Sustainability.

Sustainability is a key element of our strategy for the future growth of the business. The group’s Sustainability 2017 Vision, launched in December 2007, sets out our aspirations for building a more sustainable business and includes challenging targets to support business growth. Our aims are to at least double our underlying earnings per share whilst achieving carbon neutrality, zero waste to landfill and halving the key resources that we consume per unit of output by 2017, the 200th anniversary of the founding of the company. The full statement is available on the company’s website at www.matthey.com.

There are two key drivers for our vision. The first is to be more efficient with the resources we use as a business and the second is to design new products and services that help our customers to be more sustainable and competitive. However, growing our business through sustainability is not only about our operations and products. We are also committed to best practice in governance, to creating a positive working environment for employees and to being a responsible partner for our customers, suppliers and communities. Some of the progress we have made towards achieving the vision is presented in summary in this report. Further details can be found in Johnson Matthey’s Sustainability Report 2009/10 which will be published on the company’s website in July 2010.

Sustainability is embedded into our routine management processes. All of the group’s businesses are required to develop, implement and report progress on their own sustainability plans as part of the group’s annual financial budgeting processes. These plans have the common corporate objectives as their foundation and are tailored to the businesses’ own specific operations. This approach encourages commitment at a local level and takes advantage of Johnson Matthey’s culture and methods of working.

Progress towards our Sustainability 2017 targets and the group’s other social, environmental and ethical targets is summarised in the Progress Towards Sustainability 2017 table. We have developed appropriate key performance indicators (KPIs) to enable us to monitor performance and data is reported relative to a baseline year which, unless stated, is taken as our performance in 2006/07.

In 2009/10 performance against our targets has improved relative to the baseline year. Year on year progress (2009/10 versus 2008/09) has also been steady with improvement against all but three targets; earnings per share (EPS), carbon neutrality and natural gas consumption. During 2009/10, EPS growth has been held back by the impact of the global economic downturn on our business. The group’s natural gas consumption and global warming potential (GWP) both increased this year resulting from the inclusion of data from three major new manufacturing facilities. The increase in GWP was also due in part to the geographical mix of production where this year, a greater proportion of our total output originated in countries where the carbon intensity from grid electricity is high.

Much of our progress to date has been achieved by incremental improvements in operational and process efficiencies, the so called ‘low hanging fruit’. We have recognised the need to focus further on the step change opportunities that will drive accelerated progress towards our 2017 targets and add real value to Johnson Matthey.

During the year we have continued to develop our strategy to achieve carbon neutrality. We have also introduced a more formal system of site and functional reviews to drive improved performance. Conducted by members of the Group Sustainability team, the reviews aim to raise awareness of sustainability, provide help and support with initiatives, identify and share examples of good practice and ensure that the principles of sustainability are fully embedded across Johnson Matthey.

The site and functional reviews also focus on the progress being made against local plans and on the alignment of local targets with the 2017 goals. This includes examination of the tools and metrics which can be used to understand the sustainability impacts and benefits of our operations and products.

Sharing information on successes, ideas and challenges across the whole group is also important to support continued progress. Employee engagement has remained a key priority to ensure all staff have a clear view of the importance of sustainability to the overall business strategy and to equip them with the information they need to take forward their own ideas. A dedicated intranet site has recently been launched to provide a means for everyone in the group to share good practice on sustainability and to offer a central source of information which employees can draw upon to support their initiatives.

During the year the Johnson Matthey Sustainability Awards were introduced to recognise and share best practice across the group. The awards, which will be made each year, span five categories which were carefully chosen to reflect the breadth of our Sustainability 2017 Vision. Last year a very strong set of around 90 entries was received, demonstrating the way in which everyone in the group continues to embrace sustainability and embed it as part of the way of doing business. Details of the seven winners can be found in the 2008/09 Sustainability Report.

Going forward the group will focus on accelerating performance towards the Sustainability 2017 targets through identifying and implementing operational / process improvements and by developing new sustainable products for our customers. The global sustainability agenda continues to evolve at a considerable pace presenting new challenges and opportunities for our industry. Johnson Matthey will continue its ongoing assessment of the current and likely future impacts on its business and the identification of new markets to ensure the group is well positioned to respond and benefit over the years ahead.

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