Report of the Directors

Governance and Sustainability

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The group has well established policies, processes and management systems to support its governance and sustainability efforts, which apply to all group operations worldwide. These encompass the key areas of:

Together they provide the framework for managing environmental, social and governance matters. Brief summaries are set out in this section. Further details, together with information about progress and developments over the year to 31st March 2012, can be found on the company’s website.

Read more on our website.

Compliance with applicable legal requirements is a minimum standard for group operations and employees. In many cases we set standards which are in advance of these.

Employment contracts, handbooks and policies specify acceptable business practices and the group’s position on ethical issues. The Group Control Manual, which is distributed to all group operations, and security manuals provide further operational guidelines to reinforce these.

The Corporate Governance Report describes the role of the board, the Audit Committee and other committees in risk management and internal control.

The board of directors is ultimately responsible for social, environmental and ethical matters. These matters are embedded into the group’s risk management processes and reviewed annually by the board. The Audit Committee monitors performance and reviews the business risks associated with corporate social responsibility (CSR) at least once a year. Policies are set and approved by the Chief Executive’s Committee (CEC). The CEC also addresses risk and control issues and reviews key EHS, social and governance issues. The CSR Compliance Committee, a sub-committee of the CEC, has specific executive responsibility for the identification and monitoring of risks in these areas. It sets and oversees compliance with group standards through the dissemination, adoption and implementation of appropriate group policies and other operational measures.

Every business is required to include sustainability in its annual budget setting process and define the nature of programmes and projects to be undertaken together with capital expenditure requirements and value generated over a three year business cycle. Plans are discussed with the CEC and are formally approved by the board. As part of the process, progress against the Sustainability 2017 targets is assessed on a group basis to establish if additional management action is required.

We have a formal system of site and functional reviews to drive improved performance in sustainability. In 2011/12, 12 site reviews and six sustainability training sessions were undertaken.

The group’s sustainability strategy (as detailed in the section on Our Strategy) was defined following an assessment of the risks, major impacts and future commercial opportunities open to the business. The long term targets within it address the issues which could potentially have a material effect on the group’s future performance. The group’s materiality map outlines the key material issues and the targets in place to address and monitor them.

View the materiality map online.

The area of sustainability continues to develop rapidly and we continually monitor emerging issues, regulation, legislation, standards and good practice. Developments are proactively managed through reviewing the external landscape to understand the material issues that may negatively impact the group or present real business opportunities. Responsibility for identifying and assessing these issues lies with the group sustainability team and the CSR Compliance Committee.

During the year a gap analysis and peer review study against the ISO 26000 guidelines on social responsibility were conducted to ensure the group remains abreast of best practice developments in sustainability. We continued to develop our understanding of life cycle assessment (LCA) and completed the first full quantitative LCA of our automotive emission control catalysts. In addition, a project to understand potential implications of water stress to our operations was carried out.

Business Integrity and Ethics

Johnson Matthey strives to maintain the highest standards of ethical conduct and corporate responsibility worldwide to ensure we act with integrity, transparency and care for the rights of the individual wherever we do business. The group’s ethical principles and standards are set out in its Business Integrity and Ethics Policy which applies to all the group’s employees.

The board and its committees, the Chairman, the Chief Executive and the other individual directors all play key roles, together with management, in the promotion and monitoring of ethical behaviour and the safeguarding of the group’s reputation.

Compliance training is provided to employees to support their understanding of, and commitment to, group policies in order to protect and enhance the company’s reputation. The training educates managers in their responsibilities for employees, commercial contracts and company assets and is delivered globally via online learning programmes, face to face seminars and individual training. Online compliance training for employees addresses the bribery and corruption, money laundering and competition risks faced by the group.

All facilities have established policies and procedures for employees to raise employment related issues for consideration and resolution.

A confidential, secure, externally-run ‘whistleblowing’ website and telephone helpline are also in place to give all employees additional means to raise any issue of concern. The website offers multilingual access and allows for written or telephone reports. The site is publicised via site notice boards and the company’s corporate intranet site. Reports received through the website and helpline (as well as any received through other media, such as email, telephone or letter) are appropriately investigated in accordance with the Group Human Resources Policy on Whistleblowing. Responses and outcomes are posted on the website, or are communicated to employees via other internal media, such as site notices or briefings. For the group as a whole, there was a total of eight new whistleblowing reports in the calendar year 2011 and all but two have been resolved as at the date of publication of this annual report.

Development of new products for automotive glass applications at our Colour Technologies business’ technology centre in Maastricht, the Netherlands.

Sustainability initiatives at Johnson Matthey’s sites around the world are focused on improving resource efficiency and developing more sustainable products.

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