Report of the Directors
Business Review

Environmental Performance in 2011/12

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Johnson Matthey undertakes a comprehensive annual review of group environmental performance which covers all manufacturing and research and development facilities. Data is presented for a five year period for nine key environmental indicators and data is presented on a financial year (unless otherwise stated).

Business expansion has had a direct impact on our environmental performance this year with increases in eight of the nine key environmental indicators we report. The increases in our emissions and use of resources have arisen as a result of a full year’s data in 2011/12 from sites acquired during 2010/11 (Process Technologies’ Savannah, USA site and Fine Chemicals’ Riverside facility in Conshohocken, USA), recently commissioned facilities reaching full production and from incremental increases across the group’s manufacturing operations as demand for our products increased. Despite these absolute increases, six out of nine of our environmental metrics increased at a rate below the rate of growth of the group’s sales excluding the value of precious metals (sales) as illustrated in the graphs and tables in this section of the report. There were no significant fines and no non-monetary sanctions for non-compliance with environmental laws and regulations in the year.

Energy Consumption

The group’s total energy consumption was essentially flat this year at 4.7 million GJ but reduced by 15% relative to sales benefiting from programmes at our sites to improve energy efficiency. Of the energy consumed in 2011/12, 65% arose from direct sources (i.e. various fuels and natural gas combusted by the group) and 35% from consumed electricity generated by a supplier. The global energy bill for 2011/12 was £54.7 million, an increase of £3.0 million compared with 2010/11, reflecting higher global energy costs.

Global Warming Potential

We report greenhouse gas emissions from process and energy use and convert the total group energy use to tonnes of carbon dioxide (CO2) equivalent using national and regional conversion factors for each emissions source as appropriate. The group’s total global warming potential (GWP) is based on our Scope 1 and Scope 2 emissions (as defined by the greenhouse gas protocol www.ghgprotocol.org).

In 2011/12 the group’s GWP increased only very slightly by less than 1% to 417,407 tonnes CO2 equivalent, which represents a good result given the inclusion of a full year’s data from the Savannah and Riverside sites and increased demand for our products. Of this year’s total, 38% resulted from Scope 1 emissions (generated by the direct burning of fuel, predominantly natural gas) and 62% from Scope 2 emissions (generated by the purchase of grid electricity). The group also made good progress towards its Sustainability 2017 target to halve carbon intensity in 2011/12 with a year on year reduction of 14% in GWP relative to sales.

Johnson Matthey does not own the ships, trucks or aircraft used to transport its products and so emissions from transportation are not included in the data. The majority of our products are high value but low volume and so the carbon produced by transportation is low relative to other carbon intensity indicators, for example Scope 2 emissions.

We also report indicative data for our CO2 emissions from travel by employees on company business and collect data from all sites. While we recognise this data does not represent all emissions as a result of company travel, it does provide an indicator and year on year comparator. In 2011/12 CO2 emissions from air travel by employees on company business were 6,263 tonnes and emissions from company car travel were 1,569 tonnes. We continue to develop our work on assessing the carbon footprint of our business, including ways to expand the level of information we collect on our indirect carbon emissions, to include emissions from third party transportation of our products by air, sea, rail and road.

The UK’s Carbon Reduction Commitment

Ongoing compliance with the UK government’s Carbon Reduction Commitment (CRC) does not present a material issue for Johnson Matthey, given that the majority of our UK facilities are exempt from the process as they are already being regulated under existing climate change levy agreements that drive year on year energy efficiency and reduction programmes. Our facilities in the UK account for 31% of the group’s total GWP (Scope 1 and 2 emissions) and of the emissions from these facilities, over 95% are exempt from the CRC process. In the 2011/12 CRC Annual Report, to be submitted to the Environment Agency during July 2012, Johnson Matthey Plc will report energy use data for its four UK subsidiaries that are not covered by the group’s exemption.

EU Emission Trading Scheme (EU ETS)

We are closely monitoring the potential impacts and opportunities for our business arising from the Phase III of EU ETS which will be implemented in 2013.

Operations at Johnson Matthey Colour Technologies’ headquarters in Maastricht, the Netherlands.

Developing catalysts and components for fuel cells, a technology for generating low carbon power.

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