Sustainability Governance and Risk management

Strong Governance and Risk Management

A crucial component of securing a sustainable future is ensuring that Nouryon continues to always operate ethically and responsibly. This means maintaining a sound decisionmaking process while fulfilling regulatory requirements and commitments, mitigating risks, strengthening our cybersecurity, and establishing and enforcing ethical standards – for our customers, suppliers, and our Company. Our robust Governance and Risk Management capabilities form the core of Nouryon’ s operations. 

In 2021, we completed a comprehensive qualitative analysis using the Task Force on Climate-related Financial Disclosures (TCFD) framework. As our first TCFD analysis, we see this as the beginning of our journey towards  incorporating climate scenario analysis in reporting and planning, and we expect the guidance and tools to advance over time.

Highlights

Task Force on Climate-Related Financial Disclosures

Board-level
oversight of
all ESG areas

Corporate
Responsibility
Committee

Task Force on Climate-related Financial Disclosures

Climate change is one of the most pressing issues of our time, and the transition to a net-zero-carbon economy will create significant risks and opportunities. In 2021, we completed a comprehensive qualitative analysis using the Task Force on Climate-related Financial Disclosures (TCFD) framework.

Governance

Nouryon’s Board of Directors (Board) is charged with accountability and oversight of our Company’s Environmental, Social and Governance (ESG) performance. Progress is reported to the Board on a quarterly basis. The Board is supported by the following committees:

  • The Corporate Responsibility Committee provides Board-level oversight of sustainability, health, safety and environmental (HSE), product quality, social policies and programs, including inclusion and diversity, and other matters that may impact the Company’s reputation.
  • The Audit Committee is responsible for oversight of the integrity of our financial statements and effectiveness of our internal controls over financial reporting.
  • The Compensation Committee oversees the compensation of key employees and other matters related to our human capital.
  • The Nominating & Corporate Governance Committee recommends the nomination of individuals to serve on our Board and is responsible for setting our corporate governance practices.

You can find more information about our Board and its committees here.

Risk Management

Effective risk management is a key success factor for realizing our strategic objectives. Nouryon employs an enterprise risk management (ERM) approach to identify potential rewarded and unrewarded risks in order to take appropriate mitigating actions. Within Nouryon, ERM is used to augment the decision-making process. Nouryon’s approach to risk management and internal control is
based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO)* reference model and includes strategic, financial, information technology (IT), legal, business continuity, HSE, and security components. Transparency and accountability are confirmed through various cycles of monitoring and audits to ensure all mitigating actions are performed.

Sustainability report

Our ERM approach allows us to identify and manage strategic, operational, financial, and compliance risks to which Nouryon is exposed, including climate-related risks. This approach guides how we work and underpins our clear, strong, and consistent culture of ethical and sound decision-making. It also enables us to improve effectiveness and efficiency in our operations, accurately report financial results, and ensure compliance with applicable laws and regulations. Taken together, all these factors reinforce Nouryon’s reputation and ability to be a consistently reliable business partner.

Nouryon’s Board is ultimately responsible for oversight of our Risk Management and Compliance. Our ERM and internal control activities are organized in three lines:

  • First line: all Businesses and Operations managers own and manage risk, which includes identifying and mitigating risks.
  • Second line: oversight functions, such as Internal Controlling and Compliance, support Business and Operations management and help ensure that the risks are identified, properly mitigated, and that monitoring control procedures are operating as intended. In addition, the second line has oversight of the complete risk program.
  • Third line: Internal Auditing provides an independent, objective means to evaluate and improve the effectiveness of governance, risk management, and internal controls, including the way Business and Operations are led, as well as how oversight functions manage and control risk.

Identifying and Mitigating Risk to Harness Growth Opportunities

Our risk management capability and resources were expanded in 2021 to align risk management more closely with Nouryon’s strategic objectives.

Two internal cross-organizational risk assessment processes were defined – one for evaluating emerging market risk and one for strategic risk – to further support decisionmaking and solid governance. The emerging market risk assessment is aligned with Nouryon’s focus on geographies with growth potential.

Sustainability-related risks and opportunities, including climate-related risks, are being reviewed at three layers of strategy: macro (generic), meso (industry), and micro (Nouryon). These assessments cover strategic, financial compliance, and operational considerations. The ERM process includes long-term sustainability risks. For example, the macro layer considers risks in the political and legal, sociocultural, ecological, demographic, technology and economic environments.

The new analyses underpin an updated and comprehensive ERM approach within Nouryon, for which we continually ask ourselves whether we are acting appropriately, and in which sustainability is a pervasive topic and integral to every aspect of risk management.

Cybersecurity

Cybersecurity is a component of the overall risk management program, reducing the risk to system and plant outages, or loss of sensitive information, which are essential to our business operations. In 2021, Nouryon strengthened its security profile with the appointment of a Chief Information Security Officer and team.

These cyber specialists are strengthening Nouryon’s digital defenses and cybersecurity foundation, enhancing our security operations, leveraging efficiencies, and continuously improving Nouryon’s position to ensure sustained operations and business continuity. This is achieved by strategic prioritization, targeted technology improvements, employee awareness campaigns, protecting our brand, among other initiatives.

Task Force on Climate-related Financial Disclosures

Our Approach to Assessing Climate-related Risks and Opportunities

Climate change is one of the most pressing issues of our time, and the transition to a net-zero-carbon economy will create significant risks and opportunities. In 2021, we completed a comprehensive qualitative analysis using the Task Force on Climate-related Financial Disclosures (TCFD) framework. As our first TCFD analysis, we see this as the beginning of our journey towards incorporating climate scenario analysis in reporting and planning, and we expect the guidance and tools to advance over time. Our qualitative analysis included transition risks and opportunities as well as physical risks, and used leading climate models and scenarios. We drew upon publicly available data from the UN Intergovernmental Panel on Climate Change (IPCC) peer reviewed climate models, and we considered a range of scenarios to identify potential risks and opportunities to the company. We considered potential risks over short, medium, and long-term time horizons, across our value chain – upstream, downstream, and in our direct operations.

These results are described in our 2021 CDP response, and other sections of this report also cover TCFD elements. We provide a summary table of how our results align with the TCFD framework. For more information on our approach to climate change, see Mitigating Climate Change: Objectives and Opportunities in our Sustainability Report.

Sustainability report

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