Report of the Directors
Business Review

Environmental Performance in 2012/13

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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.

Johnson Matthey has made progress in improving its environmental performance with decreases in eight of the nine key environmental indicators we report. These improvements have been achieved in the context of similar / increased production. They demonstrate the positive impacts of our Sustainability 2017 and Manufacturing Excellence programmes on the efficiency and environmental performance of our business. Consequently, with sales excluding precious metals (sales) flat for the year, eight out of nine of our environmental metrics also reduced relative to the rate of growth of the group’s 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 reduced slightly to 4,648 thousand GJ and by 2% relative to sales, benefiting from programmes at our sites to improve energy efficiency. Of the energy consumed in 2012/13, 64% arose from direct sources (i.e. various fuels and natural gas combusted by the group) and 36% from consumed electricity generated by a supplier. The global energy bill for 2012/13 was £55.6 million, an increase of £0.9 million compared with 2011/12, reflecting higher global energy costs.

Business growth often means higher production volumes and the commissioning of new manufacturing lines, both of which increase the challenge of energy conservation. During the year, our Emission Control Technologies business has implemented energy management systems and energy process mapping, along with sharing best practice, an example of which is presented in the case study on Energy Efficiency at Germiston, South Africa.

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 2012/13 the group’s GWP decreased slightly, down 1% to 413,130 tonnes CO2 equivalent, with reductions in gas use at some big user sites and some green electricity usage at our West Deptford facility in the USA. 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 progress towards its Sustainability 2017 target to halve carbon intensity in 2012/13 with a year on year reduction of 1% in GWP relative to sales.

This year we have elected not to collect or report data from our Scope 3 emissions sources. Previously we have reported emissions data from travel by employees on company business however this figure represented less than 2% of our emissions in 2011/12 and at this stage we do not consider them to be material. 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 figures. The majority of our Scope 3 emissions relate to the extraction and / or production of purchased materials and outsourced activities such as waste disposal. We continue to develop our understanding of these Scope 3 emissions through conducting life cycle analysis studies of our major product categories and by improving our knowledge of our role in the value chain.

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. The government’s review of this legislation during the year did not impact our business. In the 2012/13 CRC Annual Report, to be submitted to the Environment Agency during July 2013, Johnson Matthey Plc will report energy usage data for four subsidiary businesses that are not covered by the group’s exemption. This is estimated to be approximately 6,000 tonnes of carbon credits at a cost of £60,000 to £70,000.

Mandatory Greenhouse Gas (GHG) Reporting

Under the Companies Act 2006 (Strategic and Directors’ Reports) Regulations 2013, quoted companies are required to report their annual Scope 1 and Scope 2 GHG emissions in their directors’ report, effective 30th September 2013. This applies to Johnson Matthey from the start of the year beginning 1st April 2013 and we will be required to report according to these regulations in our 2014 annual report. In preparation, we have undertaken a readiness assessment to ensure that the data we report will meet the new reporting regulations. The initial assessment raised no issues and concluded that Johnson Matthey is already reporting to the required level. However, a more detailed analysis of other emission sources of GHGs in our operations may be required.

Quoted companies will also be required to provide a breakdown of emissions by geographical area in the directors’ report. Johnson Matthey already reports total emissions from its operations on a global basis. Data on a geographical basis is currently captured internally to drive performance improvement and so we foresee no major issues in meeting this requirement. With companies’ environmental performance under ever increasing scrutiny, we continue to monitor and assess the impacts of legislative changes on our business, assisted by specialist consultants as required.

EU Emission Trading Scheme (EU ETS)

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

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