Health, safety and environmental management

Our Akzo Nobel HSE management system drives improvement on various underlying sustainability issues that are important for the future success of the company. Improving on and/or resolving these issues is achieved by the execution of business unit or site specific projects and programs. Overall progress is followed throughout the company by measuring Key Performance Indicators, for which clear targets are set (non-financial KPIs) that are monitored via the direct line of responsibility. The sections below give an overview of the various sustainability issues that we see as important for the success of our company. Each sustainability issue is monitored on a frequent basis by one or more KPIs.

Reliable operations: operational excellence

Operational management systems at our sites are integrated on quality, HSE and security. They are risk-based and follow the Responsible Care® and Coatings Care® principles. Management systems have been set up in line with international standards as ISO-9000, ISO-14001, RC-14001 and OHSAS-18001.

All manufacturing sites are audited by multidisciplinary teams of HSE specialists under the ownership and responsibility of our auditing department. Internal and external compliance is checked and, where necessary, findings and recommendations to improve are brought forward to management to implement.

Audit follow-up reports ensure that our sites implement the improvement actions and operate within safe boundaries. In the last five years, all coatings and chemicals businesses have shown a gradual improvement in their audit scores. The audit scores in Australasia have improved over the last four years and are now completely in line with the audit scores in the other continents where we operate.

The HSE audit intervals are risk-based and are determined by the most recent audit score achieved and by the inherent hazard present on site. All sites are audited at least once in five years. Synergy is achieved in HSE audits by making full use of the information obtained from external insurance audits that are executed at our sites. At the request of our Board, every year a critical review is performed at all sites with a high inherent hazard. The critical review consists of an HSE performance review, a review of audit scores and audit findings and a report on the adequacy of their follow-up by local and BU management. Based on this critical review and feedback with the responsible manager, additional actions are defined if necessary.

The Akzo Nobel corporate directives on the reporting of serious incidents and on emergency management procedures were expanded in 2007: the directives contain clear instructions for direct reporting of incidents to the Corporate Crisis Team.
Reporting is based on a risk matrix which defines four tiers of incidents – including their potential impact on people, business, environment, assets and reputation – and sets clear instruction for direct reporting. The procedure will improve corporate oversight on incidents; moreover it will provide more speed to corrective and preventive action and emergency management. Transparency is also enhanced and learning from incidents improved.

health, safety and environmental performance

		Including OBS					Excluding OBS
PARAMETER		2003	2004	2005	2006		2006	2007	2010
1	Number of serious incidents1	–	–	15	3		3	2	0
2	Lost Time Injury Frequency Rate per million hours (LTI-FR)	2.8	2.0	2.3	2.2		1.9	2.5	0.5
	Total Reportable Rate of injuries per million hours (TRR)	–	–	7.4	6.8		6.2	5.8	2.0
	Number of Lost Time Injuries of Contractors (C-LTI)	–	–	76	72		58	55	–
	Percentage of sites with a TRR < 2.0 during last two years	–	–	–	–		–	51	–
3	Total Illness Absence Rate in % (TIAR)	2.5	2.5	2.4	2.3		2.2	2.2	2.2
	Occupational Illness Frequency Rate per million hours (OIFR)	–	–	0.5	0.4		0.3	0.3	0.2
4	Non Reusable Waste in kilotons (NRW)	95	70	109	112		58	57	75
	Non Reusable Waste as % of produced quantity	–	–	–	–		–	0.45	–
	Hazardous waste as part of NRW in kilotons2	18	11	25	27		16	15	–
	Hazardous waste as wt% of NRW2	19	15	23	24		27	27	–
5	Fresh water consumption in million m3	–	–	298	285		274	254	–
	Fresh water consumption per produced quantity l/t	–	–	–	–		–	20	–
	Chemical Oxygen Demand, discharge to surface (COD) in metric kilotons	3.2	3.7	2.4	2.4		1.8	1.8	1.5
	Chemical Oxygen Demand as wt% of produced quantity	–	–	–	–		–	0.014	–
63	Direct CO2 emissions in million tons	–	–	3.3	3.2		3.1	0.9	–
	Direct CO2 emissions as wt% of produced quantity	–	–	–	–		–	7.1	–
	Indirect CO2 emissions in million tons	–	–	–	–		1.9	2.4	–
	Indirect CO2 emissions as wt% of produced quantity	–	–	–	–		–	19.0	–
	Total CO2 emission in million tons	–	–	–	–		5	3.3	–
	Total CO2 emisison as wt% of produced quantity	–	–	–	–		–	26.1	–
7	Volatile Organic Compounds emission to air (VOC) in metric kilotons	5.8	5.3	5.1	4.9		4.1	3.8	4.0
	Volatile Organic Compounds as wt% of produced quantity	–	–	–	–		–	0.03	–
Serious incidents are incidents involving fatalities or grave bodily injury to our employees or contractors, and incidents involving serious environmental, financial or reputational damage. No target: percentage of hazardous waste is for information only. Target is focused on reduction of non-reusable waste. Figures based on 100 percent emission contribution of joint ventures. Target: 20 percent less CO2 in 2020.

In 2007, two additional process safety standards were issued to support our business to upgrade their existing Management of Change and Process Hazard Analyses procedures, thus further enhancing the safety of our operations. See parameter 1.

Serious incidents are incidents involving fatalities or grave bodily injury to our employees or contractors, and incidents involving serious environmental, financial or reputation damage.

• In 2007, we regret to report the loss of life of one of our employees. A Ukrainian employee from our Decorative Coatings business was fatally injured in a fire. A root cause analysis was performed and corrective and preventive actions have been defined on site, and at business unit and corporate level. Lessons learned were shared throughout the organization.
• The second serious incident occurred at one of our chemicals sites in Houston (U.S). A chemical burn resulted in a ten-day hospital stay, but the employee did not suffer any long term disabilities.

Occupational safety and health management: towards best in class safety performance

The human factor remains an essential element in safety management. In 2006, Akzo Nobel management set an ambitious 2010 target on safety performance. The Total Reportable Rate of Injuries should reduce from 7.4 in 2005 to 2.0 in 2010. In order to reach this target, all of our business units are required to establish a safety roadmap including the implementation of a behavior based safety improvement process – which focuses on reducing unsafe situations and unsafe behaviors and which includes all employees.

Our businesses report on their safety improvement programs and on their agreed upon targets on a quarterly basis – for review by the Board. Although we have improved our overall safety performance in the last year, our business units need to put even more emphasis on: demonstrating safety leadership, empowering our employees, committing line managers and embedding the behavior based safety processes into our day-to-day culture. Only then can our very ambitious target for 2010 be achieved. See parameter 2.

• Out of 439 reporting units (excluding OBS), 51 percent (corresponding with 30 percent of our employees) have achieved this ambitious safety target of a TRR below 2.0 incidents per million working hours – over the last two years.
• The Total Reportable Rate of Injuries (including Lost Time Injuries, excluding OBS) went down significantly by 7 percent. The Lost Time Injury Frequency Rate for our own employees went up 32 percent, caused by an increased number of LTIs in 5 out of 10 BUs.
• Contractor LTIs (excluding OBS) went down in absolute numbers: from 58 to 55.
• This is the last year that Contractor-LTI will be reported as an absolute number only. As of 2008, contractor injuries will be reported as a Total Reportable Rate of Injuries similar to our own employees. At Akzo Nobel we want to ensure that there is an equal focus on safe working conditions, both for Akzo Nobel workers as for contracted workers. All of our businesses have issued clear guidance on managing contractor safety thus aiming to further reduce the number of contractor injuries and to reduce risk to the mechanical integrity of our operations.

Employee health

Besides ensuring a safe working environment, we also put our emphasis on employee health. For five consecutive years, Akzo Nobel businesses have focused on managing and reducing illness absence. Total Illness Absence Rate is considered an outcome of our employees health, vitality and performance and of organizational health aspects, including the quality of management. With a current Total Illness Absence Rate of 2.2 percent in 2007, we have reached our longer term 2010 target. Obviously our sites with higher TIAR levels will continue their efforts for further improvement.

Work related health hazards also exist in the workplace. These hazards need proper management to protect our employees from their potential negative effects. Occupational health management programs are in place and their effectiveness is regularly checked by internal and corporate audits. Since 2005, we have been identifying and reporting on occupational illnesses occurring in Akzo Nobel. Each occupational illness case – identified and analyzed – offers learning potential and improvement opportunities for health and safety at our workplaces. Through our Occupational Health Management programs, we will continue our focus on preventing occupational illness. See parameter 3.

As of 2008, our reporting criteria for occupational illnesses will be expanded, ensuring a validated overview of the type of occupational illnesses in line with the CEFIC definition on occupational illness categories.

For personal health promotion we are in the process of rolling out the so-called “wellness check point”. First pilots have been held and were successful. The program allows employees to prepare their personal health risk assessments and their personal health improvement plans. The results – private and confidential – can be updated with additional medical information, and can be monitored and discussed with medical health providers, if desired by the employee. Only group profiling (minimum 25 employees) can be carried out by authorized personnel to enable departmental health monitoring.

Raw materials efficiency

Raw materials are becoming scarcer these days and require tight control. Effective waste management helps to increase raw materials efficiency in our manufacturing operations, reduces our environmental footprint and reduces cost for the company. The table provides the overview of our Non Reusable Waste streams leaving our sites. As of 2007 waste streams are also reported relative to production volume to allow better trend monitoring. See parameter 4.

In 2007, a drastic reduction has taken place from 112 to 57 kiloton of NRW. This reduction is mainly due to the divestment of our OBS organization. All other businesses together realized a reduction of two percent compared with last year’s results. During the coming year we will expand our efforts in waste reduction by conducting many identified projects at our sites with the help of our sourcing group. The use of the eco-efficiency concept in manufacturing will help to analyze where inefficiencies in our processes can be eliminated and/or improved. Waste reporting will be expanded this year to Total Waste reporting. Both non-reusable and reusable waste will be reported.

Soil and groundwater remediation projects

The company is confronted with substantial costs arising out of environmental laws and regulations, which include obligations to eliminate or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites. In some cases this concerns sites divested in prior years or derelict sites belonging to companies acquired in the past. It is the company’s policy to accrue and charge against earnings environmental
clean-up costs when it is probable that a liability has materialized and an amount is reasonably estimable. Estimates related to provisions for environmental matters are based on the nature and seriousness of the contamination, as well as on the technology required for clean-up.

We have set aside a substantial provision of EUR 228 million for potential clean-up actions of historically contaminated sites owned by Akzo Nobel. The amount is about on the same level as per the end of 2006. Over the last year, we have improved the reporting processes of our liabilities worldwide and continue our efforts to clean up these sites worldwide for safe future use.

Fresh water availability – sustainable water management

With industry accounting for around 22 percent of the world’s total consumption of fresh water, industrial companies have a responsibility to reduce their burden on fresh water supplies – in regions where fresh water is scarce. Moreover, if companies want to ensure the sustainability of their business, they need to ensure sustainable use of fresh water resources. In view of the above, our ambition is to achieve sustainable fresh water management at all our sites in 2015.

Besides intake of fresh water, the emission of contaminated water from our sites to surface waters may also negatively impact fresh water resources and eco-systems. For this reason, we measure quantities of fresh water consumption and the emission of COD in our effluent to surface water and have – if appropriate – programs in place to reduce our impact.

In 2007 we mapped all our sites to determine if they are located in water sensitive areas. We will use this listing to set priorities in the risk assessments of our sustainable water management at our sites. In the sustainable water pilot, 19 sites out of 31 investigated have been determined as having sustainable water use. "See parameter 5.

• The data gathering process in 2007 included the figures of fresh water use from all of our plants, which was not the case in 2006. In spite of the larger number of sites evaluated in 2007, the amount of water used decreased significantly. Compared with 2006 (excluding OBS) we see an overall reduction of seven percent in fresh water consumption.
• Fresh water is a scarce resource. All of our businesses are actively looking for opportunities to further reduce their fresh water use, as well as their discharge of COD emissions to surface water.

In a pilot, Akzo Nobel sites have tested the sustainability of their fresh water use via a risk assessment model. Both the supply side – be it drinkable-, ground- or surface water – as well as the water discharge side is reviewed. This assessment tool reviews sustainable use of fresh water resources and investigates local trends and constraints for future supply. The model will be made available to all Akzo Nobel sites in 2008 to evaluate the sustainability of their water supply. In 2008 and 2009, we will complete the inventory at all Akzo Nobel sites.

carbon footprint

	2006	2007 old accounting rules	2007 new accounting rules	target 2010
Net Energy Consumption Index, NECI (%)	81	821	882	79
Zero/Low Carbon Power Consumption	74	73	73	72
Direct CO2 (million tons)	3.2	3.1	0.92	–
Indirect CO2 (million tons)4	2.0	1.9	2.42	–
Total CO2 (million tons)	5.2	5.0	3.33	–
The NECI is one percent higher than in 2006, which means a lower energy efficiency, a.o. caused by operational problems within Pulp & Paper Chemicals. The benefits of the energy savings with CHPs are no longer part of the reporting (NECI increases with six percent). The direct CO2 emission is substantially lower than last year. Obviously our indirect CO2 emission now comprises the pro rata part of the energy that Akzo Nobel takes from these CHPs. The 1,7 million tons reduction of direct and indirect CO2 is due to the removal from the joint ventures in the new accounting rules. Indirect CO2 emissions are emissions caused by generation of energy (electrical power or heat) purchased from third parties.

Carbon footprint reduction

Since 2005 the company has been reporting on direct CO2 emissions according to the greenhouse gas protocol. Details about our carbon strategy and the related KPIs are given in the section on energy and carbon strategy. In this section we report the direct, indirect and total CO2 emissions from our industrial activities (process and combustion related). We expect that – by analyzing the eco-efficiency and carbon footprint – across our key value chains we will be able to expand the scope of our CO2 reporting in the coming year. To allow better trend monitoring, we have added the relative CO2 emission levels divided by produced quantities. See parameter 6.

As of 2007, we changed the environmental accounting of the non-consolidated Combined Heat and Power plants (CHP) to be in line with the financial reporting. Carbon emissions associated with power and steam sold to third parties (power is sold mainly to the public grid) are not counted in our carbon inventory. This allows us to put a stronger focus on the carbon intensity and the energy efficiency of our chemicals and coatings operations. Due to this, there is an important effect on the Akzo Nobel environmental data. The 2007 corporate parameters are shown in the table on page 45 (the second column gives the data according to the accounting rules until now, in the third column the outcome with the new rules is shown).

Restrict low level ozone creation – clean air around our plants

Volatile Organic Compounds (VOC) emissions may lead to local low level ozone creation, smog formation and associated health problems to nearby society. For this reason we have local measures in place to reduce and contain our VOC emissions. See parameter 7.

• Further improvement in the emissions of Volatile Organic Compounds to air was achieved and the target for 2010 has already been reached. Our businesses contributed to a significant reduction in VOC emissions to air by product innovation and process improvement.
• For our coatings businesses, our emphasis on VOC reduction will shift from reducing emissions of manufacturing installations to further reducing the VOC content of our product mix.

Emissions contributing to acidification

In 2007, our total SOx emissions resulting from the energy used by Akzo Nobel in our sulfuric acid and carbon disulfide plants in Le Moyne, U.S. and Cologne, Germany, amounted to approximately 3,200 tons.

In 2007, total NOx emissions originating from the energy used for Akzo Nobel in our Combined Heat and Power plants present in the Netherlands and Denmark resulted in approximately 220 tons.

Emissions of ozone depleting substances

Akzo Nobel does not make products containing ozone-depleting substances (ODS). Ozone-depleting substances were used for refrigeration purposes, air conditioners and in fire extinguishers. At Akzo Nobel facilities, small amounts of ODS (mostly Freon 22) are still present in older air conditioning equipment and coolers and are continuously being replaced by environmentally-friendly systems. Maintenance is aimed at preventing leakages from for example refrigerant compressors and associated pipes. In recent years, the emissions have been reduced significantly to an almost negligible level.

Growth target in relation to sustainability

Eco-efficient solutions help to create value for our business and for our customers. An initial inventory has shown that 18 percent of our turnover is based on products contributing to more eco-efficient solutions than average along their value chains. These products provide top line growth opportunities because of their improved performance in areas such as raw material use, manufacturing processes and product innovation. We have a target to increase the share of products contributing to eco-efficient solutions to at least 30 percent of turnover in 2015.

By adjusting their product portfolios, our businesses have anticipated on both chemicals legislation (REACH, Global Harmonizing System) and the EU VOC 2010 directive. By doing so, we will comply with emerging regulation well in advance. In the long run, the costs of compliance – for REACH in the area of EUR 120 million – are expected to be more than offset by new business opportunities.