Integrated annual and sustainability report, IIRC Framework, GRI standards, UN Global Compact, TCFD, WBCSD

Solvay SA – Annual report – 31 December 2019

Industry: chemicals

About this report (extract)
In 2019 we took major steps to unleash Solvay’s full potential, adapting our strategy – aligned with our newly unveiled Purpose – and revising our key policies accordingly. These major new steps are outlined in this Annual Integrated Report, along with our continued integrated management progress.

ReInventing Solvay
2019 opened a new chapter in the story of our Group. Ilham Kadri, our new CEO, has been writing its first pages, bringing a fresh viewpoint to a comprehensive review of our strategy and culture. Inspired by our teams, she has worked with them to unveil Solvay’s Purpose – the why that unites us all and gives us a shared direction. This report shares those pages and details how they dovetail with our complex and fast-changing business environment. How they have shaped our new G.R.O.W. strategy and new sustainability program (Solvay ONE Planet), our new operating model (Solvay ONE), our new employee engagement model (Solvay ONE Team), our governance and our sustainable value creation model.

Much was new in 2019, but connecting with stakeholders remains at the heart of our business and fundamental to achieving our Purpose. And this report also tells their stories, how Solvay has met their expectations, and what we need to improve.

Your guide to this report
This is the fourth edition of Solvay’s Annual Integrated Report, based on the International Integrated Reporting Council (IIRC) principles and elements of content. The ReInventing Solvay section takes an integrated thinking approach, putting selected contents into the perspective of our Vision and strategy, linking material information, and looking ahead to the future. It also highlights how we create sustainable value for all stakeholders in the short, medium and long terms.

This edition takes integration further by introducing our Purpose and how it meshes with our model and our medium-term strategy. It also outlines our value chain, giving an overview of Solvay’s core business activities, and strengthens our stakeholder engagement by showcasing our response to their needs.

Links in the ReInventing Solvay section open detailed analyses in the Management Report, including a focus on high materiality issues.

“Our approach to integrated thinking continues to evolve and gain momentum. Our new sustainability targets, Solvay ONE Planet and our new Purpose will support the delivery of superior, long-term value as an integral part of our G.R.O.W. strategy. We continue to welcome initiatives to standardize disclosures by corporates and utilization by investors in relation to Environmental, Social, and Governance as an integral part of value creation – indeed we particularly commend and appreciate the recent Consultation Draft ‘Towards Common Metrics and Consistent Reporting of Sustainable Value Creation’ prepared by the World Economic Forum’s International Business Council.”
Karim Hajjar,
Member of the Executive Committee,
Chief Financial Officer

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The scope of this report
The 2019 Annual Integrated Report provides material information on Solvay for the year ending December 31, 2019. It builds on last year’s report, integrating feedback from our stakeholders, including several recognized bodies such as the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the World Business Council for Sustainable Development (WBCSD).

It is aligned with GRI Standards, the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and the WBCSD’s ESG Disclosure Handbook. Its contents also serve as a progress report on the implementation of the ten principles of the UN Global Compact and the Sustainable Development Goals (SDGs). Unless otherwise stated, all social and environmental indicators are consolidated using the “financial control” approach described in the Greenhouse Gas Protocol Corporate Standard.

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Extra-financial statements (extract 1)

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Extra-financial statements (extract 2)
3. Basis of preparation
Main reporting frameworks used to prepare this Annual Integrated Report

  • Global Reporting Initiative (GRI): the GRI standards are the main reference for Solvay’s sustainability reporting;
  • United Nations Global Compact: the information provided serves as a progress report on implementation of the United Nations Global Compact’s ten principles;
  • International Integrated Reporting Council (IIRC): Solvay adheres to the principles and content elements of Integrated Reporting, as described in the “International Framework” published by the IIRC;
  • 2014/95/EU: Solvay uses the GRI Standards to comply with Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information. The Directive was transposed into Belgian law in September 2017;
  • Sustainability Accounting Standards Board (SASB): Solvay aligns its materiality analysis with the SASB approach to prepare the SASB Materiality Map™. For more details, see the Materiality Analysis section of this chapter.
  • World Business Council for Sustainable Development (WBCSD): Solvay’s report aligns with the WBCSD ESG Disclosure Handbook guidance in terms of process and content selection.

3.1 Task Force on Climate-related Financial Disclosure
The Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) developed voluntary, consistent, climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.

The task force structured its recommendations around four themes that represent key aspects of how organizations operate: governance, strategy, risk management, and metrics and targets.

This section addresses the disclosures, with links to the relevant sections of the Annual Integrated Report, and provides a self-assessment of Solvay’s level of alignment with the TCFD recommendations.

Governance
+ The Charter of Corporate Governance describes how the Board of Directors manages sustainability-related aspects and is available on the Solvay Website. The Board thus devotes at least one meeting per year to an update on trends in global sustainable development issues, including climate change risks and opportunities;
+ A Climate Risks Officer has been appointed at the Executive Committee level. He is in charge of ensuring that climate-related aspects are adequately considered in the Group’s strategy and operations.

Strategy
+ Long-term horizon assumptions are presented in the description of megatrends. See in particular the description of the “Resource constraints and demand for sustainability” megatrend. Medium-term assumptions (in the coming five years) are explained in the description of Solvay’s main markets. Short-term assumptions (one year) are presented in the Group’s outlook;
+ Climate related risks and opportunities were fully reviewed in 2019 and are described in the “Risk Management” chapter. Four main risk categories were analyzed:

– Product-related transition risks (using the Sustainable Portfolio Management methodology)
– Scenario analysis using as reference the International Energy Agency “Sustainable Development” scenario
– Acute physical risks linked to droughts, hurricanes and earthquakes,
– Chronic physical risks linked to water scarcity.

+A scenario analysis was made in 2019, using as reference the International Energy Agency “Sustainable Development” scenario. Impacts on energy and CO2 costs (including impact on raw material costs) and impacts on main markets have been assessed. Four Executive committee members were directly involved in the exercise. According to this exercise, the order of magnitude of favorable impacts on markets outweighs the negative impact on energy and CO2 costs.

-The presentation of the Group’s main risks does not include a differentiation between short-, medium-, and long-term horizons. Quantification of impacts is not disclosed.

Risk management
+ The risk management process, the main risks, and the process used to rank them are described in the “Risk Management” chapter;
+ Analysis of sustainability-related risks and opportunities is done through the Sustainable Portfolio Management methodology, for each product in each application or market, including the climate change transition risk;
+ “Greenhouse gas emissions” (GHG) have been identified as a priority aspect in the Group’s materiality analysis. “Climate transition risks” have been identified as part of the Group’s main risks. Links between main risks and high materiality issues are part of the materiality analysis process. “Climate-related physical risks” have been ranked up to now as “moderate materiality aspects”;
+ The Sustainable Portfolio Management tool is a requirement in key Group processes and in particular in the assessment of capital expenditures projects, Research and Innovation projects, and acquisition and divestiture projects.

Metrics and targets
+ The strategic objectives used to drive sustainable value creation are described in the Solvay scorecard;
+ Greenhouse gas emissions, energy consumption, and Sustainable Portfolio Management metrics and targets are reported in the “Extra-financial statements” chapter. Solvay has pledged to reduce Scope 1 and 2 greenhouse gas emissions by 1 million tons by 2025, compared to 2017, by improving its energy efficiency and energy mix and by investing in clean technologies. The greenhouse gas emissions reduction target is used as a criteria in a “positive incentive loan” signed with a consortium of banks;
+ Greenhouse gas Scope 1, Scope 2 and Scope 3 emissions are fully reported and audited. The scope of emissions reporting is consistent with financial reporting.

3.2 United Nations Sustainable Development Goals
In 2015, the United Nations established a set of goals to end poverty, protect the planet, and ensure prosperity for all. Each of these 17 Sustainable Development Goals (SDGs) includes specific targets to be achieved by 2030. Achieving the SDGs requires efforts by governments, the private sector, civil society, communities, and individuals.

Nine leading chemical companies, including Solvay, and two industry associations formed a dedicated working group, convened by the World Business Council for Sustainable Development (WBCSD). The group took a leadership role in piloting and refining the three-step framework described in WBCSD’s SDG Sector Roadmap Guidelines.

In the context of this exercise, Solvay identified nine SDGs where the Group can have a material impact, positive or negative. The Group then integrated these seven SDGs into its materiality analysis as the official agenda of the “Planet” (Governments and NGOs) stakeholder group.

This preliminary list was reviewed in 2019, within the context of the work to define the Group’s purpose, with an increasing focus on the impacts of products and operations. Solvay’s main impacts can be grouped into three categories: climate, resources, and quality of life. The corresponding list of SDGs on which Solvay can have the most impact, positive or negative, through its operations and the products it sells, is the following:

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Climate, through the Group’s energy consumption and greenhouse gas emissions, but also through products that impact customers’ energy consumption or greenhouse gas emissions.

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Resources, through the Group’s raw materials consumption, water consumption, effluents, emissions, and waste generation, but also through products’ life cycles and end-of-life management.

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• Better Life, through the Group’s management of hazardous materials, people, process and product safety, through social dialogue initiatives, and through its product portfolio.

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