otal reportable injury rate employees/temporary
workers (/200,000 hours)
• T
otal reportable injury rate contractors (/200,000 hours)
• Loss of primary containment – Level 1 (number)
• Loss of primary containment – Level 2 (number)
• Process safety event – Level 3 (number)
• Occupational illness rate employees (/200,000 hours)
• Security incidents Level 3 (number)
• V
olatile organic compounds (kilotons)
• V
olatile organic compounds (kg per ton of production)
• Energy use (1,000 TJ)
• Energy use (GJ per ton of production)
• T
otal waste (kilotons)
• T
otal waste (kg per ton of production)
• Hazardous waste to landfill (kilotons)
• Hazardous waste to landfill (kg per ton of production)
• Renewable energy (own operations) (%)
• Renewable electricity (own operations) (%)
• Greenhouse gas emissions (kg CO
2
(e) per ton of
production)
• Greenhouse gas emissions – Direct CO
2
(e) emissions
(Scope 1) (kiloton)
• Greenhouse gas emissions – Direct CO
2
(e) emissions
(Scope 1) (kg per ton of production)
• Greenhouse gas emissions – Indirect CO
2
(e) emissions
(Scope 2) (kiloton)
• Greenhouse gas emissions – Indirect CO
2
(e) emissions
(Scope 2) (kg per ton of production)
• T
otal reusable waste (kilotons)
• T
otal non-reusable waste (kilotons)
• T
otal non-reusable waste (kg per ton of production)
• T
otal waste – circular (%)
• Fresh water use (million m
3
)
• Fresh water use (m
3
per ton of production)
• Fresh water consumption (million m
3
)
• Fresh water consumption (m
3
per ton of production)
• Scope 3 upstream (million tons)
• Scope 3 downstream (million tons)
• Cradle-to-grave carbon footprint (Scope 1, 2 and 3)
(million tons)
• Suppliers participating in sustainability program
(% against baseline)
• Suppliers in sustainability program – in line with our
expectation (% against baseline)
• Suppliers in sustainability program – under development
(% against baseline)
• Sustainable solutions (% of revenue)
Some Indicators have a differ
ent reporting period
compared to the calendar year 2021, in these cases,
this is indicated in the annual report and the Reporting
principles Sustainability statements 2021.
The basis for our conclusion
We conducted our examination in accor
dance with Dutch
law
, including the Dutch Standard 3000A “Assurance enga-
gements, other than audits or reviews of historical financial
information (attestation-engagements)”. This engagement
is aimed to provide limited assurance. Our r
esponsibilities
under this standard ar
e further described in the section
“Our responsibilities for the examination” of our r
eport.
We believe that the assurance information we have
obtained is sufficient and appr
opriate to provide a basis for
our conclusion.
Independence and quality control
We ar
e independent of Akzo Nobel N.V
. in accordance
with the “V
eror
dening inzake de onafhankelijkheid
van accountants bij assurance opdrachten” (ViO, Code
of Ethics for Professional Accountants, a r
egulation
with respect to independence) and other r
elevant
independence requir
ements in the Netherlands.
Furthermore, we have complied with the “V
erordening
gedrags- en beroepsr
egels accountants” (VGBA,
Code of Ethics for Professional Accountants, a r
egulation
with respect to rules of pr
ofessional conduct).
We apply the “Nader
e voorschriften kwaliteitssystemen”
(NVKS, Regulations for quality systems) and accordingly
maintain a comprehensive system of quality contr
ol, inclu-
ding documented policies and procedur
es regarding com-
pliance with ethical requir
ements, professional standards
and other applicable legal and regulatory r
equirements.
Applicable criteria
The Indicators need to be read and understood in con-
junction with the reporting criteria. The r
eporting criteria
used for the preparation of the Indicators ar
e AkzoNobel’
s
Reporting principles Sustainability statements 2021
developed by the company
, as disclosed in the “Managing
sustainability” paragraph of the annual report 2021 and
further elaborated in the document “Reporting principles
Sustainability statements 2021” which was made available
online* at www
.akzonobel.com/en/about-us/sustainability-/
reporting-principles-. The absence of a significant body
*
The maintenance and integrity of AkzoNobel’
s website is the responsibility of the
Board of Management; the work carried out by us does not involve consideration
of these matters and, accordingly
, we accept no responsibility for any changes that
may have occurred to the Reporting Principles Sustainability statements 2021 when
presented on AkzoNobel’
s website after the date of this assurance report.
ASSURANCE REPORT
OF THE INDEPENDENT
AUDITOR
145
AkzoNobel Report 2021
of established practice on which to draw
, to evaluate and
measure non-financial information allows for dif
ferent,
but acceptable, measurement techniques and can af
fect
comparability between entities and over time.
Responsibilities for the Indicators and the
examination thereof
Responsibilities of the Board of Management and
the Supervisory Board
The Board of Management of Akzo Nobel N.V
. is
responsible for selecting the criteria, taking into account
applicable law and regulations r
elated to reporting, and
for the preparation of the Indicators in accor
dance
with the AkzoNobel Reporting principles Sustainability
statements 2021, including the identification of the
intended users and the criteria being applicable for the
purpose of these users.
Furthermore, the Boar
d of Management is responsible
for such internal control as it determines is necessary to
enable the preparation of Indicators that ar
e free from
material misstatement, whether due to fraud or error
.
The Supervisory Board is r
esponsible for overseeing the
company’
s reporting process on the Indicators.
Our responsibilities for the examination
Our responsibility is to plan and perform our examination
in a manner that allows us to obtain sufficient and
appropriate evidence to pr
ovide a basis for our conclusion.
Our conclusion aims to provide limited assurance.
The procedur
es performed in this context consisted
primarily of making inquiries with officers of the entity and
determining the plausibility of the Indicators. The level of
assurance obtained in a limited assurance engagement
is substantially lower than the assurance that would have
been obtained had a reasonable assurance engagement
been performed.
Misstatements may arise due to fraud or error
. They
are consider
ed to be material if, individually or in the
aggregate, they could r
easonably be expected to influence
the decisions of users taken on the basis of the Indicators.
Materiality affects the natur
e, timing and extent of our
assurance procedur
es and the evaluation of the effect of
identified misstatements on our conclusion.
Procedur
es performed
We have exer
cised professional judgement and have
maintained professional scepticism thr
oughout the
examination in accordance with the Dutch Standar
d
3000A, ethical requir
ements and independence
requir
ements.
Our examination consisted, among other things of
the following:
• Evaluating the appropriateness of the reporting
criteria used, their consistent application and related
disclosures to the Indicators. This includes the
evaluation of the reasonableness of estimates made by
the Board of Management.
• Obtaining an understanding of the reporting process
for the Indicators, including obtaining a general
understanding of internal control relevant to the
examination in order to design assurance pr
ocedures
that are appr
opriate in the circumstances, but not
for the purpose of expressing a conclusion on the
effectiveness of the company’
s internal control.
Identifying areas of the Indicators with a higher
risk of a material misstatement, whether due to fraud
or error
.
•
Designing and performing assurance procedures
responsive to those risks and obtaining evidence that
is sufficient and appr
opriate to provide a basis for
our conclusion. These procedur
es consisted, among
others, of:
– Interviewing management (and/or relevant staff)
at corporate level responsible for the sustainability
strategy
, policy and results;
– Interviewing relevant staff r
esponsible for providing the
information for
, carrying out internal control procedur
es
on, and consolidating the data resulting in the
Indicators;
– Determining the nature and extent of procedur
es
relating to gr
oup components and locations. For
this, the nature, extent and/or risk pr
ofile of these
components are decisive. Based ther
eon, we selected
a component and location (Chengdu, China) for which
we performed remote r
eview procedures to validate
our understanding of local processes and internal
control, and validated selected sour
ce data
– Obtaining assurance evidence that the Indicators
reconcile with underlying r
ecords of the company;
– Reviewing, on a limited test basis, relevant internal and
external documentation;
– Performing an analytical review of the data and
trends of the Indicators submitted for consolidation at
corporate level.
• Evaluating the consistency of the Indicators with the
information in the annual report 2021, which is not
included in the scope of our review
.
• T
o consider whether the Indicators as a whole, including
the disclosures, r
eflect the purpose of the reporting
criteria used.
We communicated with the Supervisory Boar
d and the
Board of Management r
egarding, among other matters,
the planned scope and timing of the review and significant
findings that we identified during our review
.
Amsterdam, February 28, 2022
PricewaterhouseCoopers Accountants N.V
.
Original has been signed by Fernand Izeboud RA
146
AkzoNobel Report 2021
FINANCIAL SUMMARY
¹ Adjusted operating income is operating income excluding identified items.
2
Cash dividend paid to shareholders of AkzoNobel.
3
ROS has been restated and are based on r
evenues from third parties. ROS% is calculated as adjusted operating income(operating income excluding identified items) as a
percentage of revenues fr
om third parties (as from 2020, before 2020 this was based on gr
oup revenue). ROI% is calculated as adjusted operating income (operating income
excluding identified items) of the last 12 months as a percentage of average invested capital of the last 12 months. Invested capital is calculated as total assets (excluding cash
and cash equivalents, short-term investments, investments in associates, the receivable from pension funds in an asset position and assets held for sale) less curr
ent tax liabilities,
deferred tax liabilities and trade and other payables. OPI margin has been restated and is calculated as operating income as a per
centage of revenues from third parties.
4
Not meaningful as operating income and net income were losses.
5
Represented to present the Specialty Chemicals business as discontinued operations.
6
Represented to the new adjusted earnings per share definition, which no longer excludes post-tax amortization charges.
7
Includes the impact of the adoption of IFRS 16 “Leases”.
Consolidated statement of income
In € millions
2012
2013
2014
2015
2016
5 6
2017
2018
2019
7
2020
2021
Revenue
15,390
14,590
14,296
14,859
9,434
9,612
9,256
9,276
8,530
9,587
Operating income
(1,198)
958
987
1,573
923
825
605
841
963
1,118
Adjusted operating income
1
972
897
1,072
1,462
928
905
798
991
1,099
1,092
Financing income and expenses
(205)
(200)
(156)
(114)
(91)
(78)
(52)
(76)
(69)
(39)
Income tax
(203)
(111)
(252)
(416)
(234)
(253)
(118)
(230)
(241)
(246)
Results from associates and joint ventures
13
14
21
17
18
17
20
20
25
26
Profit/(loss) for the period from continuingoperations
(1,593)
661
600
1,060
616
511
455
555
678
859
Discontinued operations
(436)
131
18
6
436
393
6,274
22
(7)
6
Non-controlling interests
(63)
(68)
(72)
(87)
(82)
(72)
(55)
(38)
(41)
(36)
Net income, attributable to shareholders
(2,092)
724
546
979
970
832
6,674
539
630
829
Common shares, in millions at year
-end
239.0
242.6
246.0
249.0
252.2
252.6
256.2
199.6
190.6
181.6
Dividend
2
214
210
212
222
239
1,287
390
1,423
366
365
Number of employees at year
-end
50,610
49,600
47,200
45,600
36,300
35,700
34,500
33,800
32,200
32,800
Average number of employees
52,200
50,200
48,200
46,100
36,200
36,200
34,900
34,200
33,000
32,700
Employee benefits
3,018
2,950
2,824
2,728
1,794
1,935
1,976
1,875
1,850
1,773
Average revenue per employee (in €1,000)
295
291
297
322
261
266
265
271
258
293
Average operating income per employee (in €1,000)
(23)
19
20
34
25
23
17
25
29
34
Ratios
ROS
3
6.3
6.1
7.5
9.8
9.8
9.4
8.6
10.7
12.9
11.4
OPI margin
(7.8)
6.6
6.9
10.6
9.8
8.6
6.5
9.1
11.3
11.7
ROI
3
8.2
9.0
10.9
14.0
14.4
13.9
12.6
14.1
16.1
16.0
Net income in% of shareholders’ equity
–
4
12.9
9.5
15.1
14.8
14.2
56.4
8.5
11.0
15.3
Employee benefits in % of revenue
19.6
20.2
19.8
18.4
19.0
20.1
21.3
20.2
21.7
18.5
Interest coverage
–
4
5.1
8.6
16.2
13.2
12.3
8.0
14.3
18.5
18.0
Per share information
Net income
(8.82)
3.00
2.23
3.95
3.87
3.31
26.19
2.53
3.29
4.48
Adjusted earnings per share
2.55
2.62
2.81
4.02
3.80
4.40
1.91
3.10
3.88
4.07
Shareholders’ equity
24.12
23.06
23.53
26.04
25.99
23.22
46.19
32.33
30.26
30.32
Highest share price during the year
49.75
56.08
60.77
74.81
64.74
82.64
82.70
91.86
91.60
107.80
Lowest share price during the year
35.16
42.65
47.63
55.65
50.17
59.11
68.82
69.12
48.50
83.50
Y
ear-end shar
e price
49.75
55.71
57.65
61.68
59.39
73.02
70.40
90.69
87.86
96.50
147
AkzoNobel Report 2021
¹ 2016 is represented to pr
esent the Specialty Chemicals business as discontinued operations.
2
Capital expenditures include investments in intangible assets as from 2018.
3
As from 2018 trade payables include certain other payables, which were pr
eviously classified as Other working capital. T
rade payables,
Operating working capital and Other working capital items have been represented for this change of definition for some €240 million.
4
Operating working capital is measured against four times fourth quarter revenue.
5
Includes the impact of the adoption of IFRS 16 “Leases”.
Consolidated balance sheet
In € millions
2012
2013
2014
2015
2016
2017
2018
2019
5
2020
2021
Intangible assets
4,454
3,906
4,142
4,156
4,413
3,409
3,458
3,625
3,554
3,690
Property
, plant and equipment
3,739
3,589
3,835
4,003
4,190
1,832
1,748
1,700
1,621
1,800
Right-of-use assets
–
–
–
–
–
–
–
374
324
304
Other non-current assets
2,628
2,219
2,148
2,125
1,736
1,894
1,965
2,541
2,614
2,736
T
otal non-current assets
10,821
9,714
10,125
10,284
10,339
7,135
7,171
8,240
8,113
8,530
Inventories
1,545
1,426
1,545
1,504
1,532
1,094
1,139
1,139
1,159
1,650
Receivables
2,789
2,622
2,831
2,810
2,846
2,026
2,215
2,196
2,049
2,488
Short-term investments
–
–
–
–
–
–
5,460
138
250
58
Cash and cash equivalents
1,752
2,098
1,732
1,365
1,479
1,322
2,799
1,271
1,606
1,152
Assets held for sale
921
203
66
–
–
4,601
–
–
–
—
T
otal current assets
7,007
6,349
6,174
5,679
5,857
9,043
11,613
4,744
5,064
5,348
Shareholders’ equity
5,764
5,594
5,790
6,484
6,553
5,865
11,834
6,350
5,746
5,425
Non-controlling interests
464
427
477
496
481
442
204
218
204
211
T
otal equity
6,228
6,021
6,267
6,980
7,034
6,307
12,038
6,568
5,950
5,636
Provisions
2,677
1,938
2,143
1,865
1,938
964
899
981
896
812
Long-term borrowings
3,388
2,666
2,527
2,161
2,644
2,300
1,799
2,042
2,771
1,994
Other non-current liabilities
434
389
412
360
367
285
368
391
467
567
T
otal non-current liabilities
6,499
4,993
5,082
4,386
4,949
3,549
3,066
3,414
4,134
3,373
Short-term borrowings
662
961
811
430
87
973
599
169
119
1,556
Other current liabilities
3,632
3,438
3,634
3,716
3,704
2,912
2,870
2,602
2,742
3,164
Current portion of provisions
455
601
494
451
422
241
211
231
232
149
Liabilities held for sale
352
49
11
–
–
2,196
–
–
–
—
T
otal current liabilities
5,101
5,049
4,950
4,597
4,213
6,322
3,680
3,002
3,093
4,869
Average invested capital
1
11,817
10,007
9,871
10,475
6,422
6,494
6,340
7,026
6,834
6,829
Capital expenditures
2
826
666
588
651
634
613
184
214
258
288
Depreciation
1
463
472
477
487
206
202
181
293
297
281
Operating Working Capital
3
1,572
1,384
1,418
1,385
1,405
927
898
1,068
878
1,247
Net debt
2,298
1,529
1,606
1,226
1,252
1,951
(5,861)
802
1,034
2,340
Ratios
Equity/non-current assets
0.58
0.62
0.62
0.68
0.68
0.88
1.68
0.80
0.73
0.66
Inventories and receivables/other currentliabilities
1.19
1.18
1.20
1.16
1.18
1.07
1.17
1.28
1.17
1.31
Operating working capital as % of revenue
4
10.7
9.9
10.1
9.7
10.2
10.2
9.7
11.9
9.9
13.0
148
AkzoNobel Report 2021
1
The 2019 figures are r
estated to represent revenue fr
om third parties instead of group revenue.
2
ROS, ROI and OPI margin have been restated and are based on adjusted operating income. ROS% is calculated as adjusted
operating income (operating income excluding identified items) as a percentage of revenues fr
om third parties (as from 2020, before
2020 this was based on group revenue). ROI% is calculated as adjusted operating income (operating income excluding identified
items) of the last 12 months as a percentage of average invested capital of the last 12 months. Invested capital is calculated as
total assets (excluding cash and cash equivalents, short-term investments, investments in associates, the receivable from pension
funds in an asset position and assets held for sale) less current tax. OPI margin is calculated as operating income as a percentage
of group revenue.
3
Includes the impact of the adoption of IFRS 16 “Leases”.
Segment statistics
In € millions
2012
2013
2014
2015
2016
2017
2018
2019
3
2020
2021
Decorative Paints
Revenue
1
4,297
4,174
3,909
4,007
3,835
3,898
3,699
3,670
3,558
3,979
Adjusted operating income
108
199
248
345
357
351
346
418
573
598
Operating income
(2,012)
398
248
345
366
334
308
425
551
640
ROS
2
2.5
4.8
6.3
8.6
9.3
9.0
9.4
11.4
16.1
15.0
OPI margin
2
(46.8)
9.5
6.3
8.6
9.5
8.6
8.3
11.6
15.5
16.1
Average invested capital
4,701
2,896
2,824
2,959
2,783
2,803
2,798
3,106
2,799
2,872
ROI
2
2.3
6.9
8.8
11.7
12.8
12.5
12.4
13.4
20.5
20.8
Capital expenditures
206
171
143
158
107
112
50
62
77
108
Average number of employees
17,200
16,800
15,500
15,100
14,800
14,700
14,100
12,900
12,100
12,500
Average revenue per employee (in €1,000)
250
248
252
265
259
265
262
284
294
318
Average operating income per employee (in €1,000)
(117)
24
16
23
25
23
22
33
46
51
Performance Coatings
Revenue
1
5,702
5,571
5,589
5,955
5,665
5,775
5,587
5,549
4,957
5,603
Adjusted operating income
542
525
545
792
759
669
629
688
700
648
Operating income
542
525
545
792
735
668
577
565
665
650
ROS
2
9.5
9.4
9.8
13.3
13.4
11.6
11.3
12.4
14.1
11.6
OPI margin
2
9.5
9.4
9.8
13.3
13.0
11.6
10.3
10.2
13.4
11.6
Average invested capital
2,499
2,463
2,480
2,692
2,586
2,860
3,066
3,325
3,388
3,520
ROI
2
21.7
21.3
22.0
29.4
29.4
23.4
20.5
20.7
20.7
18.4
Capital expenditures
123
143
143
147
159
129
107
113
146
147
Average number of employees
21,700
21,300
21,000
19,700
19,300
19,800
19,200
18,000
17,500
17,000
Average revenue per employee (in €1,000)
263
262
266
302
294
292
291
308
283
330
Average operating income per employee (in €1,000)
25
25
26
40
38
34
30
31
38
38
149
AkzoNobel Report 2021
1
The regional split has been changed compared to pr
evious year to align to our new internal regional structure.
2
At year
-end.
3
includes the impact of the adoption of IFRS 16 “Leases”.
Regional statistics¹
In € millions
2017
2018
2019
3
2020
2021
2017
2018
2019
3
2020
2021
2017
2018
2019
3
2020
2021
The Netherlands
North America
China
Revenue by destination
282
318
359
342
335
1,288
1,233
1,246
1,114
1,163
1,494
1,329
1,268
1,205
1,418
Revenue by origin
423
458
484
434
445
1,320
1,263
1,278
1,126
1,194
1,493
1,321
1,271
1,198
1,389
Capital expenditures
17
25
42
46
45
24
20
32
43
37
32
13
15
24
30
Average invested capital
1,528
1,560
1,622
1,713
1,701
883
716
707
689
784
787
732
908
852
876
Number of employees
2
2,500
2,400
2,400
2,300
2,400
3,200
3,000
3,100
3,000
3,100
6,000
5,300
4,900
4,500
4,400
UK
South America
Other Asian countries and Pacific
Revenue by destination
777
818
838
838
882
801
716
709
601
744
1,614
1,538
1,548
1,282
1,454
Revenue by origin
891
918
951
975
1,034
776
718
674
588
724
1,553
1,482
1,525
1,215
1,416
Capital expenditures
39
29
16
15
26
21
12
11
11
15
45
29
32
44
61
Average invested capital
746
758
850
623
553
372
335
350
290
315
587
706
773
768
684
Number of employees
2
3,200
3,200
3,200
3,000
3,000
2,600
2,400
2,400
2,300
2,400
7,300
7,100
6,800
6,100
6,200
Other EMEA countries
Revenue by destination
3,356
3,304
3,308
3,147
3,591
Revenue by origin
3,156
3,096
3,093
2,994
3,385
Capital expenditures
72
56
66
75
74
Average invested capital
1,591
1,533
1,816
1,899
1,916
Number of employees
2
10,900
11,100
11,000
11,000
11,300
150
AkzoNobel Report 2021
Adjusted EBITDA
Adjusted EBITDA is operating income excluding
depreciation, amortization and identified items.
AGM or EGM
Annual General Meeting of shareholders; Extraor
dinary
General Meeting of shareholders.
Alternative performance measures (APM)
AkzoNobel uses APM adjustments to the IFRS measures
to provide supplementary information on the r
eporting
of the underlying developments of the business. APM
include, but are not limited to, adjusted operating income,
(adjusted) EBITDA, adjusted earnings per share, ROS and
ROI.
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 values of
safety
, integrity and sustainability to life and shows what
they mean in practice.
Capital expenditures
The total of investments in property
, plant and equipment
and investments in intangible assets.
Carbon footprint
The total amount of greenhouse gas (GHG) emissions
caused during a defined period of a product’
s lifecycle.
It is expressed in terms of the amount of carbon dioxide
equivalents CO
2
(e) emitted. Greenhouse gases include
CO
2
, CO, CH
4
, N
2
O and HFCs, which have a global
warming impact. We also include the impact of VOCs in
our targets.
Circular economy
An economic system which is restorative and r
egenerative
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
Defines our core values and how we work. It incorporates
fundamental principles on issues such as business
integrity
, labor relations, human rights, health, safety
,
environment and security and community involvement.
Comprehensive income
The change in equity during a period resulting fr
om
transactions and other events, other than those changes
resulting fr
om transactions with shareholders in their
capacity as shareholders.
Constant currencies
Calculations exclude the impact of changes in foreign
exchange rates.
Earnings per share
Net income attributable to shareholders divided by the
weighted average number of common shares outstanding
during the year
. Adjusted earnings per share are the
basic earnings per share, excluding identified items and
taxes thereon.
EBITDA
Operating income excluding depreciation and amortization.
EMEA
Europe, Middle East and Africa.
Emissions and waste
We r
eport emissions to air
, land and water for those
substances which may have an impact on people or the
environment: CO
2
, NOx and SOx, VOCs, hazardous and
non-hazardous waste. Definitions ar
e in the Sustainability
statements.
HSE&S
Health, safety
, environment and security
.
Identified items
Identified items are special charges and benefits, r
esults
on acquisitions and divestments, major restructuring and
impairment charges and charges related to major legal,
environmental and tax cases.
Invested capital
T
otal assets (excluding cash and cash equivalents,
short-term investments, investments in associates, the
receivable fr
om pension funds in an asset position, assets
held for sale) less current income tax payable, deferr
ed tax
liabilities and trade and other payables.
Leverage ratio
Calculated as net debt divided by EBITDA, which is
calculated as the total of the last 12 months.
Loss of primary containment
A loss of primary containment is an unplanned release
of material, product, raw material or energy to the
environment (including those r
esulting from human error).
Loss of primary containment incidents are divided into
three categories, dependent on severity
, from small,
on-site spill/near misses up to Level 1 – a significant
escape.
Lost time injury rate (L
TIR)
The number of lost time injuries per 200,000 hours
worked. Full definitions are in the Sustainability statements.
Net debt
Defined as long-term borrowings plus short-term
borrowings less cash, cash equivalents and short-term
investments.
North America
Includes Mexico.
North Asia
Includes, among others, China, Japan and South Korea.
Operating income
Operating income is defined in accordance with IFRS and
includes the relevant identified items. Adjusted operating
income excludes identified items.
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.
OPI margin
Operating income as a percentage of r
evenue.
GLOSSARY
151
AkzoNobel Report 2021
R&D
Research and development.
Regulatory action
We have defined four categories of r
egulatory action, from
self-reported issues (Level 1) to formal legal notifications
with fines above €100,000 (Level 4).
Relevant markets
Segments and regions of the paints and coatings industry
from which AkzoNobel generates r
evenue.
ROI (return on investment)
ROI is adjusted operating income of the last 12 months as
a percentage of average invested capital.
ROS (return on sales)
ROS is adjusted operating income as a percentage of
revenue.
Safety incident
We have defined thr
ee levels of safety incidents. The
highest category – Level 3 – involves: any loss of life; more
than five severe injuries; envir
onmental, asset or business
damage totaling more than €25 million; inability to maintain
business; or serious reputational damage to AkzoNobel
stakeholders.
Shareholders’ equity per shar
e
Akzo Nobel N.V
. shareholders’ equity divided by the
number of common shares outstanding at year
-end.
South America
Excludes Mexico.
South Asia Pacific
Includes South East Asia and Asia Pacific.
T
otal reportable rate of injuries (TRR)
The number of injuries per 200,000 hours worked. Full
definitions are in the Sustainability statements.
TSR (total shareholder r
etur
n)
Compares the performance of dif
ferent companies’
stocks and shares over time. Combines shar
e price
appreciation and dividends paid to show the total r
etur
n to
shareholders. The r
elative TSR position reflects the market
perception of overall performance r
elative to a reference
group.
VOC
V
olatile organic compounds.
152
AkzoNobel Report 2021
INDEX
2021
results
at
a
glance
2
Acquisitions
7, 100
AkzoNobel Cares
37
Assurance report of the independent auditor
144
Audit Committee
62
Automotive and Specialty Coatings
20
Behaviors
13,
36
Board of Management
56, 88
Borrowings
100, 124, 134
Carbon footprint/cradle-to-grave
40, 48, 53
carbon footprint
Case studies
10, 19, 46, 54, 79
Cash, cash flow and net debt
6, 96, 120, 124, 134
CEO statement
4
Circular economy
42
Climate
44, 46, 48
Code of Conduct
45, 78
Company financial statements
130
Company purpose
Inside cover
, 1, 4, 13
Compliance
69, 76
Consolidated balance sheet
92
Consolidated statement of cash flows
93
Consolidated statement of changes in equity
94
Consolidated statement of comprehensive income
91
Consolidated statement of income
91
Core values
13, 45
Corporate governance
66
COVID-19
4, 9, 37, 44, 58
Decorative Paints
16-18
Dividend proposal
8, 62, 117
Earnings per share
8, 98, 111
Eco-premium solutions
2, 31, 47, 53
Emissions
41, 48
Employees
7, 32, 38
Energy
8, 31, 40, 41
Executive Committee
56
Financial information
90
Financial instruments
99
Financial summary
146
Grow & Deliver
13
How we created value
6
Human rights
38
Independent auditor’
s report
137
Industrial Coatings
22
Innovation 15
Intangible assets
98, 112, 131
Internal controls
57, 62, 73
Invested capital
6
“Let’
s Colour”
19, 37
Marine and Protective Coatings
24
Net debt
6, 124, 134
Nomination Committee
64
Operating income
7
Outlook
9
Paint the Future
14, 15, 16, 54
People. Planet. Paint.
Inside cover
, 1, 5, 30
Pensions
118
Performance Coatings
20-27
Powder Coatings
26
Product stewar
dship
47
Profit allocation
62, 136
Property
, plant and equipment
51, 98, 113
Provisions
99, 118, 122
Raw materials
4, 39, 40, 42
Regional statistics
149
Remuneration
80, 126
Remuneration Committee
64
Report of the Supervisory Board
60
Resource pr
oductivity
31, 41
Return on investment
3, 6
Return on sales
3, 6
Risk management
74
Safety
35
Segment information
101
Shareholders’ equity
132
Strategy
13
Supervisory Board
59, 60, 69
Supervisory Board Chair’
s statement
58
Supplier
sustainability
44
Sustainable Development Goals (SDGs)
31
Sustainable solutions
2, 31, 47
Sustainability statements
30
T
alent management
61
W
aste
8, 31, 41, 42
W
ater
8, 42, 43, 44
Winning together: 15 by 20
58, 84
153
AkzoNobel Report 2021
Reporting principles
APPENDIX
People
Organizational health score
The overall percentile score is used in the Report 2021. In 2019, four quarterly surveys were held with results per quarter
. For the 2019 annual report, the Q4 score was reported.
Since 2020, we’ve been conducting two quarterly surveys, with results in Q1 and Q3. For the annual report, the Q3 scor
es are now reported.
Female executives
Percentage of women at executive level, a pay grade level at AkzoNobel, which excludes the Executive Committee.
T
otal reportable injury rate
The total r
eportable injury rate (TRR) is the number of injuries resulting in a medical treatment case, restricted work case, lost time case or fatality
, per 200,000 hours worked. T
empo-
rary workers are reported with employees since day-to-day management is by AkzoNobel. In line with OSHA guidelines.
Lost time injury rate employees/temporary
workers
The lost time injury rate (L
TIR) is the number of injuries resulting in a lost time case per 200,000 hours worked. T
emporary workers are reported together with employees since day-to-
day management is by AkzoNobel.
Life-changing injuries
Life-changing injuries are injuries to employees, contractors and members of the public that are considered life-changing. This includes (but is not limited to): coma, some level of
permanent disability (including loss of sight or hearing), organ removal, the requir
ement for ongoing multiple surgeries, lingering trauma, any amputation of digits or limbs, skin grafts,
the insertion of plates, pins or screws.
Occupational illness rate employees
The total number of r
eportable occupational illness cases for the reporting period per 200,000 hours worked. This parameter is reportable for employees.
Occupational illness is defined as any abnormal condition or disorder other than one resulting dir
ectly from an accident caused by
, or mainly caused by
, work-related factors over a
period of time rather than an instantaneous event and recognized during the reporting year
, as part of national schemes or regulations.
Loss of primary containment Level 1 and 2
A loss of primary containment (LOPC) fr
om a process or uncontrolled or unsafe release fr
om a pressure relief device (PRD) that exceeds the Level 1 chemical r
elease threshold.
Level 1 includes on-site injury to employees, contractors or members of the general public which leads to severe injury; release that is observable or has impact of
f-site and can give
rise to public concern and local media attention; permit violation (significant regulatory action as a result of LOPC Level 1 release); damage (including financial and quality of life) to local
stakeholders (such as local suppliers or neighbors), or exceeding €25,000 asset damage.
Level 2 includes reportable injury
, medical treatment injury
, restricted work injury
, or lost time injury not resulting in severe injury; r
elease almost certainly contained on site, not readily
controlled, with no observable impact off-site; external complaint which affects company r
eputation for some employees, or exceeding €2,500 asset damage.
Process safety event - Level 3
Covers all losses of primary containment and near misses which are not Level 1 or 2. A Level 3 PSE is triggered by the following types of events:
• LOPC below threshold conditions of PSE Level 1 and 2 according to the categorization flowchart
•
Safe operating limit excursions: process parameter deviation that exceeds the safe operating limit applicable to the phase operation
• Primary containment inspection or testing results outside documented acceptable limits
• T
rip or safety instrumented system (SIS) activation
• Other process safety near misses
Regulatory actions Level 4
Formal legal notification with fines above €100,000 (Level 4).
Security incident Level 3
Security incidents are divided into three categories, dependent on severity
, from small up to Level 3 – a significant security incident. They are also separated into three incident catego-
ry types (crime against a person, property crime and financial crime). This is the number of security incidents Level 3 in a reporting entity during the r
eporting period resulting from:
1.
Crime against person/organization (CAPO): Kidnapping, robbery
, malicious wounding, murder
, other fatality resulting from criminal activity
, multiple victims >5
2.
Property crime (PC): Hijacking, sabotage, terrorism or any of the above, with loss or damage to pr
operty >€10,000
3.Financial crime (FC): >€10,000
AkzoNobel Cares (number of projects and
number of community people trained)
Social impact programs, consisting of four initiatives: “Let’
s Colour”, SOS Children’
s Villages, Education Fund, and local AkzoNobel CSR projects (e.g. CSR in India).
AkzoNobel Cares projects ar
e defined as a separate activity benefiting people in communities, involving AkzoNobel employees or funding, reported to the central AkzoNobel Cares
team quarterly
.
Community people trained are people with vulnerable backgrounds, including young people at risk, who ar
e trained in painting, professional and life/soft skills as a result of pr
oject/
activity/participation delivered by AkzoNobel employees or through financial donations.
154
AkzoNobel Report 2021
Planet
Renewable energy
% renewable energy and electricity consumed. Renewable energy is energy (electricity or heat) that is generated from inexhaustible resour
ces; e.g. wind, solar
, hydro, biomass and
tidal. Energy is expressed as “primary” energy
, or fuel equivalents. Expressed as the share of r
enewable energy AkzoNobel uses in its own operations relative to the total energy used.
We use an average efficiency factor of 40%.
Energy use
The energy consumption of AkzoNobel in absolute measures (1,000 TJ) and per ton of production.
V
olatile organic compounds
Volatile organic compound emissions in absolute measur
es (kilotons) and kg per ton of production. Note: In 2018 and 2019 we further improved our VOC modeling. As the emissions
are strongly dependent on solvent type, pr
ocess, use of an abatement system and product composition, we developed and implemented a tool incorporating all these factors.
Direct CO
2
(e) emissions (Scope 1 and 2)
The total greenhouse gas emissions from pr
ocesses and combustion at our facilities and indirect emissions from purchased energy in absolute measur
es (Mt CO
2
e) and kg CO
2
e per
ton of production. Emissions from transport in own operations is very limited and ther
efore not material compared with other Scope 1 and 2 emissions. As transport is not material to
Scope 1 and 2, these scopes exclude transport. We measure the six main gr
eenhouse gases defined in the Greenhouse Gas Protocol.
T
otal waste
T
otal waste in absolute measures (kilotons) and kg per ton of production. W
aste is reported as total weight, not dry weight.
• Reusable waste
• Non-reusable waste
Waste is any material arising fr
om our routine operations which is not incorporated into final products and not dir
ectly released to atmosphere or direct to surface water
.
Non-reusable waste is waste which is not used for resour
ce recovery
, recycling, reclamation, direct r
e-use or alternative uses, e.g. composting.
Percentage circular
The amount of materials reused by AkzoNobel and partners (reusable waste and by-products) divided by the total waste plus by-pr
oducts.
Hazardous waste
T
otal hazardous waste to landfill in absolute measures (kilotons) and kg per ton of pr
oduction.
Fresh water use and consumption
Fresh water use and consumption as absolute measure (million m
3
) and m
3
per ton of production.
Fresh water consumption is the fresh water use minus cooling water and water in pr
oduct. Cooling water is excluded as it is extracted and returned from the same basin, only with an
adjusted temperature (chemically unchanged).
Suppliers signed Business Partner Code of
Conduct (% of spend)
% product related (PR) spend (measur
ed in euro value) with suppliers (raw materials and packaging) who have signed our Business Partner Code of Conduct.
% non-product related (NPR) spend (measur
ed in euro value) with suppliers who have signed our Business Partner Code of Conduct.
Our Business Partner Code of Conduct states that we want to do business with partners who endorse our ethical values and our social and environmental standards. W
e therefore
require suppliers to sign our Business Partner Code of Conduct, which is based on the AkzoNobel Code of Conduct.
Sustainability risk analysis
Suppliers participating in sustainability
program
Suppliers in sustainability program – in line
with our expectations
Suppliers in sustainability program – under
development
Number of suppliers who have been identified as a risk to AkzoNobel due to their spend level (>€250,000), country risk (sensitive and emerging countries using EcoV
adis’ country risk
profile) and category risk (baseline).
Number of suppliers who performed an EcoV
adis online assessment or TfS onsite audit (in % of baseline).
Number of suppliers who meet our expectations in the EcoV
adis assessment (in % of baseline): 45 total score and human right and labor score of 50.
T
ogether for Sustainability (TfS) is a chemical industry initiative designed to improve the sustainability practices in their supply chains and of which AkzoNobel has been a member
since 2013. The assessments (performed by EcoV
adis) and audits are based on established global principles, for example the UN Global Compact, Responsible Care charter
.
Paint
Sustainable solutions
A measure of the sustainability of our products, which have customer/consumer sustainability benefits, as a percentage of our r
evenue. Reporting period for sustainable solutions is
November
-October
A sustainable solution is a product which has a benefit in one or more sustainability criteria (r
educed carbon and energy
, health and well-being, less waste, reduced/reused and
renewed material use, and longer
-lasting performance). A sustainable solution does not adversely affect any of these sustainability criteria thr
oughout the value chain.
Cradle-to-grave carbon footprint
(Scope 1, 2, and 3)
Our CO
2
(e) footprint in million tons of CO
2
(e) including Scope 1 (own operations), Scope 2 (energy use), Scope 3 (upstream) and Scope 3 (downstream). Reporting period is October
-
September
. The footprint includes the six main greenhouse gases defined in the Greenhouse Gas Protocol.
Upstream: category 1 – purchased goods and services.
Downstream: category 10 – processing of sold pr
oducts; category 11 – use of sold products; category 12 – end-of-life treatment of sold pr
oducts.
The climate change impact of VOC emissions is included in the cradle-to-grave carbon footprint due to the impact VOC emissions have within the paints and coatings industry
.
The complete reporting principles can be found on our website.
155
AkzoNobel Report 2021
|
Appendix
Ownership %
1
Argentina
Akzo Nobel Argentina S.A.
Buenos Aires
100.000
Australia
Akzo Nobel Coatings (Holdings) Pty Limited
Sunshine
100.000
Akzo Nobel Pty Limited
Sunshine
100.000
Austria
Akzo Nobel Coatings GmbH
Salzburg
100.000
Akzo Nobel Holding Österreich GmbH
Vienna
100.000
Belgium
Akzo Nobel Paints Belgium NV
Vilvoorde
100.000
Auto Body Services CV (ABS)
Vilvoorde
84.615
Cleming BV
Vilvoorde
100.000
International Paint (Belgium) NV
Vilvoorde
100.000
Bolivia
Pinturas Coral De Bolívia Ltda
Santa Cruz de la Sierra
100.000
Botswana
Dulux (Botswana) (Pty) Limited
Gaborone
100.000
Brazil
Akzo Nobel Ltda
Barueri
100.000
Canada
Akzo Nobel Coatings Ltd
Ontario
100.000
Akzo Nobel Wood Coatings Ltd
Port Hope
100.000
Cayman Islands
Ichem Reinsurance Company Limited
George T
own
100.000
ICI International Investments
George T
own
100.000
Chile
International Paint (Akzo Nobel Chile) Ltda
Santiago
100.000
China
Akzo Nobel (China) Investment Co., Ltd.
Shanghai
100.000
Akzo Nobel Car Refinishes (Suzhou) Company Limited
Suzhou 100.000
Akzo Nobel Chang Cheng Coatings (Guangdong) Co., Ltd.
Shenzhen 100.000
Akzo Nobel Coatings (Dongguan) Co., Ltd.
Dongguan
100.000
Akzo Nobel Coatings (Jiaxing) Co., Ltd.
Jiashan
100.000
Akzo Nobel Coatings (Tianjin) Co., Ltd.
Tianjin
100.000
Akzo Nobel Decorative Coatings (China) Ltd (in liquidation)
Guangzhou 100.000
Akzo Nobel Decorative Coatings (Langfang) Co., Ltd.
Langfang 100.000
Akzo Nobel International Paint (Suzhou) Co., Ltd.
Suzhou 100.000
Akzo Nobel Paints (Chengdu) Co., Ltd.
Chengdu
100.000
Akzo Nobel Paints (Guangzhou) Co., Ltd.
Guangzhou
90.000
Akzo Nobel Paints (Shanghai) Co., Ltd.
Shanghai
100.000
Akzo Nobel Performance Coatings (Changzhou) Co., Ltd.
Changzhou 100.000
Akzo Nobel Performance Coatings (Shanghai) Co., Ltd.
Shanghai 100.000
Akzo Nobel Powder Coatings (Chengdu) Co., Ltd.
Chengdu 100.000
Akzo Nobel Powder Coatings (Langfang) Co., Ltd.
Langfang 100.000
Akzo Nobel Powder Coatings (Ningbo) Co., Ltd.
Ningbo
100.000
Akzo Nobel Powder Coatings (Wuhan) Co., Ltd W
uhan
100.000
International Paint of Shanghai Co., Ltd.
Shanghai
51.000
Colombia
Interquim S.A.
Medellin
100.000
Czech Republic
Akzo Nobel Coatings CZ, a.s.
Prague
100.000
Denmark
Akzo Nobel Deco A/S
Copenhagen
100.000
International Farvefabrik A/S
Herlev
100.000
Ecuador
Interquimec S.A.
Quito
100.000
Egypt
Akzo Nobel Egypt LLC
6th of October City
100.000
Akzo Nobel Powder Coatings S.A.E.
Giza
100.000
Estonia
Akzo Nobel Baltics AS
T
allinn
100.000
Eswatini
Dulux Swaziland (Pty) Limited
Matsapha
100.000
Finland
Oy International Paint (Finland) AB
V
antaa
100.000
France
Akzo Nobel Decorative Paints France S.A.
Thiverny
99.975
Akzo Nobel Distribution SAS
Corbas
99.975
Akzo Nobel SAS
Montataire
100.000
Mapaero SAS
Pamiers
100.000
SAS BOUCHER
Pamiers
100.000
Germany
Akzo Nobel Coatings GmbH
Stuttgart
100.000
Akzo Nobel Deco GmbH
Wunstorf
100.000
Akzo Nobel GmbH
Cologne
100.000
Akzo Nobel Hilden GmbH
Hilden
100.000
Akzo Nobel Powder Coatings GmbH
Reutlingen
100.000
International Farbenwerke GmbH
Börnsen
100.000
Mapaero GmbH
Norderstedt
100.000
Schramm Coatings GmbH
Offenbach am Main
100.000
Schramm Holding GmbH
Offenbach am Main
100.000
Greece
Akzo Nobel Anonymous Company of Paints and Related Products
Athens 100.000
V
arnishes and Paints Industry Vivechrom Dr
. Stefanos D. Pateras S.A.
Mandra Attica
79.184
Guernsey
Impkemix T
rustee Limited
St. Peter Port
100.000
Hong Kong SAR
2
Akzo Nobel Chang Cheng Limited
Hong Kong
100.000
Akzo Nobel HK (Holdings) Limited
Hong Kong
100.000
Akzo Nobel Paints Limited
Hong Kong
100.000
International Paint (Hong Kong) Limited
Hong Kong
100.000
Mapaero HK Limited
Hong Kong
100.000
Schramm Hong Kong Co., Limited
Hong Kong
100.000
Hungary
Akzo Nobel Coatings Zrt
Budapest
100.000
India
Akzo Nobel Global Business Services LLP
Pune
100.000
Akzo Nobel India Limited
Kolkata
74.756
ICI India Research & T
echnology Centre
Mumbai
18.690
Indonesia
PT Akzo Nobel Car Refinishes Indonesia
Jakarta
100.000
PT Akzo Nobel Wood Finishes and Adhesives Indonesia
Jakarta 100.000
PT ICI Indonesia
Jakarta
100.000
PT ICI Paints Indonesia
Jakarta
55.000
PT International Paint Indonesia
Jakarta
100.000
Ireland
Akzo Nobel (CR9) Limited
Dublin
100.000
Akzo Nobel Car Refinishes (Ireland) Limited
Dublin
100.000
Dulux Paints Ireland Limited
Cork
100.000
ICI Fertilisers (Ireland) Limited
Cork
100.000
ICI Ireland Limited
Cork
100.000
Italy
Akzo Nobel Coatings S.P
.A.
Cesano Boscone (MI) 100.000
Japan
Akzo Nobel Coatings K.K.
T
okyo
100.000
Kenya
Akzo Nobel Kenya Limited
Nairobi
100.000
Korea (South)
Akzo Nobel Industrial Coatings Korea Ltd
Ansan
100.000
Akzo Nobel Powder Coatings Korea Co., Limited
Ansan 100.000
International Paint (Korea) Ltd
Busan
60.000
International Paint (Research) Ltd
Geoje City
100.000
Kuwait
International Warba Coatings Paint Mfg Co. W
.L.L.
Kuwait 49.000
Latvia
Akzo Nobel Baltics SIA
Riga
100.000
Lithuania
Akzo Nobel Baltics, UAB
Vilnius
100.000
Malaysia
Akzo Nobel Adhesives Sdn Bhd
Selangor
100.000
Akzo Nobel Industrial Coatings Sdn Bhd
Kuala Lumpur
100.000
Akzo Nobel Paints (Malaysia) Sdn Bhd
Kuala Lumpur
59.949
Akzo Nobel Paints Marketing Sdn Bhd
Selangor
59.949
Colourland Paints Sdn Bhd
Selangor
59.949
International Paint Sdn Bhd
Johor Darul T
akzim
70.000
Mauritius
Coloris Ltd
Les Pailles
100.000
Mauvilac Industries Limited
Les Pailles
100.000
Mexico
Akzo Nobel Performance Coatings S.A. de C.V Mexico City
100.000
Akzo Nobel Inda S.A. de C.V
.
Monterrrey
100.000
Compania Mexicana de Pinturas International S.A. de .C.V
.
Mexico City
100.000
Morocco
Akzo Nobel Coatings S.A.
Casablanca
59.628
Akzo Nobel Performance Coatings Morocco S.A.R.L.
Casablanca 100.000
Distral Maroc S.A.
Rabat
59.608
Sadvel S.A.
Casablanca
59.625
Myanmar
Akzo Nobel (M) Co. Ltd.
Y
angon
100.000
Appendix: List of affiliated legal entities and
corporations
List at December 31, 2021, of affiliated legal
entities and corporations in conformity with
articles 379 and 414, Book 2 of the Dutch
Civil Code belonging to Akzo Nobel N.V
.,
Amsterdam
List of consolidated legal entities and
corporations
156
AkzoNobel Report 2021
|
Appendix
Netherlands
3
*Akzo Nobel (C.) Holdings B.V
.
Woerden
100.000
Akzo Nobel Assurantie N.V
.
Arnhem
100.000
*Akzo Nobel Car Refinishes B.V
.
Sassenheim
100.000
*AKZO Nobel Coatings B.V
.
Sassenheim
100.000
Akzo Nobel Coatings Chile Holding I B.V
.
Amsterdam
100.000
Akzo Nobel Coatings Chile Holding II B.V
.
Amsterdam
100.000
*Akzo Nobel Coatings International B.V
.
Ar
nhem
100.000
*AKZO Nobel Decorative Coatings B.V
.
Sassenheim
100.000
*AKZO Nobel Decorative Coatings T
urkey B.V
.
Arnhem
100.000
*Akzo Nobel Insurance Management B.V
.
Arnhem
100.000
*Akzo Nobel Management B.V
.
Arnhem
100.000
*Akzo Nobel Nederland B.V
.
Arnhem
100.000
*Akzo Nobel Powder Coatings B.V
.
Sassenheim
100.000
*Akzo Nobel Sino Coatings B.V
.
Sassenheim
100.000
*Akzo Nobel Sourcing B.V
.
Ar
nhem
100.000
*B.V
. Alabastine (Holland)
Ammerzoden
100.000
*Carelaa B.V
.
Arnhem
100.000
*De Sikkens Grossier B.V
.
Wormerveer
100.000
*ICI Omicron B.V
.
Rotterdam
100.000
ICI Theta B.V
.
Rotterdam
100.000
*International Paint (Nederland) B.V
.
Rhoon
100.000
*Panter B.V
.
Hoofddorp
100.000
*Remmert Holland B.V
.
Arnhem
100.000
*Sikkens V
erkoop B.V
.
Sassenheim
100.000
*Sikkens V
erkoop Nederland B.V
.
Weert
100.000
*Syncoflex B.V
.
Arnhem
100.000
New Zealand
Akzo Nobel Coatings Ltd
Avondale
100.000
Norway
Akzo Nobel Coatings AS
Oslo
100.000
Oman
Akzo Nobel Oman SAOC
Muscat
50.000
Pakistan
Akzo Nobel Pakistan Limited
Karachi
98.030
Panama
International Paint (Panama) Inc.
Mercantil
100.000
Papua New Guinea
Akzo Nobel Limited
Geheru
100.000
Peru
Akzo Nobel Peru S.A.C.
Lima
100.000
Poland
Akzo Nobel Car Refinishes Polska Sp. z o.o.
W
arsaw
100.000
Akzo Nobel Decorative Paints Sp. z o.o.
Warsaw
100.000
Akzo Nobel Industrial Coatings Sp. z o.o.
Kostrzyn Wlkp.
100.000
International Paint Sp. z o.o.
Gdansk
100.000
Portugal
Akzo Nobel Tintas para Automoveis Lda
Carregado
100.000
International Paint Ibéria, Lda
Setúbal
100.000
Tintas T
itan, S.A.
Maia
100.000
Qatar
Akzo Nobel LLC
Doha
100.000
Romania
Fabryo Corporation S.r
.l.
Popesti Leordeni
100.000
Russian Federation
Akzo Nobel Dekor CJSC
Balashikha
100.000
International Paint (East Russia) LLC
Vladivostok
51.000
OOO “Akzo Nobel Car Refinishes”
Moscow
100.000
OOO “Akzo Nobel Coatings”
Moscow
100.000
OOO “Akzo Nobel Lakokraska”
Orehovo-Zuevo
100.000
Saudi Arabia
Akzo Nobel Saudi Arabia Ltd
Dammam
60.000
Singapore
Akzo Nobel Adhesives Pte Ltd
Singapore
100.000
Akzo Nobel Car Refinishes (Singapore) Pte Ltd
Singapore
100.000
Akzo Nobel Paints (Singapore) Pte Ltd
Singapore
100.000
International Paint Singapore Pte Ltd
Singapor
e
100.000
Slovenia
Akzo Nobel Adhezivi d.o.o.
Ljubljana
100.000
South Africa
Akzo Nobel Powder Coatings South Africa (Pty) Ltd
Alberton 100.000
Akzo Nobel South Africa (Pty) Ltd
Johannesburg
100.000
ICI Dulux (Pty) Limited
Johannesburg
100.000
P J A (South Africa) (Pty) Ltd
Alberton
100.000
Spain
Akzo Nobel Coatings, S.L.U.
Barcelona
100.000
INDUCAN DE PINTURAS, S.L.
Las Palmas de Gran Canaria
100.000
Industrias Titan, S.A.
Barcelona
100.000
TIT
AN SERVICIO DE A
TENCIÓN AL CLIENTE, S.L.
Madrid 100.000
Sri Lanka
Akzo Nobel Paints Lanka (Pvt) Ltd
Colombo
40.000
Sweden
Akzo Nobel Adhesives AB
Stockholm
100.000
Akzo Nobel Car Refinishes AB
T
yresoe
100.000
Akzo Nobel Decorative Coatings AB
Malmö
100.000
Akzo Nobel Industrial Coatings AB
Malmö
100.000
Akzo Nobel Industrial Finishes AB
Gamleby
100.000
Akzo Nobel Sweden Finance AB
Göteborg
100.000
International Färg AB
Göteborg
100.000
Switzerland
Akzo Nobel Car Refinishes AG
Bäretswil
100.000
Akzo Nobel Coatings AG
Neuenkirch
100.000
T
aiwan
Akzo Nobel Paints T
aiwan Limited
Chung Li
100.000
International Paint (T
aiwan) Limited
Kaoshiung
100.000
Thailand
Akzo Nobel Coatings Limited
Nakornprathom
100.000
Akzo Nobel Paints (Thailand) Limited
Amphur Pakkred
100.000
Schramm SSCP (Thailand) Co., Ltd.
Rayong
100.000
T
unisia
Société T
unisienne de Peintures Astral S.A.
Megrine
60.000
T
urkey
Akzo Nobel Boya Sanayi ve Ticaret A.S.
Izmir
100.000
Akzo Nobel Kemipol A.S.
Izmir
51.000
Akzo Nobel Server Boya Sanayi ve Ticaret A.S.
T
uzla
55.000
International Paint Pazarlama Limited Sirketi
Istanbul
100.000
Marshall Boya V
e Vernik Sanayii A.S.
Gebze
92.974
T
ekyar T
eknik Y
ardim A.S.
Dilovasi
100.000
Uganda
Akzo Nobel Uganda Limited
Kampala
100.000
Ukraine
LLC “Akzo Nobel Holding Ukraine”
Kiev
100.000
United Arab Emirates
Akzo Nobel Decorative Paints L.L.C.
Dubai
49.000
Akzo Nobel ME Coatings FZE
Jebel Ali Free Zone
100.000
Akzo Nobel UAE Paints L.L.C.
Dubai
48.979
United Kingdom
Akzo Nobel (CPS) Pension T
rustee Limited
Slough
100.000
Akzo Nobel (NASH) Limited
Slough
100.000
Akzo Nobel (NSC) Limited
Slough
99.902
Akzo Nobel Aerospace Coatings Limited
Slough
100.000
Akzo Nobel CIF Nominees Limited
Slough
100.000
Akzo Nobel Coatings (BLD) Limited
Slough
100.000
Akzo Nobel Coatings Limited
Slough
100.000
Akzo Nobel Decorative Coatings Limited
Slough
100.000
Akzo Nobel Finance Limited
Slough
100.000
Akzo Nobel Finance (2) Limited
Slough
100.000
Akzo Nobel Holdings Limited
Slough
100.000
Akzo Nobel ICI Holdings
Slough
100.000
Akzo Nobel Industrial Coatings Limited
Slough
100.000
Akzo Nobel Limited
Slough
100.000
Akzo Nobel Packaging Coatings Limited
Slough
100.000
Akzo Nobel Powder Coatings Limited
Slough
100.000
Akzo Nobel Properties Limited
Slough
100.000
Akzo Nobel UK Ltd
Slough
100.000
Cambrian Decorator Supplies (C.D.S) Limited
Slough
100.000
Cuprinol Limited
Slough
100.000
Deeside Coatings Limited
Slough
100.000
Dulux Limited
Slough
100.000
Ergon Investments International Limited
Slough
100.000
Ergon Investments UK Limited
Slough
100.000
Flexcrete T
echnologies Limited
Slough
100.000
Hammerite Products Limited
Slough
100.000
Holywell-Halkyn Mining and T
unnel Company Limited
Slough 96.955
Horseferry Investments Limited (in liquidation)
Slough
100.000
I C I Finance Limited
Slough
100.000
ICI Chemicals & Polymers Limited
Slough
100.000
ICI International Limited (in liquidation)
Slough
100.000
ICI North America Limited (in liquidation)
Slough
100.000
ICI Paints (T
rade Contract) Limited
Slough
100.000
Imperial Chemical Industries Limited
Slough
100.000
International Coatings Limited
Slough
100.000
International Paint Limited
Slough
100.000
International Paints (Holdings) Limited
Slough
100.000
Intex Y
ar
ns (Manufacturing) Limited
Slough
100.000
J.P
. Mcdougall & Co. Limited
Slough
100.000
Mapaero UK Ltd
Crawley
100.000
Mortar Investments International Limited
Slough
100.000
Mortar Investments UK Limited
Slough
100.000
Polycell Products Limited
Slough
100.000
Resinous Chemicals Limited
Slough
100.000
Sales Support Group Limited
Slough
100.000
Scottish Agricultural Industries Limited
Edinburgh
100.000
Stevenston Holdings Limited
Edinburgh
100.000
United States of America
Akzo Nobel Coatings Inc.
Delaware
100.000
Akzo Nobel Inc.
Delaware
100.000
Akzo Nobel Services Inc.
Delaware
100.000
Blue Water Marine Paint LLC
Delaware
100.000
Expert Management Inc.
Delaware
100.000
ICI Americas Inc.
Delawar
e
100.000
International Paint LLC
Delaware
100.000
Mapaero Inc.
Delaware
100.000
New Nautical Coatings Inc.
Florida
100.000
Uruguay
Pinturas Inca S.A.
Montevideo
100.000
157
AkzoNobel Report 2021
|
Appendix
Vietnam
Akzo Nobel Coatings Vietnam Ltd
Bien Hoa
100.000
Akzo Nobel Paints Vietnam Ltd
Binh Duong
100.000
Akzo Nobel Powder Coatings (Vietnam) Co., Ltd.
Dong Nai
100.000
Schramm SSCP Hanoi Co., Ltd.
Phuong Lieu Commune
100.000
Zambia
Dulux Zambia (2005) Limited
Lusaka
100.000
Italy
Metlac Holding S.r
.l.
Alessandria
49.000
Metlac S.p.A.
Alessandria
71.666
List of non-consolidated legal entities
and corporations
1
The ownership percentage repr
esents the interest Akzo Nobel N.V
. or one or more
of its majority subsidiaries singly or jointly have in the issued share capital of the
participation. The list does not include entities that are of insignificant relevance in
respect of the insight requir
ed by law, such as dormant companies and companies
in liquidation.
2 Hong Kong Special Administrative Region.
3
With respect to the Dutch legal entities marked *, Akzo Nobel N.V
. has declared in
writing that it accepts joint and several liability for contractual debts of the relevant
companies, in conformity with article 403, Book 2, of the Netherlands Civil Code.