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

Solvay SA – Annual report – 31 December 2018

Industry: chemicals

ABOUT THIS REPORT (extract)
For Solvay, 2018 was a year of extensive transformation and growth. We are now ready to unleash our full potential. Our Annual Integrated Report explains how. It also reflects our progress on an integrated management journey that began six years ago.

Our Annual Integrated Report explains how we are completing the ongoing transformation of our portfolio to deliver sustainable solutions created to play their part in meeting the key challenges of caring for our planet. How we continue to deliver through an ever-sharper focus on our customers,
through innovation, through collaboration with all our stakeholders to create more sustainable value for them. How in 2018, we have worked to shape an organization and a culture to support a Solvay that is now ready to deliver growth as an advanced materials and specialty chemicals company.

Jean-Pierre Clamadieu has substantially transformed the Group since 2011 and initiated the change in its organization and culture. His successor, Ilham Kadri, will begin a new chapter in this company’s history, building on the potential of its portfolio and its employees, and taking it to the next level.

We are convinced that collaboration makes a real difference and we are continuing to progress in building closer relationships with our stakeholders. In this year’s report, we highlight how much we care about collaboration at Solvay, by sharing direct conversations between stakeholders and members of our Executive Committee on a number of central topics. This too is part of delivering on our commitments.

Moving ahead on our integrated management journey

Solvay’s third Annual Integrated Report reflects our progress on an integrated management journey that began in 2012 when the Group introduced an integrated thinking approach to strengthen the connection between its businesses, sustainability and finance. Since then, our business and product portfolio decisions have been made with both economic value creation and sustainability in mind.

“Integrated thinking at Solvay is not about compliance, it is about the way we are doing business every day. Integrated reporting is a highly demanding approach that adds transparency and, for us, it is becoming the new standard. The Integrated Thinking Award we received in 2018 from the Institut du Capitalisme Responsible is a recognition of our progress. We still have more to do.”
Karim Hajjar,
Member of the Executive Committee and Chief Financial Officer

Once again, this report is based on the guiding principles and content elements of Integrated Reporting, as established by the International Integrated Reporting Council (IIRC).

The report details the Group’s new, streamlined business model. It also highlights stakeholder engagement, sharing the outcomes of these interactions.

Links in the Understanding Solvay section lead to the Management Report which provides a more detailed analysis of key topics, including a focus on high materiality issues. Information on the materiality assessment process and other reporting guidelines are illustrated in our Extra-financial statements, within the “basis of preparation” and “materiality analysis” sections.

Driven at the highest level
From day one, the Board of Directors has supported the Group’s integrated management approach, which is fully in line with Solvay’s values and culture. All the Group’s Governance bodies – the Comex, the CEO and the Board – were involved in preparing, reviewing and approving this Annual Integrated Report, which complies with Belgian legislation and governance code, the 2014/95/EU directive on non-financial reporting, IFRS financial reporting rules and <IR> guiding principles and content elements.

The 2018 Annual Integrated Report builds on last year’s report, and integrates feedback from our stakeholders, including several recognized bodies such as the Global Reporting Initiative (GRI) and the World Business Council for Sustainable Development (WBCSD).

This year, for the first time, we also brought together a panel of employees and asked for their feedback on the report, with the aim of making it clearer and more reader-friendly, and meeting their expectations in terms of content.

It is aligned with GRI Standards and the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Its contents also serve as a progress report on implementation of the ten principles of the UN Global Compact and the Sustainable Development Goals (SDGs).

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EXTRA-FINANCIAL STATEMENTS (extract 1)

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3. Basis of preparation (extract)
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 <IR> 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.

This section includes the following topics: Task Force on Climate-related Financial Disclosure, United Nations Sustainable Development Goals, reporting practices, materiality analysis, and stakeholder engagement.

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 provide 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 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 transition risks are described in the “Risk Management” chapter. The Group has included water-related risks in climate transition risks rather than in physical risks, because elements of transition risks affect water-related risks (i.e. in legislative developments). Other climate-related physical risks are not in the Group’s list of highest risks, as “physical impacts of climate change” are currently ranked as having moderate materiality. The focus in 2018 was the definition of a new greenhouse gas emissions reduction plan; climate risks and opportunities will be reviewed in 2019;

The Sustainable Portfolio Management methodology is used to assess sustainability-related risks and opportunities for each product in each application, with a focus on the long term. Environmental impact monetization of CO2 emissions uses a CO2 price of € 75 per ton, in line with 2°C scenario assumptions. This allows Solvay to have a sound understanding of the climate resilience of the majority of its products and solutions portfolio, but the Group need to extrapolate this understanding to a strategic business level. Over the coming years Solvay plans to conclude its work in this regard, to identify mitigation actions by reference to innovation priorities, capital investments, and portfolio actions, and to disclose the progress qualitatively;

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.

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