For a number of years, Johnson Matthey has adopted the principles of corporate social responsibility (CSR), embedded these into its risk management processes and reported on its performance in this important area. In 2006/07 the Chief Executive launched an initiative to broaden the company’s definition of these principles to ensure a more sustainable business for the future.
Sustainability is fundamentally about the best long term way to run a business. There is growing concern globally, including among our employees, our customers, our communities and others with whom we work closely, about the way countries, companies and people are using the world’s resources. This is affecting people now in many ways and our decisions and actions today will affect future generations for a long time to come.
Work continued throughout 2007/08 and we have made considerable progress in a number of areas. In the early part of the year we considered the implications for sustainability through discussions at the company’s management conference and a series of high level seminars across the group which sought to reach a consensus on how best to manage this emerging topic. The conclusions stemming from this work were reviewed and adopted by the Chief Executive’s Committee (CEC) and gained the full support of the board.
One of the key conclusions is that sustainability should be fully embedded into our routine management processes and the CEC has agreed that this will apply from the 2008/09 budget year. It was also concluded that if we are to make solid progress we need to further refine our measures of performance, set more challenging targets and measure our achievement against these targets.
In December 2007, the Chief Executive launched Johnson Matthey’s Sustainability 2017 Vision to all employees which sets out the group’s aspirations for the next ten years. The full statement is available on the company’s website at www.matthey.com and is presented in summary below:
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We are committed to the principles of sustainable development and strive for outstanding resource efficiency and carbon neutrality.
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We aim to further develop and enhance sustainability as a core competence and key driver of competitiveness for our business.
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We seek to encourage suppliers and customers to adopt the values of sustainability which we uphold.
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We will apply our expertise to the development of a new generation of sustainable products and services.
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We aim to more than double our earnings per share whilst achieving zero waste to landfill and halving key resources that we consume per unit output by 2017, our 200th anniversary.
The Sustainability 2017 Vision encompasses the commitments, aims and targets which will drive the business forward into its third century of operation. For Johnson Matthey, there are two key thrusts to the vision. The first is about being more efficient with the resources we use as a business and the second is about designing new products that help our customers to be more sustainable and competitive. Some of the ways in which we are working towards achieving the vision are presented in summary in this report.
Sustainability is a challenging area for business but also a very exciting one for Johnson Matthey. It presents an opportunity to improve the efficiency of our offices, internal operations and processes whilst also developing current and future products and services to meet the sustainability needs of our customers. There is a burgeoning market, in which we already participate, for products which benefit the environment. There is also a nascent market for a new generation of products which enable the more efficient use of materials and other resources. This represents a key opportunity for us. Our active participation in this emerging area also helps us to identify and manage the risks of sustainability.
Since the launch of the vision we have begun the process of embedding sustainability into every aspect of our business. From 2008/09 all businesses will be required to include their plans for sustainability as an integral part of the annual financial budgeting process. These plans were presented and discussed with management then agreed by the CEC at the budget discussions in February 2008.
We have also begun an extensive training programme for employees designed to help them put the Sustainability 2017 Vision into practice in their day-to-day work. The first session was held in March and workshops will continue in 2008/09.
During the next year, businesses will be working towards their plans and setting appropriate targets. We expect this process to evolve over a number of years and will be working very hard to refine our measures of performance so as to monitor our progress against the business level targets and group targets in the vision. Further work is aimed at developing the tools of sustainability including those necessary to better estimate the carbon intensity of our products and their complete life cycle.
We will continue to report on our plans, targets and performance in this area. As in previous years we will publish a separate more detailed report on-line during July 2008. This year’s report will be our first Sustainability Report and will provide more detail on our vision for 2017, what sustainability means for us and how we will deliver this for our customers and society through better products and fewer impacts.
Managing Improvement and Compliance
Johnson Matthey embraces a culture of continuous improvement in all aspects of sustainability. Continuous improvement is driven through corporate policies, a comprehensive management system and the commitment of our employees. Johnson Matthey has three key policy areas which provide the framework for the management of environmental, social and governance matters: Environment, Health and Safety (EHS); Employment; and Business Integrity and Ethics.
Our ethical, social and environmental policies are well established and over the last year further initiatives have been undertaken to improve our operational performance in these areas. Details of these policies, initiatives and our progress can be found in Johnson Matthey’s Sustainability Report and are presented here in summary. The full report can be found on the company’s website at www.matthey.com.
As outlined in the Corporate Governance section the board has embedded environmental, social and governance matters into its risk management processes and formally reviews the area once a year. These matters are monitored by the CSR Compliance Committee which is a sub committee of the CEC. Click here for a description of the committee.
Stakeholder Engagement
Johnson Matthey undertakes a wide range of engagement activities focused on communication with individuals and organisations who are impacted by its operations or who may impact on its business, both at corporate and divisional level. These include shareholders, fund managers, employees, customers, communities and national and international trade associations. The company plays an active role within the Chemical Industries Association (CIA) with representation on the CIA Council and other strategy boards. Johnson Matthey has also continued to play a leading advisory role through its participation in a number of sector trade associations and national and local government organisations. The company is also actively involved more broadly with other international trade and government bodies to inform the development of policy in areas where Johnson Matthey’s technology and products can play a pivotal role, for example in improving air quality and enabling the shift towards more sustainable consumption and production. Neil Carson, Chief Executive of Johnson Matthey, chairs the UK government’s Business Taskforce on Sustainable Consumption and Production and is a prominent member of the Corporate Leaders Group which has provided valuable suggestions to UK government and the European Commission on climate change issues. A number of the company’s senior management are involved in the UK government’s sustainability and climate change initiatives.
In addition to our work with the UK government, last October Neil Carson was invited to give testimony on Business Opportunities in a Low Carbon Economy in the US House of Representatives’ Select Committee on Energy Independence and Global Warming. This was very well received and resulted in a number of follow up questions from members of the committee.
Further details of Johnson Matthey’s stakeholder engagement activities can be found in the Sustainability Report on the company’s website at www.matthey.com.
Environment, Health and Safety
Environmental, Health and Safety Policy Statement
The Chief Executive’s Committee formulates and agrees a written policy statement which forms the basis of the group EHS management system. The board approves this policy statement which is signed by the Chief Executive and is available at each site throughout the group, as well as being published externally. This policy is presented in full in the Sustainability Report and on the company’s website at www.matthey.com.
Environmental, Health and Safety Management
Johnson Matthey is firmly committed to managing its activities throughout the group so as to provide the highest level of protection to the environment and to safeguard the health and safety of its employees, customers and the community. Our EHS policies provide the guiding principles that ensure high standards are achieved at all sites around the world and are used to promote continuous improvement based on careful risk assessment and a comprehensive EHS management system.
The group EHS management system is reviewed regularly to ensure that it reflects international best practice and our growing understanding of the practical application of sustainable development.
The corporate objectives, policies and group EHS management system define accountability and set the standards against which conformance audits are assessed. This system is available to all employees via the company intranet. All facilities have developed local policies to meet the requirements of these corporate policies.
EHS compliance audits are an integral part of Johnson Matthey’s corporate EHS management system and are vital for the achievement of continuous improvement in all aspects of EHS. All Johnson Matthey operated manufacturing and research and development facilities are included in the audit programme. The audit frequency for each facility is determined by the scale, inherent risk and past performance of the operation. Audits review conformance with the group EHS management system and compliance with national legislation, as well as providing an opportunity to share best environmental, health and safety practices.
The Group Occupational Physician undertakes business health management reviews to provide consulting advice to guide the prioritisation and planning of programmes to optimise workplace health protection and promote workforce sustainability. The final year of the three year programme to implement a revised corporate health management strategy throughout the business was completed successfully. All business units now undertake annual health management continuous improvement planning as a formal exercise to structure appropriate programmes and services that meet changing business needs.
All audit reports (including health management reviews) are reviewed by the CSR Compliance Committee and appropriate follow up is taken on any outstanding issues. A total of 42 detailed compliance audits were completed in 2007/08.
Accidents and incidents are investigated to gain shared learning and drive continuous EHS improvement. We also monitor relevant events in our industry sectors to derive additional learning and assurance that we are working to the highest standards and best practices. Following the publication of the investigation reports on the incidents at BP’s Texas City refinery and at the Buncefield oil storage facility, we reviewed these reports with a view to integrating any relevant learning into our existing EHS management systems. The review generated a number of actions that will be completed during the next financial year.
ISO 14001
Over the past year continued progress has been made with the implementation of ISO 14001, in line with our target of achieving registration at all major manufacturing sites by 2010. Three manufacturing sites, two in India and one in South Korea, achieved ISO 14001 registration during the last year.
Regulation
The REACH regulation which introduces the new EU chemical management framework is now in force and Johnson Matthey has been preparing for its implementation since the final shape of the legislation became clear several years ago. This included establishing a centrally coordinated REACH compliance programme covering all of our operating units and products within the scope of the regulation. Key objectives of the programme are to assure uninterrupted product flows to customers and ensure our high rate of product innovation is not affected. To avoid unnecessary testing and reduce the cost and technical burden of compliance, the company is collaborating with other industrial companies under the auspices of key trade associations. Considerable effort has been made to maintain dialogue and information flow throughout the supply chain so that product and process materials and their uses are well characterised. Individual Johnson Matthey business units will be progressing substance pre-registration and registration actions in line with REACH timelines from June 2008 onwards.
The company has also commenced its preparation for the anticipated widespread international rollout of the Globally Harmonised System for hazard classification of chemicals.
Training
Training is vital to ensuring continuous improvement in environmental, health and safety performance. A number of seminars on high priority health and safety topics were completed during the year across the group. A series of project management training courses have been completed in the US and Europe, in which facility managers and engineers were able to gain greater understanding and share best practice on how to improve the EHS aspects and impacts of significant development projects. This training will be extended to Asia during 2008/09.
Johnson Matthey undertakes a comprehensive annual review of group environmental performance covering all manufacturing and research and development facilities. Where necessary, past environmental data has been restated to reflect changes in the business, for example divestments and site closure. The group sold its Ceramics Division on 28th February 2007 and, as such, the data presented in this Sustainability section excludes any contribution from Ceramics Division.
All of the manufacturing facilities across the group made progress against their individual environmental improvement targets during the year and our five year performance is shown in the tables above. The group’s total energy consumption and total global warming potential reduced by 3% and 2% respectively during the year. Relative to sales excluding precious metals, both decreased by 24% compared to the previous year. Total emissions of acid gas (primarily oxides of nitrogen, NOx) reduced by 8% in absolute terms and by 28% relative to sales excluding precious metals. The total amount of waste generated during the year increased by 8% across the group although relative to sales excluding precious metals, waste generated decreased by 16%. During the year, water consumption for the group increased by 7% as a direct result of increased production by our Emission Control Technologies business.When calculated relative to sales excluding precious metals, water consumption reduced by 17% across the group.
There is a group reporting system to record and investigate occupational illness incidents arising as a result of exposure to workplace health hazards. An overall reduction of more than 25% has been achieved in the annual incidence of occupational illnesses since the reporting scheme was introduced in 2005.
Accidents are actively monitored and detailed statistics are compiled monthly at group level. In April 2006 the CEC set a new group target of zero greater than three day accidents.
Our safety performance has improved during the past year with the incidence of greater than three day accidents at Johnson Matthey calculated as 2.65 per 1,000 employees in March 2008, a reduction of 39% from 4.38 reported in March 2007. The total number of accidents that resulted in lost time was 68, an 11% reduction compared to the previous year (76, restated). During the same time period, the total accident rate reduced by 8% from 8.77 to 8.05 per 1,000 employees per year.
In 2007/08 the number of days lost per 1,000 employees per year was 68, a reduction of 12% compared with 2006/07. All accidents were thoroughly investigated to determine root causes and assign appropriate preventative and corrective actions.
On 27th July 2007 Avocado Research Chemicals Limited, a subsidiary of the company, was fined £600 and ordered to pay £100 costs after pleading guilty at the City of London Magistrates’ Court to the unlawful exportation of a controlled chemical substance. Following the incident, the business has improved its automated ordering system and recruited a dangerous goods compliance specialist to prevent recurrence.
Environmental, Health and Safety Targets
Johnson Matthey continually monitors environmental, health and safety performance in order to identify those issues most pertinent to the business and to drive improvement.
Sustaining the continued reduction in the incidence of occupational illnesses, particularly those attributable to exposure to chemical hazards, remains the highest priority health protection issue for the business. Each business is now also addressing the development of health and wellness programmes to secure and enhance the longer term health, wellbeing and work ability of employees, as part of the people and communities element of the new corporate sustainability strategy.
All sites within the group will aim to continue to make progress against the target of zero greater than three day accidents. Leading and lagging indicators are now an integral component of site improvement plans in order to better monitor performance against these improvement conditions.
We will continue our process risk management review of Johnson Matthey facilities and analyse our results in conjunction with external experts to ensure that the policies, guidance and training that we develop are both robust and appropriate to those hazards within our business.
We will complete new environmental, health and safety guidance to support the existing policies within the group EHS management system. This guidance will be issued to all sites and appropriate training will follow.
Human Capital Management
Johnson Matthey’s people are the group’s most valuable resource. We are committed to recruiting high calibre employees and providing them with the information, training and working environment they need in order to perform at the highest standards. We encourage all our employees to develop to their maximum potential and we are committed to supporting them with effective human resources policies and practices that are strategically linked to the needs of our business and our customers.
Implementation of Johnson Matthey Human Resources Policies
Johnson Matthey’s human resources policies are implemented through the corporate human resources standards which set requirements for operations throughout the group to follow. These standards, which are generally in advance of legal requirements, provide internal consistency and are supported either by detailed regional procedures and / or business unit procedures. All of these policies and procedures are subject to regular review to ensure that they continue to reflect both regional best practice and local legislation. Site specific human resources policies and procedures are communicated to staff at inductions and through staff handbooks. Human resources policies and risks are examined by the Chief Executive’s Committee and the CSR Compliance Committee.
Employee data relates to the calendar year 2007 and excludes 658 employees transferred out of the group with the completion of the sale of the Ceramics Division on 28th February 2007
Key Employment Policies Equal Opportunities
It is the policy of the group to recruit, train and develop employees who meet the requirements of the job, regardless of gender, ethnic origin, age, religion, sexual orientation or disability. The policy recognises that people with disabilities are often denied a fair chance at work because of misconceptions about their capabilities and seeks to enhance the opportunities available by attempting wherever possible to overcome obstacles, such as the need to modify equipment, restructure jobs or to improve access to premises, provided such action does not compromise health and safety standards. Equally, employees who become disabled are offered employment consistent with their capabilities. The business values the diversity of its people and employment applications are welcomed and encouraged from all sections of the community including minority groups.
Training and Development of People
The Management Development and Remuneration Committee of the board takes a special interest in ensuring compliance with the Training and Development of People Policy objectives to:
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Ensure highest standards in the recruitment of employees.
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Assess training needs in the light of job requirements.
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Ensure relevance of training and link with business goals.
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Employ and evaluate effective and efficient training methods.
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Promote from within, from high potential pools of talent.
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Understand employees’ aspirations.
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Provide development opportunities to meet employees’ potential and aspirations.
Johnson Matthey recognises the need to maintain its ability to recruit well qualified staff to support the development of the business in new and emerging markets. This challenge will be met through appropriate manpower planning, local recruitment and the encouragement of international mobility.
Cross divisional management development activities are coordinated worldwide to ensure longer term management succession and the retention of high potential employees. Included are programmes providing key skills, interactive learning and Johnson Matthey business awareness at career foundation, middle and senior manager levels. These are delivered at Johnson Matthey facilities throughout Europe, the USA and Asia to meet current and future management requirements worldwide and are being extended in number and variety to meet the growing needs of the business. Presentations from senior executives anchor these programmes to the company’s progress and priorities and align attendees with our strategic intent.
A continuing high level of attendance by employees from Asia, particularly from our operations in Japan, China, Korea and India, reflects the increasing importance of this region. Attendance from acquired businesses is also encouraged as a well proven way of exposing individuals to the wider company culture and assisting rapid integration with the rest of the group.
Johnson Matthey has a steady requirement for high calibre graduate recruits to meet immediate technical and commercial job needs and for development to meet future management requirements. The combination of direct scientific contact with key university departments and a streamlined recruitment procedure ensures a reliable supply of high calibre applicants worldwide. A variety of career foundation training, including a new technology awareness programme, quickly engages new recruits in intellectual challenge and early responsibility.
Employee Relations and Communication The quality of its employee relationships is a priority for Johnson Matthey. The company has a low voluntary staff turnover (7.6% in the calendar year 2007, see Key Performance Indicators section) with many employees staying with the company for their whole careers.
Johnson Matthey recognises the importance of effective employee communications and particularly the value of face to face dialogue. Information and comment is exchanged with employees through the company’s in house magazine, regular news bulletins, presentations to staff and team briefings. Employees are also encouraged to access the company’s intranet and website.
Johnson Matthey continues to maintain good and constructive relations with all recognised trade unions which collectively represent 34% of all group employees worldwide. From 12th to 25th September 2007, production was affected at the company’s emission control catalyst plant in Germiston, South Africa by a 14 day national strike in the components industry, led by NUMSA (National Union of Metalworkers of South Africa). Other than this event no working time was lost within the group due to employee action.
The company supports employee share ownership and where practicable offers employees the opportunity to participate in share ownership plans which provide the facility to purchase company shares with a company funded matching component. Employees in six countries worldwide are able to contribute to a company share ownership plan or a 401k approved savings investment plan. Through these ownership plans Johnson Matthey current and former employees collectively held 1.55% of the company’s shares at 31st March 2008.
Johnson Matthey also sponsors pension plans for employees of its operations throughout the world. These pension plans are a mixture of defined benefit or defined contribution pension arrangements, savings schemes and provident funds designed to provide appropriate retirement benefits based on local laws, custom and market practice.
Activities over the Last Year
There have been a number of key initiatives at Johnson Matthey sites during the past year with a strong emphasis on sustainability, employee recognition, people development and wellbeing. Improvements to employee communications and engagement have continued to focus on the use of site satisfaction and attitude surveys as a means of strengthening and enhancing the two way dialogue with employees. Based on the success of a pilot survey, during the year a decision was taken to run a global employee attitude survey within each of the group’s operating divisions on a rotational basis. The first global business to run the survey will be Emission Control Technologies. It will be conducted during the summer of 2008 using a confidential and independent survey administrator and a combination of web hosted and paper survey questionnaires. The results of the survey will be published and it is hoped that its findings will help to identify issues for action and guide management to build the optimum working environment for employees.
Cross divisional movement of employees as part of their career development is encouraged and monitored as an important part of the annual management development and succession planning review process. The further development of the management skills inventory database provides the group with a powerful means of helping to identify and match suitably qualified internal candidates to promotional and development opportunities both cross divisionally and globally.
Continuing priority is given to manager and employee understanding of Johnson Matthey’s policies and commitment to their implementation to maintain and enhance the reputation of the company. Appropriate compliance training for managers in their responsibilities for employees, commercial contracts and company assets has been maintained during the year through on-line learning programmes and seminars where appropriate.
The reduction in sickness absence rates across the business over the last three years has been sustained in the past year through continued focus on attendance management and rehabilitation support programmes. There has also been an increased investment in programmes to improve employee health and wellbeing and promote attendance and work performance.
Going forward, the commitment of Johnson Matthey’s employees will be key in delivering our Sustainability 2017 Vision. During the year we have commenced a global programme of employee engagement activities and management seminars to enhance employees’ understanding, promote local action and spread best practice across the group. This will continue in 2008/09 to support our employees in working towards achieving the vision.
Social and Ethical Matters Business Integrity and Ethics
A reputation for integrity has been a cornerstone of Johnson Matthey’s business since Percival Norton Johnson founded it in 1817. It gives customers the confidence that the company’s products meet the standards claimed for them and that they may safely entrust their own precious metals to Johnson Matthey for processing and safe keeping. Employees at all levels are required to protect Johnson Matthey’s reputation for integrity.
The company strives to maintain the highest standards of ethical conduct and corporate responsibility worldwide. All employees have a duty to follow the principles set out in Johnson Matthey’s Business Integrity and Ethics Policy Statement which is presented here in summary and available in full on our website at www.matthey.com. It is the responsibility of directors and senior management to ensure that all employees who directly or indirectly report to them are fully aware of Johnson Matthey’s policies and values in the conduct of the company’s businesses. It is also the responsibility of directors and senior management to lead by example and to demonstrate the highest standards of integrity in carrying out their duties on behalf of the company. These issues are further safeguarded through corporate governance processes and monitoring by the board and sub-committees of the board.
Johnson Matthey facilities have established policies and procedures through which employees can raise employment related issues for meaningful consideration and resolution. In the US a confidential and secure website and telephone helpline was established in 2006 to give employees an additional means to raise any issue of personal concern. These confidential reporting arrangements have been extended to all Johnson Matthey employees worldwide during 2007.
Supply Chain
Management of the supply chain and contractor activities is a core component of the ISO 9000 and ISO 14000 series of standards. Supply chain and contractor management questionnaires are a requirement of achieving and maintaining registration and as such, ISO registered Johnson Matthey sites require the completion of appropriate questionnaires. For those sites without ISO registration, the group EHS management system provides policy and guidance on both supply chain management and contractor control.
Whilst we are confident of the human rights performance of our own operations we recognise that business practices in the supply chain are not always transparent and represent a risk that must be managed. We support the principles defined within the United Nations Universal Declaration of Human Rights and the International Labour Organisation Core Conventions including the conventions in relation to child labour, forced labour, non-discrimination, freedom of association and collective bargaining.
Community Engagement Activities
Johnson Matthey is actively involved in programmes worldwide that promote good community relations to foster a relationship of understanding, trust and credibility. Guidance on site requirements is detailed in the group EHS management system.
An annual review of community engagement activities across the group has been carried out and shows that 100% of Johnson Matthey operations with over 50 employees participate in activities within their local communities. These activities are wide ranging and include charitable giving, support for educational projects, the advancement of science and economic regeneration projects. Johnson Matthey employees also participate in activities or hold community related roles outside of the work environment. The company is supportive of this broader community engagement, allowing employees time off during working hours as appropriate. The review also demonstrates that a higher proportion of sites are setting objectives for their community engagement activities and planning specific activities in their community programmes.
Sustainability issues are also important to the communities in which Johnson Matthey operates. As such, businesses are encouraged to integrate community elements into their sustainability plans for the coming year. We will continue to offer further support to sites in developing and implementing meaningful community programmes and facilitate the sharing of best practice across the group. A review of site community engagement activities will be conducted once again and we will continue to focus on how best to measure and improve the impact of our community involvement.
Charitable Programmes
Johnson Matthey’s long history of support for charitable causes is matched today through programmes at both a group and a business unit level. The causes supported are aligned to issues to which the Johnson Matthey business makes a contribution and issues on which employees are passionate.
In 2007/08, Johnson Matthey supported 36 charitable causes through its corporate annual donations programme. These included support for organisations working in the areas of arts and the environment, medical and health, science and education and social welfare. 50% of these corporate donations were in support of social welfare causes. A total of 78 additional charitable causes received one-off donations through the corporate programme during the year.
In the UK, Johnson Matthey continues to operate its annual charity of the year programme and employee views are considered when deciding on the charity. EveryChild was chosen as our charity of the year for 2007/08 and further details on the partnership are available in the Sustainability Report. Johnson Matthey sites around the world also lend support to many other charities locally and nationally through donations, employee time or loans of company facilities.
In the financial year to 31st March 2008 Johnson Matthey donated £415,000 to charitable organisations. This figure only includes donations made by Johnson Matthey and does not include payroll giving, donations made by staff or employee time. The company made no political donations in the year.
We will continue to support a wide range of charitable causes in 2008/09. In particular we are developing a specific programme of support focused on promoting the understanding and awareness of science among children and young people. Johnson Matthey believes that encouraging the next generation of scientists is very important to the sustainability of our industry and we will continue to contribute our resources and expertise.
Verification
The board, Audit Committee, Chief Executive’s Committee and CSR Compliance Committee review sustainability issues as part of the company’s risk management processes. The board believes that the internal measures taken to review the sustainability information provide a high level of confidence. However, for the first time, third party verification of our full Sustainability Report has been commissioned. The full Sustainability Report will be published on the company’s website at www.matthey.com in July 2008.
