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DELIVERING TODAY, INVESTING FOR

TOMORROWSynthomer plcCorporate Social

Responsibility Report 2016

Synthomer is a specialist chemical company and one of the world’s leading

suppliers of aqueous polymers. We produce innovative formulations to support customers in a range of industries from construction and

coatings to healthcare.

02 Overview04 Sustainability highlights04 Our approach04 Performance summary04 Occupational health and safety04 Process safety04 Environment

05 Sustainability management and activities

05 Our policy commitments05 Modern Slavery Act06 External certification and

accreditation06 Certification06 Accreditation and external

benchmarking07 Our people07 Attraction and retention08 Organisational effectiveness08 Learning and development08 Leadership development09 Key SHE practices and programmes

10 Our SHE Rrinciples10 10 Golden Rules11 Managing safety and environmental

performance11 Regulatory affairs11 REACh11 Management systems12 Sustainable value chain14 Life-cycle inventory, sustainability

and sustainable product development

14 SHE audit programme14 Manufacturing Excellence, asset

protection and insurance inspections14 Business practices14 Sustainable procurement

15 Health and safety performance15 Occupational safety15 Occupational health & hygiene16 Process safety17 Reportable safety incidents

18 Environmental performance18 Managing our environmental

responsibilities18 Energy19 Atmospheric acidification19 Water use20 Waste disposal21 Other environmental metrics21 Environmental incidents

22 Greenhouse gas emissions22 Reporting parameters23 Calculation methods23 Performance in 201624 Reduction opportunities24 Environmental KPIs25 Table 1 – Legacy site performance26 Table 2 – New Synthomer

performance (PAC Site FY2016)

1 Synthomer plc Corporate Social Responsibility Report 2016

DELIVERING TODAY,A CONSECUTIVE YEAR OF RECORD PROFITABILITY

FINANCIAL HIGHLIGHTSUnderlying IFRS

2016 2015 2016 2015

Volume (ktes) 1,324.9 1,215.9 1,324.9 1,215.9

Revenue (£m) 1,045.7 870.1 1,045.7 870.1

EBITDA (£m) 160.1 125.0 – –

Operating Profit (£m) 130.2 102.9 144.7 80.3

Profit before tax (£m) 122.2 95.3 136.7 72.5

Earnings per share (p) 28.3 21.5 32.5 17.8

Ordinary dividends per share (p) 11.3 8.6 11.3 8.6

Net Borrowings (£m) 150.3 77.4 150.3 80.1

Underlying Statement The Group’s management uses Underlying performance to plan for, control and assess the performance of the Group. Underlying performance differs from the statutory IFRS performance as it excludes the effect of Special Items, which are detailed in note 3. The Board’s view is that Underlying performance provides additional clarity for the Group’s investors and so it is the primary focus of the Group’s narrative reporting. Where appropriate, IFRS performance inclusive of Special Items is also described. References to ‘unit margin’ and ‘margin’ are used in the commentary on Underlying performance. Unit margin (or margin) is calculated on selling price less variable raw material and logistics costs. Further explanations can be found in notes 4, 5 and 6.

COMMERCIAL HIGHLIGHTS• Europe and North America (ENA) momentum underpinned

by margin improvement and PAC contribution:

– Underlying operating profit at £93.3m increased 27.3% (2015: £73.3m) due to improved unit margins, the acquisition of PAC and foreign currency gains.

– IFRS operating profit at £75.4m increased 51.1% (2015: £49.9m).

– Synthomer 2015 cost savings programme delivered annualised savings of €13m in 2016.

• Asia and Rest of the World (ARW) resilient in challenging market environment:

– Underlying operating profit up 20.2% to £48.7m (2015: £40.5m) mainly driven by a good performance in Nitrile latex, in a challenging market, a strong performance in the dispersions market and foreign currency gains.

– IFRS operating profit up 96.0% to £81.3m (2015: £41.5m).

• M&A activity:

– The acquisition of PAC for $221m on 30 June represented a milestone for our new team and reinforced a key part of our strategy for growth.

– Acquisition of Perstorp Oxo Belgium AB (‘Perstorp Belgium’), a speciality chemicals company, for enterprise value of €78m announced 6 March 2017.

• R&D driving innovation:

– Products launched in last five years represented 20.0% of sales calculated on a legacy business basis (2015: 18.0%).

• Significant cash generation:

– Cash inflow from operating activities grew 41.1% to £136.6m (2015: £96.8m).

• Investments in our organisational structure:

– An Operational and Manufacturing Excellence team.

– A specialist procurement function for Europe.

– Business Development teams created to drive growth.

• Earnings per share:

– Underlying earnings per share for the year rose 31.6% to 28.3p (2015: 21.5p) and on an IFRS basis earnings per share rose 82.6% to 32.5p (2015: 17.8p).

• Dividend:

– Full year dividend increased by 31.4% to 11.3p per share in line with dividend policy (2015: 8.6p per share).

Overview


Employees

2,698Countries

16 Manufacturing sites

25 R&D centres

4ACQUISITION

NORTH AMERICAThe new manufacturing site and R&D centre in the USA introduces a manufacturing presence in North America for the first time and accelerates our business development program.

ASIAOne new plant in Thailand gives us additional capacity to take advantage of opportunities in the growing dispersions market.

EUROPEFive new sites in Europe bring new products, capacity and market opportunities.

MAP KEY Sales office

Manufacturing site

Manufacturing site and R&D centre

Operational head office

New PAC manufacturing site

Overview continued

DELIVERING TODAY, INVESTING FOR TOMORROW


SUSTAINABILITY HIGHLIGHTS• Successfully launched our SHE Principles and 10 Golden Rules

to further strengthen the Synthomer SHE culture• Total recordable accident rate reduced by 46% compared to 2015• Increased focus on process safety supported by our new SHE

audit approach which proved effective at both existing and newly acquired sites

• A Human Resources framework was introduced to enhance the performance of our employees and provide the “Synthomer Way” to newly acquired sites

• Organic and M&A growth strategy resulted in larger business in 2016 with seven new sites. Increases in resource consumption and emissions but underlying improvements in per tonne consumption on legacy basis

• Continuous improvement and benchmarking methodologies targeted at sites contributing most to overall consumption going forward will drive delivery on group SD targets

OUR APPROACHFinancial results remain an important measure of success but Synthomer recognises that to be a truly successful global business we must work hard to continually improve our safety, health and environment (SHE) performance and identify how we can positively impact our employees and the communities in which we operate.

In line with our SHE Policy, the Board, Chief Executive and Group Executive Committee are fully committed to improving SHE performance and engaging and involving employees at all levels in all locations in our SHE programmes. Effective SHE Leadership to deliver SHE performance is a primary duty and expectation of management at all levels in the Group, aligned to our three long term goals:

1. To minimise any environmental burden created by our activities and to reduce the consumption of resources;

2. To have no accidents or incidents; and

3. To have no adverse impact on the health of those who work in, or live near our operations, nor on the health of those who use our products.

PERFORMANCE SUMMARY2016 was a year of change. The company strategy is to grow the business organically and through synergistic and complementary M&A activity. The acquisition of seven new sites from Hexion and divestment of the South African site has had a noticeable impact on our absolute consumption of resources. In combination with the different processes associated with some of the acquisitions this also impacts our reference usage per tonne metric.

However, we have still been able to show improvement in some fundamental metrics, and intend to use our continuous improvement methodology and best practice benchmarking to improve both newly acquired sites performance where possible and further enhance existing site efficiencies.

In this report we will discuss our key performance indicators and activities over the last year.

Except where stated the performance figures quoted in this report are for the new company structure with full year 2016 data included for the new sites and South Africa data excluded.

Overview continued

OCCUPATIONAL HEALTH AND SAFETY• Recordable injury case rate (RCR) improved 46% from 0.55 to 0.30

per 100,000 hours worked• Group performance on >3 day lost time accidents was worse at 0.20

per 100,000 hours worked, but still the 2nd best in company history.• Employee engagement through SHE Rules and Principles roll-out,

global SHE Week activities during Q4.

PROCESS SAFETY• Adoption of new International Council of Chemical Associations

(ICCA) definition for recordable process safety events (PSE) within our reporting systems.

• Recordable PSE Rate 0.17 per 100,000, 35% improvement on 1st year of reporting in 2015

• No Recordable PSE with impact / consequence above ICCA severity level 1.

• Focused process safety auditing and training provision continued across the Group.

ENVIRONMENTInclusion of the new sites had significant impact on our key environmental indicators encompassing energy, waste, water and emissions in 2016:

• Our overall specific primary energy use per tonne rose 29%, the majority relating to a new acquisition in the Czech Republic that produces monomers, acrylic acid and polymer dispersions and now accounts for 24% of the Group total. On a legacy site basis specific energy consumption was just 0.4% worse although absolute consumption was down 2.3%.

• Specific water usage (including water extracted from rivers and used once through for cooling) rose 15% per tonne of production compared to 2015, with the Czech site accounting for 20% of the absolute volume of water used. Excluding river water, specific water consumption was 1.1% better than 2015. On a legacy basis total usage per tonne was 0.1% better and total consumption per tonne 1.9% worse.

• The total amount of hazardous waste generated rose 60% compared to 2015 to over 12,000 tonnes, with 4,000t associated with one new site in Italy, and 34% on a per tonne basis. However, hazardous waste sent to landfill dropped 27% to a record low 775 tonnes, and on a per production tonne basis was 39% better.

• Non-hazardous waste totals increased by 12% in absolute terms to 10,550 tonnes, but dropped 6.4% on a per tonne basis. Non-hazardous waste going to landfill increased by 28% in absolute terms, and 6.9% on a per tonne basis.

• Total greenhouse gas emissions (as CO2 equivalent) rose 49% in 2016 compared to 2015. 16% of the total emissions are accounted for by the Czech plant burning brown coal. On a per tonne basis there was a 24% increase. On a legacy basis there was a reduction in emissions of 8.7%, 6.1% on a per tonne basis, linked to improvements in operational efficiency and reduced VOC and refrigerant emissions.


OUR POLICY COMMITMENTSIn addition to the long term SHE goals described in the overview that form a core part of our SHE Policy, the Group remains committed to both the International Council of Chemical Associations’ Responsible Care® (RC) initiative and to the principles of sustainable development (SD) as set out in the UK Chemical Industries Association (CIA) SD guiding principles, to which we have been a signatory since 2005.

The principles that Responsible Care® embodies remain central to the global chemical industry’s efforts to improve and enhance our SHE performance, year on year. Toward the end of 2016 the UK CIA prepared a revised set of Responsible Care® Guiding Principles. Following their formal publication at the start of 2017 the Group Chief Executive has signed his commitment to the new Principles and these will be fully adopted during 2017.

All the Group’s employees are encouraged to measure their activities against our long terms goals and to work towards achieving them. Managers in particular are expected to use these goals when setting targets for themselves, for their teams and for the staff who report to them.

Open reporting of environmental performance is an essential principle in SD and our commitment to that principle is reflected in this annual CSR report that provides a broader view of our performance in addition to our legal reporting requirements relating to global warming burden estimates as set out in the Annual Report and the end of this report.

The Group is also committed to the principles of having a diverse, fair culture and work environment, as set out in our Group Policy on equal opportunities, diversity and human rights.

This extends to ensuring that fair and ethical business practices are followed, with a Group-wide code of business conduct on corruption and anti-competitive activities in place to ensure that the Group’s employees have a clear understanding of the principles that are important in these areas when conducting the Group’s business.

All Group Policies are available within the Corporate Responsibility section of our website www.synthomer.com.

MODERN SLAVERY ACTSynthomer is committed to ensuring that there is no modern slavery in our business or any of our supply chains. Following publication of the UK Modern Slavery Act in 2015, in 2016 the Group ran an initial awareness training and risk assessment session with our procurement team from around the globe.

This concluded that whilst our business is not facing a high risk of these forms of exploitation, we cannot yet adequately be assured that they are completely absent. As a result during 2017 we will be reviewing the effectiveness of our policies and supplier due diligence processes to reduce further the potential for modern slavery within our business. Our approach will be prioritised towards the areas identified to be at higher risk.

Synthomer’s full Modern Slavery Act statement for 2016 is accessible from the Synthomer website homepage (www.synthomer.com) or can be downloaded at: https://www.synthomer.com/fileadmin/files/Synthomer_Modern_Slavery_Act_Statement_2016_FINAL_no_signature.pdf

SUSTAINABILITY MANAGEMENT AND ACTIVITIES


EXTERNAL CERTIFICATION AND ACCREDITATIONCERTIFICATIONWe are committed to external certification of our management systems to ensure that we deliver on our policy commitments and we continue to make significant progress particularly with ISO 14001 and the expansion of certification of sites to ISO 50001.

The Group has matrix certification for ISO 14001 in place for all bar two of our legacy operating locations (19 in total). Four of the seven Hexion PAC sites had individual ISO 14001 certification and all will be incorporated to the matrix certificate over the next 2-3 years. During this time we will also be preparing to move to certification to the ISO 14001:2015 Standard.

All UK and German sites have accreditation to the ISO 50001 Energy Management System standard and the learning from this structured approach to energy management will be applied across other sites.

Three sites in the combined Group have OHSAS 18001 certification – both Italian sites to meet legal requirements, plus the Czech Republic site.

At Group level we have in place an integrated SHE Management System that is in line with the requirements of OHSAS 18001 but is based more on UK HSE expectations for management systems that address occupational health & safety and process safety (in addition to the environment).

As we undertake extensive internal auditing of our systems, with ISO 9001 and 14001 audits covering a number of areas common to OHSAS 18001 there is no current objective to seek certification at Group level to OHSAS 18001 or the new ISO 45001 Standard, although this position will be kept under review.

Sustainability management and activities continued

ACCREDITATION AND EXTERNAL BENCHMARKINGIn addition to our Standards certification we also seek to benchmark ourselves against our peer companies and demonstrate our commitment to sustainability through participation and membership of the following:

• FTSE4Good: Synthomer plc has been a member of FTSE4Good for a number of years and is committed to maintaining membership of that index and improving its overall rating as the business grows

• CDP: We have reported on climate change performance to the Carbon Disclosure Project (CDP) since 2013. In 2016 we achieved a “C” score at the Awareness level, matching our performance in 2015. We continue to look for opportunities for sustainable improvement in this area. We also chose to voluntarily submit information to CDP’s water assessment as a means of helping us better understand potential risk areas. At present we do not believe there are any materially significant risks but we continue to review and include both climate change and water risks within our business risk assessment process.

• Ecovadis: At Group level we are committed to annually submitting data to the Ecovadis CSR platform and using the assessment to identify areas for improvement. Data is shared with many of our customers as an efficient means of streamlining communication on CSR performance. In 2016 we further increased our score from 50 to 57, maintaining our Silver rating.

Synthomer is committed to ensuring that there is no modern slavery in our business or any of our supply chains.



OUR PEOPLEOur people are at the heart of everything we do, from R&D and manufacturing to sales and logistics. We rely on every employee to help create our culture and drive the business forward.

Human Resources has developed a new framework to drive growth and productivity of our people. The framework is composed of five elements supported by an open and positive working environment, HR policies and processes, and an integrated HR Business Partnership team.

OUR PEOPLE

Employees in emerging markets

26%Total Group employees

2,698Employees working in R&D

138

CASE STUDY: OUR COMMITMENT TO OUR LOCAL COMMUNITIES

We seek to play a positive role in the communities in which we operate. In particular, we use our unique talents, expertise and passion for chemistry and engineering to inspire the next generation to learn and consider future careers in these important disciplines.

Our specialist manufacturer William Blythe teamed up with Catalyst to inspire young people from a local school in Accrington to take a closer look at science. Catalyst is an interactive science centre and museum devoted to chemistry and how the products of chemistry are used in everyday life. The excited pupils discovered that science can be engaging and fun when they visited the Catalyst Science Discovery Centre in Widnes sponsored by William Blythe.

Male Female Total

Board 8 1 9

Senior management 22 3 25

Employees 2,186 512 2,698

ATTRACTION AND RETENTIONOur aim is to further enhance the attraction, selection and retention of staff through enhancing our employer brand, incorporating improved selection techniques when filling vacancies and continuing the development of a vibrant, challenging yet supportive culture. Over the last year improvements have been made in our Global Engineering Graduate Programme. These improvements will be rolled out into our Global Technical and Commercial Graduate programmes in the coming year.

Part of the heritage of Synthomer is the cultural diversity across the Group and this continued to grow following the acquisition of the PAC business at the end of June. We continue to embrace diversity as an equal opportunity employer and have seen a small increase in females within our senior management population.

We recruit, train and promote employees according to their achievements and commitment, treating employees equally regardless of their race, national origin, religious affiliation, gender sexual orientation, disability, age or background.

It is a common challenge in the chemistry industry to recruit and retain a workforce that properly reflects the communities in which they operate, particularly in respect of gender. We actively promote gender equality and work with local universities to inspire women to consider careers in our industry and with us.

PROMOTING A POSITIVE

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We strive for fair and transparent mechanisms for recognition and reward of staff. In the past year we have simplified and updated an internationally recognised role assessment process which forms the framework of our reward and benefit policies. This enables a fair comparison of jobs across the Group and gives a validated platform on which salary and benefits can be benchmarked. Reward is linked to a global performance management process that tracks achievement of objectives together with the way that these are delivered.

The global bonus system was amended in 2016 to align performance, where practicable, with targets that the employee can impact. All staff have safety targets in their bonus scheme and the majority of staff that are based at the local manufacturing operations have KPI and EBITDA targets aligned to their local site and business unit. This scheme is being further simplified in the coming year.

ORGANISATIONAL EFFECTIVENESSWith an emphasis on productivity, and alignment of our Human Resource capital with value adding contribution towards the business, simple performance management principles continue to be developed. Training has been undertaken in parts of the Group including managing effective performance and coaching for performance.

Succession planning has been a significant area of focus through 2016 with particular focus on senior management levels. It was recognised that the business and functional leadership needed to be cost effectively strengthened to support delivery of the ambitious organic and acquisition growth plan. The succession plan is reviewed by the Executive Committee and the Board.

LEARNING AND DEVELOPMENTThrough the second half of 2016 the Human Resources and Operational Excellence teams have developed simple Leadership Attributes based on best practice within the Chemical industries. These simple attributes compliment work done within ENA and ARW and will, together with past performance, form the basis for selection and development of current and future leaders. This is also being embedded into the revamped Global Graduate Development Programme. Compliance training has been developed into an on-line training suite that allows employees to keep up to date with important developments in ethics and compliance law.

LEADERSHIP DEVELOPMENTLinked across all of the pillars is our commitment to support and challenge authentic leaders who are focused on empowering staff and helping them to understand and grow their contribution to the Group and its stakeholders. Encouraging leaders to treat others as they would like to be treated and also by leading by example, the culture continues to thrive and encourage employees to perform and to grow. Organisational climate surveys, 360° feedback, coaching and mentoring are all utilised to support our leaders to understand their strengths and weaknesses.

In Asia a new career ladder has been introduced in 2016 with an aim to recognise staff and leadership development against firm criteria.

CASE STUDY: OUR COMMITMENT TO DEVELOP KNOWLEDGE AND SCIENCE

We actively partner with eight universities in the UK and one each in the USA, Germany, France and Spain to support science undergraduates and post graduates as well as enhance our own innovative capability through joint research on new monomers, polymers and improved process. We have recruited three PhD graduates directly as a result of these programs.

As part of our strategy to maintain our leadership position in Nitrile Latex, the Innovation Group continues to extend its fundamental research partnership and sponsorships with local universities in Malaysia. Most recently this was extended to UTM (Universiti Teknologi Malaysia) with Synthomer sponsorship of Masters Degrees focused on emulsion polymerisation in latex/acrylic systems. On successful completion, the students will join the Innovation Team in Kluang. Further recognition programmes were made during the year with an award for the best Polymer Science PhD thesis at the Malaysian Institute of Chemistry (Institut Kimia Malaysia).

Annual appraisals are a core HR process to align employee objectives with the strategy of the business. An electronic system is in place to manage this process with 91% of eligible employees having completed their appraisals by the end of March 2016.


KEY SHE PRACTICES AND PROGRAMMESSHE management practices and systems are embedded throughout the Group with the aim of continuously improving SHE performance.

Key measures, SHE performance indicators and SHE audit results are reported to the Board, the Group Executive and to the regional management meetings on a monthly basis.

KEY SHE PROGRAMMES 2016 SHE KEY ACTIONS 2017 SHE KEY FOCUS

Group’s Safety, Health and Environment Management System (SHEMS) standards and policies

All corporate SHE Standards reviewed and streamlined.

Roll-out of SHE Principles and Golden Rules to underpin all of SHEMS.

Identification and sharing of best practice; refreshing of Group SHE Procedures linked to key areas such as management of change and permit to work.

Group SHE audits Completed 2nd year of new audit process, focussing on process safety risks and identification of key improvement actions with agreed timescales to implement.

All new sites underwent a high level “shallow dive” SHE audit to identify potential priority areas for follow-up in 2017.

Completion of 3 year audit cycle on legacy sites and full audit of some new sites. Group SHE will also carry out additional assurance checks on sites’ internal audit process as part of site visits.

The Group Accident and Incident Management System (AIMS)

Our electronic reporting system was modified to enable more effective identification of any system failings / failures to apply Golden Rules and Principles.

Trend analysis to identify any common themes as regards system failings – will influence future work programmes.

SHE training, communication and support

Introduction of the SHE Golden Rules and Principles across the Group.

Leadership workshop with all Site Managers to share learning and build on the Golden Rules and Principles roll-out.

Further roll-out of first line manager competence assurance programme.

Ongoing process safety training across the Group.

Global SHE Managers’ and Site Managers’ Workshops.

Alignment of staff incentives

2016 Group 2016 bonus scheme revised to reflect the importance of safety to our business and emphasize how all employees can influence SHE performance – targets based on both occupational and process safety.

Continuation of 2016 process with improved performance targets defined.

Monitoring and Auditing Roll out of a new intranet based KPI Dashboard to communicate leading and lagging performance data

A review of significant incidents and injuries from the past few years identified a number where both system failings and behavioural issues were a factor. Following launch of our core values in 2014, and “Line of Fire” work in 2015, the Group launched a set of 10 “SHE Principles” and 10 “Golden Rules” during 2016 across the whole company, and these are now an integral part of how Synthomer operates.

Global roll out of the SHE Principles and Golden Rules involved top down briefings and discussions throughout the organisation by all line managers and a video from the Chief Executive framing the principles and our core belief that we always have time to work safely.



Look after yourself

Look after each other

Effective last line of defence

Stop and think

Safe workplace

Safe vehicle, safe driver

Safe processes and operations

Safe systems of work

No change without assessment

Learning from our mistakes


10 GOLDEN RULES:

1 Do not access working areas without the required general and or task specific PPE

2 Only carry out routine tasks for which you are trained and authorised and use the specified tools and equipment for the job

3 On stairs and steps – take one at a time using handrails where present

4 Only drive vehicles for which you are authorised and follow all signs and rules

5 Do not by-pass safety devices or interlocks without prior authorisation

6 When a work permit is required ensure it is valid and complete and do not deviate from its requirements

7 Lock out and tag out all energy sources before working on equipment

8 On tankers and other vehicles ensure the fall protection and/or handrail system is in place before accessing the top

9 Do not make any change or carry out any non-routine work, without following an accepted system with an appropriate assessment and authorisation

10 Immediately report injuries, incidents or near misses to your line manager

Our SHE Principles and 10 Golden Rules

OUR SHE PRINCIPLES

We launched our Safety, Health and Environment principles in 2016 across all sites including our 2016 acquisition. We always have time to work safely.

THE GOLDEN RULES ARE BASED ON FOUR FUNDAMENTAL PRINCIPLES:

1 Compliance will reduce our risk of injuries and incidents

2 They can be complied with

3 They will be enforced, and any suspected non-compliance will be investigated

4 They will apply to employees and contractors

Briefings now form a standard part of induction and refresher training for employees and contractors.

Global roll out of the SHE Principles and Golden Rules involved top down briefings and discussions throughout the organisation by all line managers and a video from the Chief Executive framing the principles and our core belief that we always have time to work safely.



MANAGING SAFETY AND ENVIRONMENTAL PERFORMANCEThe goals of Sustainable Development and Responsible Care® are integrated within Synthomer’s SHE Management System (SHEMS) and form the basis against which we judge our performance and our plans for improvement. In 2016 sites incorporated SHE improvement objectives within a holistic Manufacturing Strategy, enabling better focus and assessment of how these activities fitted with the main Business Plans. Progress with these plans was monitored by the Executive Committee at Group level and is reported to the Board.

As noted in the practice and programmes table, Group SHE Standards were revised in 2016, in part to reflect the new SHE Principles and Golden Rules, and gap analysis activities have been undertaken with all the newly acquired sites.

Sites must adopt the procedures which make up SHEMS or have their own procedures which will achieve equivalent levels of SHE performance. Group SHEMS is supported by training material and by guide packs: documents which set out the principal steps sites have to take to comply with SHEMS standards. There is an ongoing programme of work to streamline Group Procedures, drawing on best practice from the legacy and new sites and externally.

SHEMS is embedded in the Group-wide Document Controller system and is therefore available to people at all levels across the company. It continues to be extended to cover new areas, makes clear the standards sites are expected to achieve and provide guidance on how they should meet those standards.

Synthomer has a number of systems in place available in multiple languages to ensure that they can be used by staff at different levels of seniority at all our locations. These systems were rolled out to the new Hexion PAC sites during Q4 2016 and fully in place from the start of 2017. The systems enable the collection, analysis and presentation of our data at Group, Divisional and site level. Included in the functions these systems cover are:

• Data collection on leading and lagging indicators of performance in all areas of SHE including process safety;

• The collation of safety information on our raw materials and the provision of understandable safety information to operational staff who handle hazardous and non-hazardous materials;

• The production of safety data on our products including their suitability for specialised uses such as food contact or potable water handling;

• Risk assessment of potential exposure to hazardous materials and the implementation of suitable risk reduction measures;

• The recording of all accidents (events which cause personal injury), incidents (events which cause property damage, environmental release, cause complaints or result in other harm) and near misses (events or hazardous situations which under other circumstances could have caused an accident or incident) – including systems to track the completion of actions arising from the investigation of these events and the generation of lessons learnt documents that are shared across the Group.

REGULATORY AFFAIRSREAChWork has continued to progress towards the final REACh registration date in 2018 to ensure that Synthomer products remain compliant to this legislation. The Regulatory Affairs Department is working with elements of the business to verify that all suppliers of raw materials are aware of their REACh responsibilities and sourcing REACh compliant materials. In addition, as further substances are identified as Substances of Very High Concern the Department continues to review product ranges and work with the business to appropriately manage the removal of these substances.

MANAGEMENT SYSTEMSThe Department continues to manage systems previously implemented across the Group; ‘Raw Material Notification and Approval System’ and the complimentary ‘Product Notification and Approval System’. The Departments is also involved with the PPC process and advising to ensure Regulatory Compliance is fulfilled as part of the process.

Providing strong regulatory support to the whole Synthomer Group is an essential element of our day to day operations whilst we continue to strive to refine and maintain our high compliance standards.

SHE Principles and Ten Golden Rules launched to further strengthen Synthomer SHE culture, and dive the continuing trend towards world class performance.



CREATING AND SUSTAINING VALUE THROUGH INNOVATIVE SOLUTIONS

Synthomer is a speciality chemical company which uses its Technical Services expertise and R&D capability to understand and anticipate customer’s needs to drive competitive advantage.

OUR SUSTAINABLE VALUE CHAIN RESEARCH AND DEVELOPMENTOur four research and development ‘centres of excellence’ work to both develop products that meet our customers’ needs and to improve the efficiency of their manufacture.

CONSUMERSWe monitor mega-trends and market developments to ensure our formulations are meeting the requirements not only of our customers but the end users of their products.

TECHNICAL SERVICESOur technical service teams work with our customers to ensure we provide the right formulation for their needs.

FORMULATIONSOur formulations are designed for use in customer specific products.

SOURCING RAW MATERIALSWe work closely with our suppliers to obtain competitive prices, correct specification, and to improve supply chain resilience.

PRODUCTIONExperienced operations teams optimise the production process to be most efficient by using complex production techniques and removing bottlenecks.

QUALITY CONTROL Our quality control procedures and laboratories ensure that we manufacture and store finished products in a manner that maximises quality.

LOGISTICSOur specialist logistics teams work on ensuring safe and timely deliveries of excellent products in more than 140 countries.


We produce chemical formulations for thousands of customers in a range of industries, from construction and coatings to healthcare and automotive. Our strategic procurement specialists acquire the upstream raw materials used in our complex production processes.

The production process involves controlling the pressure, temperature and duration of mixing reactions of our raw materials in order to create specific formulations. Our highly skilled and experienced Operations teams, supported by our R&D, deliver cost effective and flexible operational capabilities to maximize output and quality.

OUR STRATEGY

Our mission is to provide our customers with innovative and high performance solutions that enable them to efficiently produce their own high quality products.

Our strategy is composed of five key elements:

1RESEARCH AND DEVELOPMENT AND TECHNICAL EXPERTISE TO EXPLOIT NEW MARKETSWe anticipate market trends and customer requirements to deliver improved products with improved margin and product differentiation.

2DRIVING EFFICIENCY AND EXCELLENCE THROUGH OPERATIONSWe operate continuous improvement across our operations to improve production efficiency, sales effectiveness and functional excellence. We seek to identify good practice in all areas of our business and ensure that relevant learnings are disseminated throughout the business.

3CAPACITY UTILISATIONOur aim is to drive profitability through maximum utilisation of our assets. This involves identifying the root causes of production bottlenecks and finding innovative solutions.

4INVESTMENT IN CAPACITYWe seek to add capacity, particularly in growth markets.

5BUSINESS GROWTH THROUGH ACQUISITIONWe actively seek opportunistic bolt on acquisitions in similar chemistries or transformational step change transactions not limited by geography or chemistry.

KEY BENEFICIARIES OF OUR VALUE CHAIN

EMPLOYEESOur employees are a critical part of our success. Employees contribute to all aspects of our value chain and all employees benefit from the success of our business. We are committed to providing a safe environment to work.

GOVERNMENTSWe look to ensure that we follow the letter and spirit of the tax regulations within each of the jurisdictions in which we operate and contribute fairly to public policy goals. We see local safety and environment legislative compliance as the minimum level at which we should operate, and we strive for higher standards.

COMMUNITIESWe look to be a valued part of the communities in which we operate, providing highly skilled employment opportunities, being aware of how our plans may impact on a community, and demonstrating that we respect the community and its environment.

CUSTOMERSOur customers expect us to provide them with innovative, high quality, competitive products. We seek to work in partnerships with customers, using our skilled Innovation and Technical Services teams, to develop products that support their goals.

SUPPLIERSOur suppliers are an important part of our business and we look to work closely with them using the skills of our strategic sourcing teams to ensure we get the right specification of products for our needs at competitive prices.

SHAREHOLDERSOur shareholders, as the owners of our business, should see the benefits of our focus on long term sustainable growth, regulatory compliance and strong governance.

Our production sites are local to our customers to better understand their needs and reduce the cost of logistics and our environmental impact. We have leading market positions in Europe and South East Asia, which continue to be underpinned by our exposure to global mega trends and the drive for environmentally friendly technology.

Effective risk management is the key method we deploy to ensure our strategy is delivered and sustainable value created.




SUSTAINABLE VALUE CHAINLIFE-CYCLE INVENTORY, SUSTAINABILITY AND SUSTAINABLE PRODUCT DEVELOPMENTSustainability research continues to be an integral part of the innovation program within Synthomer. The application and use of bio-based raw materials, emerging technologies and novel manufacturing methods are an important theme for the Innovation and Technology development programs. Our academic program supports a number of sustainability driven projects across the globe including research into the application of low carbon, bio derived monomers with universities in the UK and US and an ongoing collaborative program to exploit new sustainable manufacturing methods.

Direct support to customers has continued to grow as they continue to monitor and reduce their environmental burden. This support leverages the expertise of the sustainability specialists in both the regulatory affairs, R&D and Global SHE teams to build environmental impact data, complete supplier questionnaires and handle more specific queries.

SHE AUDIT PROGRAMMEIn 2016 we continued with the three year cycle of SHE audits started in 2015 at our manufacturing plants, with a central team of specialist chemists and engineers taking a refreshed audit approach focussing on key management systems and process safety; providing faster feedback to sites; and with agreement on actions to deliver improvement and address any significant issues at the end of the audit visit, with the involvement and buy-in of regional management. Where required the central team is now also more proactively supporting sites in completing improvement work.

This process forms a key part of the Group’s risk management strategy, as described in the 2016 Annual Report.

Alongside this the operating sites are now undertaking internal audits of all areas of their SHE Management Systems, with the central team undertaking assurance checks as part of their audit reviews.

Six full audits were undertaken in 2016 and all sites showed progress since their last audits, with several examples of good practice noted and shared with other sites. Among other site specific topics, Process Safety, Permit to Work, Management of Change, Assets integrity and Internal Audit Process were audited in detail.

All the new PAC acquired sites went through an initial audit process to identify the situation vs. Synthomer requirements.

MANUFACTURING EXCELLENCE, ASSET PROTECTION AND INSURANCE INSPECTIONSSynthomer’s very good record on insured losses continued in 2016 with no major losses during the year.

The Company continues to have an excellent long-term partnership with our insurers as we worked together to identify opportunities to improve how we protect our assets. The process has been assisted by a regular programme of property surveys which consider the inherent hazards of the process and material inventories and the engineering measures and management systems in place to prevent and mitigate potential loss.

The way we work together with our insurers is considered best practice and uses a structured process for improving our loss prevention measures. This gives visibility and confidence to the insurers that our plant operations are being effectively managed to improve process safety and minimise the risk of loss. The process also allows Synthomer to control insurance premiums and focus capital investment where we jointly identify the greatest potential benefits to both insured losses and business continuity.

The insurers surveys are always jointly conducted with internal teams from the site being surveyed and in 2017 following the introduction of Synthomer’s Manufacturing Excellence programme a number of complementary process hazard surveys were carried out supported by Synthomer’s Manufacturing Excellence team. This comprehensive approach provides a complete understanding of operational and safety management, the protective barriers required to prevent loss and an assessment of the loss mitigation systems we have in place. The interaction during the survey also provides an opportunity for a discussion of the way Synthomer Group best practice standards are being applied. We regularly review progress on action close out and it is pleasing to note that the insurer’s rating of our sites continues to improve, and this remains one of our internal performance metrics.

In 2016 eight property surveys were completed including first on-policy Surveys of Dammam and the recently acquired Sokolov site. In 2017 we have planned for a further eight surveys which will include several first on-policy sites from recent acquisitions in addition to periodic reviews.

BUSINESS PRACTICESThere is a clear expectation that company employees will follow the code of business conduct on corruption and anti-competitive activities, and a confidential reporting procedure is in place for any employee who might identify any form of malpractice.

To support assurance in this area and demonstration of understanding E-learning will be used in 2017 covering key compliance risks to targeted employees to ensure training is refreshed and to ensure that all new employees receive training relevant to their role.

Two initial modules covering “Anti-Bribery & Corruption Law” and “Competition Law” have been prepared, and scope of reach and results will be included in the 2017 Report.

SUSTAINABLE PROCUREMENTThe Procurement function has a key role to play in ensuring that Synthomer manages its wider supply chain in a way that supports our sustainability principles and goals.

Internal training for procurement personnel (such as that in relation to the Modern Slavery Act) sits alongside activities such as supplier auditing and monitoring, looking at safety and environmental standards, management and performance alongside factors such as quality, cost and reliability of supply.

Vendor approval and supplier auditing procedures have been established, with Purchasing Managers responsible for identifying and planning assessment of critical suppliers.

The Group will be looking at how we can more effectively monitor work in this area during 2017 into 2018.


>3 DAY LOST TIME ACCIDENT FREQUENCY RATES (ACCIDENTS PER 100,000 HOURS)

RECORDABLE INJURY CASE RATE (ACCIDENTS PER 100,000 HOURS)

OCCUPATIONAL SAFETYAlthough they are lagging indicators, actual accident rates remain a key comparative indicator of companies’ personal safety performance. As a Group we have for many years reported our performance on ‘over 3-day’ – “Reportable” – Lost Time Accidents as our key measure, but following several years of continued improvements in 2015 we switched to a broader “recordable injury” rate as our key metric, aligned with the widely reported US OSHA Standard. Recordable injuries are taken as any requiring more than first aid treatment.

The new Group had 18 recordable injuries in 2016 (this includes 3 that incurred at PAC sites during 2016 prior to Synthomer’s purchase) with a frequency rate of 0.30 per 100,000 hours worked, a 46% improvement on 2015 when 28 such incidents were reported. For the legacy site basis the improvement was even more significant, with only 10 recordable injuries.

Considering reportable lost time accidents on a like for like basis the Group’s reportable LTA rate improved in 2016 to give Synthomer its best ever performance, with 5 over 3 day accidents during the year. However, including full year data from the new sites there were 12 over 3 day accidents, giving a frequency rate of 0.20 per 100,000 hours worked.

Going forward we will also look at determining severity rates associated with any lost time injuries.

Whilst our performance is broadly in line with the figures reported by similar international chemical companies of our size we recognise that more is required to meet our commitment to having no accidents or injuries on our sites on a sustained basis.

The roll out of the “SHE Principles and Golden Rules” was a fundamental part of this, supported by workshops involving Site and SHE Leaders from across the Group to discuss safety culture and share learning and best practice.

The graphs show the trends for the recordable case rate from 2011 to 2016 and the >3 day LTA rate from 2000 to 2016. We are glad to say that the people who were hurt in these accidents in 2016 have recovered fully already and have returned to their normal work.

OCCUPATIONAL HEALTH & HYGIENEThe first two new Company SHE Principles introduced to sites during 2016 were ‘Look after Yourself’ and ‘Look after each Other’, showing our continued commitment to employee health and wellbeing.

This commitment was realised through further investment in our health surveillance standards, and additional promotion of occupational health and wellbeing.

In the UK, we made further enhancements to the clinical interpretation of our occupational health information to provide more risk based, job specific health surveillance relevant to the systems of work and potential occupational exposures pertinent to each employee. As well as statutory health surveillance the company also offers wellbeing assessments to ensure every employee is fit for their work.

We are pleased to report that there were no cases of disease attributed to occupational factors during the year.

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00 02 04 120806 1410 16

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Synthomer rate (legacy)UK CIA rate

Synthomer rate (new)

HEALTH AND SAFETY PERFORMANCE


RECORDABLE PROCESS SAFETY EVENT RATE (INCIDENTS PER 100,000 HOURS)

Health and safety performance continued

Globally we have introduced a ‘Corperformance’ programme, initially for senior managers, focussing on the implementation of lifestyle interventions enhancing employee wellbeing and productivity. Nutritional and exercise coaching is being used to establish a framework of individual goal setting which enables employees to transform their behaviour, positively impacting both work performance and personal achievements.

The year ended with a number of sites following the European Agency for Safety and Health at Work initiative promoting a sustainable working life and creating healthy workplaces for all ages. This supports the Europe wide issue of ageing workforces and longer working lives.

Employee health continued to be a focus during 2015, building on the work in 2014 using the CIA Sustainable Health Metrics Tool to provide a platform for the management review of occupational health. Work in this area resulted in our being shortlisted for the 2015 CIA Health Leadership Award.

PROCESS SAFETYThe effective management of process safety is essential to ensuring that the risks of having major accidents, with potentially devastating consequences for people (both inside and outside the company), plant and the environment, are as low as practicable.

We use our Accident and Incident Management System to record and monitor even minor process incidents and upsets as we recognise they could lead to significant incidents under different circumstances. These records are analysed and the lessons shared, internally and externally.

At the end of 2015 we refined our definitions for process safety events (PSE) to align them with the new International Council of Chemical Associations (ICCA) definition of a reportable PSE under Responsible Care®. Internally we now track four levels of severity for a PSE, focusing on root cause identification for the two most severe levels (Level 2 being equivalent to an ICCA Reportable PSE). We have chosen to adopt the Globally Harmonised System of classification to determine threshold limits for reporting losses of hazardous chemicals as PSE going forward.

Similarly to recordable case rate we are now measuring a process safety event rate, looking at the number of ICCA reportable PSE per

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100,000 working hours. This improved 35% from 0.26 in 2015 to 0.17 in 2016.

There were 10 events reported in 2016 across all sites that met the ICCA criteria, but none resulted in injury, significant plant damage or environmental contamination, and none of the events ranked higher than ICCA Level 1 severity.

Against our internal tier ratings 3 of the 10 were deemed Tier 1 owing to the material loss being more than 10x the reportable threshold. Two of the three Tier 1 incidents relate to losses of flammable materials that were reportable to the authorities. In one case a valve was left open following maintenance and in another a high level trip failed to operate, exacerbated by poor design meaning there was no effective level indication. The 3rd Tier 1 incident was a glycol loss from a gasket failure.

Corrective action was taken on all the above, including implementation of improved engineering controls and instrumentation.

As a result of reviewing the underlying failings that led to these events, and other less significant incidents, programmes of work are also underway in 2017 to carry out comprehensive process hazard analysis review, and improve management of change and permit to work systems and leadership.

Our Group Process Safety Standard and procedures were subject to comprehensive review and revision early in 2016, resulting in a clearer system design to ensure all parts of the Process Safety Lifecycle are being effectively managed.

Procedures and guidance draw on international standards and guidance from regulators such as HSE & TÜV, as well as competent organisations such as SAFed and EEMUA and IEC.

Group SHE auditing of sites, as mentioned earlier in this report, is also now more focussed on process safety. These audits look not just at site systems and procedures and the effectiveness of their implementation, but also look in detail at the barriers reported as being in place to protect, control and mitigate potential major accidents. The process also considers their design, appropriateness and maintenance through our so-called ‘deep dive’ process.


Health and safety performance continued

Training courses were run in-house on Hazard & Operability Studies (Hazop), alongside site specific support in a number of areas.

In 2017 two further weeks of training on the Institution of Chemical Engineers (IChemE) 5-day Fundamentals of Process Safety course have been scheduled for employees across all departments and all sites.

Work also started looking at line manager competency in relation to process safety, and there were ongoing site manager and site engineer competence assurance assessments undertaken by regional Operations Directors and the Group SHE Manager.

REPORTABLE SAFETY INCIDENTSThe overall number of reportable safety incidents increased slightly to 3 in 2016 from a record low of 1 in 2015.

Of these, two were chemical process safety loss of containment incidents reportable to the authorities and included in the previous section. The last related to failure of the chains on a forklift in the UK reportable under RIDDOR. There was no injury or damage caused by any of the incidents.

REPORTABLE SAFETY INCIDENTS (REPORTABLE TO LOCAL AUTHORITIES OR UNDER RIDDOR)

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0


TOTAL NET PRIMARY ENERGY USAGE (GIGA JOULES PER PRODUCTION TONNE)

MANAGING OUR ENVIRONMENTAL RESPONSIBILITIESThe Group is committed to minimising the environmental burden of our operations, targeting reductions year on year by managing and monitoring our performance, and reporting on the environment impacts that we measure. We believe in exceeding our statutory obligations where possible and in working with local regulators to achieve that goal.

We are proud of the fact that since 2000 we have reported ongoing reductions in each of our main environmental targets: global warming burden; energy and water consumption per tonne of production; and waste disposal from our sites, particularly targeted at reducing waste to landfill.

In 2014 we rebased our 10 year targets to 2005 actual levels for reporting purposes. We also set new 2020 targets for the above four metrics based on a 2012 baseline year, selected as it reflected the composition of the Group following the PolymerLatex acquisition in 2011.

With the acquisition of seven new sites in 2016, including those such as the monomer plant in the Czech Republic that has a wholly different energy profile to our core polymer operations, there was a need to establish a new baseline and approach to target setting.

At group level it has been agreed to continue with the short term reduction targets to 2020 against a new 2016 baseline, but with a focus on projects and efficiency gains that can be realised on the sites with the highest consumption levels – e.g. for energy six “tier 1” sites account for 73% of group energy usage. Capital plans to realise identified goals are part of sites’ broader Manufacturing Strategies, ensuring a holistic, balanced and sustainable approach is being taken to grow the business whilst limiting our environmental impact.

Site, regional and group performance is monitored on a periodic basis by operational management and reported quarterly to the Synthomer Group Board.

The following sections provide more information on the headline environmental performance of the Group.

ENERGYEffective energy management is core to ensuring long term sustainability of our business, and energy use by the Group remains a key performance indicator. Since 2012 consumption figures have included energy embedded in site services such as compressed air and nitrogen, cooling systems and cooling water where these are bought in rather than generated by our own plant.

Including full year data from the new sites the total net specific energy consumption (SEC, i.e. energy use per tonne of production) rose 29%, the majority relating to a new acquisition in the Czech Republic that produces monomers, acrylic acid and polymer dispersions. The site uses brown coal in the onsite power station as well as gas, and overall accounts for 24% of the new Group’s total energy consumption.

On a legacy site basis, absolute energy consumption (based on primary rather than metered electricity) was down 2.3%, but a 2.7% drop in production meant the specific energy consumption in GJ/tonne was 0.4% worse than last year.

Factors that negatively impacted performance included product mix at some sites where there was an increase in the manufacture of more energy intensive high solids SBR latex; an increase in natural gas usage for a waste gas thermal oxidiser unit following retrofitting work in Summer 2016 and new steam meters installed at another site highlighted a likely under-reporting of consumption in 2015.

Against this there was significant improvement seen on a number of sites as the benefits of energy projects were realised. Installation of new steam generators to replace old boilers at a plant in the UK during Q4 led to a 30% reduction per production tonne in gas consumption, and further efficiency gains have been seen a 3% improvement at one of our largest sites in Malaysia.

Better integration of energy projects within overall site manufacturing strategies is planned from 2017, and there will be a focus on “Tier 1” energy consuming sites – six sites accounting for 73% of Group metered energy consumption in order to improve from the broadly flat performance seen in recent years.

This is vital not only from an environmental sustainability perspective but also a business cost perspective. Energy costs remain a significant challenge – even with a drop in consumption for the legacy sites the costs rose 5.4% (9.1% on the same currency basis as 2015. The new sites added almost £9 million or 39% to the overall energy costs.

For the new Group structure electricity costs (direct and for imported services) accounted for 60% of the Group’s total energy bill.

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ENVIRONMENTAL PERFORMANCE


TOTAL WATER CONSUMPTION (M3 PER PRODUCTION TONNE)

ATMOSPHERIC ACIDIFICATION BURDEN (KGS SULPHUR DIOXIDE EQUIVALENT RELEASED PER PRODUCTION TONNE)

Environmental performance continued

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ATMOSPHERIC ACIDIFICATIONThe addition of a brown coal burning plant in the Czech Republic to the Group has had a significant detrimental impact on our reported sulphur dioxide (SO2) emissions, with a 5 fold increase in the level of SO2 released per tonne production in 2016 to 0.089 kg SO2 equivalent /tonne. On a legacy basis we achieved a 76% reduction to a Group best figure of 0.004 kg SO2 equivalent /tonne.

Medium to long term options are being looked at with regard to the overall sustainability of what is an inefficient means of steam generation (owing to age of plant and the fuel used) at the Czech site.

WATER USETotal water usage per tonne of production increased 14.6% in 2016, with the new Czech site accounting for approximately 20% of the absolute volume increase. Excluding the new sites the consumption per tonne was virtually unchanged.

Excluding river water (used for “once through” cooling and then returned to the river on a number of sites), water consumption per tonne improved by 1.1% on the new site basis but was 1.9% worse on a legacy basis.

Most sites in the Specialities Division saw improvements in water management, with one UK site in this Division reducing water consumption by 5.5% on a per tonne basis. One site in Germany reduced its river water usage for cooling by 19% through better process management. These gains were offset by increases in consumption on a number of sites in Malaysia and a 9% increase on a different site in Germany that consumes the most water of any in the Group.

As the majority of our products are water based dispersions some of the increases are down to product mix and volumes. Despite this, we have managed to halve our specific water consumption in the past 10 years and the strategy is to continue reducing usage of raw water as far as practicable. Opportunities to improve water efficiency will be built in to sites’ manufacturing strategies and environmental targets on a prioritised basis.

Some sites face potentially significant water constraints, and we have several projects being assessed looking to use on-site water capture not only to avoid production problems but as an environmentally preferable way of obtaining the water we use.

Following initial participation in 2015, we again voluntarily submitted information to CDP’s Water Questionnaire in 2016 – the process of data collection and review of site issues helped to identify potential risk areas and build better understanding of broader aspects of water management.

Reducing water use remains a focus for our sites, especially in areas where water supply is constrained. Efficient use of water is a key goal and the Group continues to target reduction in water use per tonne each year to ensure the longer term sustainability of our operations.


HAZARDOUS WASTE DISPOSED TO LAND (TONNES WASTE PER PRODUCTION TONNE)

NON-HAZARDOUS WASTE DISPOSED TO LAND (TONNES WASTE PER PRODUCTION TONNE)

TOTAL WASTE DISPOSED TO LAND (TONNES WASTE PER PRODUCTION TONNE)


WASTE DISPOSALConsidering only the legacy sites there was a 16% reduction in total waste generated in 2016 and a 13% reduction on a per tonne basis.

Including the new sites overall waste generation in 2016 increased by 33%, and on a per tonne production basis by 12%. The process at the new speciality plant in Italy generates a high proportion of hazardous waste which is currently not recoverable. The new French site generates a large amount of non-hazardous waste but 96% of this is recovered as energy or via recycling.

The absolute amount of waste sent to landfill rose just under 16% but was down on a per tonne basis by 3.1%. As a result of the sale of the South African business the reported 2016 hazardous waste to landfill dropped 27% in absolute terms and 39% on a per tonne basis.

There are ongoing challenges in finding alternative routes for recycling and reusing some of our waste streams that led to the amount of hazardous waste going to landfill increasing slightly for legacy sites (from 800 grams per tonne production to 940 grams per tonne production).

The addition of 7 sites to the Group led to the total amount of non-hazardous waste generated increasing by 12%, but reducing 6.4% on a per tonne production basis. For the legacy sites there was a 32% reduction in the absolute amount of non-hazardous waste generated, reflecting in part a reduction in demolition waste.

Considering the legacy sites, non-hazardous waste production per tonne of product in 2016 was 13% better than in 2015.

46% of the total non-hazardous waste generated is currently disposed of to landfill. 44% of all non-hazardous waste is recovered, recycled or burnt with energy being recovered. The remainder is municipal waste (a portion of which may be recovered).

Sites will continue to seek and develop waste minimisation techniques and environmentally acceptable disposal routes in 2017 with the aim of achieving our 2020 goals.


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OTHER ENVIRONMENTAL METRICSIn addition to these key indicators we monitor a number of other measures internally. Significant improvement has been made in all of these since 2000 and we are continuing to improve year on year in most metrics.

Examples include our phosphate, nitrate and COD releases as a combined eutrophication environmental burden factor. The addition of the new plants has had negligible impact on group performance in this area, with reported phosphate equivalent levels down to a reported 0.042 kg / tonne production (0.048 kg / tonne on a legacy basis).

Ecotoxicity levels in terms of metals (copper equivalent) were reported as 0.061 grams / tonne production (0.065 on a legacy basis). At some sites measurements are no longer required by the local regulator owing to sustained reductions shown over the past 15 years.

None of this would be achieved without the Group’s staff on all sites who have driven these improvements and whose aims are to produce better quality product, using more carefully husbanded resources, whilst producing less waste.

ENVIRONMENTAL INCIDENTSThe group monitors and reports environmental non-compliance based on either ‘reportable incidents to external authorities’ or ‘notifiable breaches of discharge consent’. 2016 saw a reduction in the number of such incidents from 10 in 2015 down to 5 within the new Group.

There were two reportable environmental incidents in 2016, relating to a loss of 50% ethylene glycol at a site in Germany which had no environmental impact; and one to a small loss of fuel oil at the site in Thailand. This did result in some basic soil remediation being required but had no lasting impact.

The total number of notifiable consent breaches dropped to 3 in 2016. As in previous years, the majority of breaches were minor component concentration breaches associated with the Group’s on-site effluents. 2 consent breaches at a site in the UK were related with air emissions and 1 consent breach in the US with waste water. None of these breaches caused environmental harm.

All the environmental incidents were investigated and required actions were put in place to avoid reoccurrence.

The Durban site in South Africa that was sold in Q3 2016 had three discharge consent breaches involving high mineral oil and COD. These are not reflected in the following chart.

CASE STUDY: OUR COMMITMENT TO THE ENVIRONMENT

Kluang is our original site in Malaysia and over the last few years we have worked to upgrade the facility to reduce our environmental impact and benefit the local community. In order to promote the use of natural rainfall and reduce our dependency on mains water, which can be scarce in Malaysia at certain times of the year, we initiated a capital project on land adjacent to the facility to increase the size of the existing rainwater reservoir to capture water which is then treated and used in our production processes. We also worked closely with the local Indian community and Malaysian Ministry of Education to move the Tamil school and associated temple, which previously were next to our plant, to a better location with upgraded facilities.

REPORTABLE ENVIRONMENTAL INCIDENTS (UNIT)

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The Group is committed to minimising the environmental burden of our operations, targeting reductions year on year by managing and monitoring our performance, and reporting on the environment impacts that we measure.


This section of Synthomer’s CSR report expands upon the information provided in the Group’s 2016 Annual Report on greenhouse gas emissions.

REPORTING PARAMETERSThe company reports environmental KPIs in the format recommended by the Department of Environment, Food and Rural Affairs (DEFRA), with Annual Reports containing data for each year since 2005 on a three year rolling basis. In 2013 the format was revised to comply with DEFRA’s guidance relating to greenhouse gas emission reporting requirements within the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.

The 2016 financial year reporting includes all manufacturing operations, all office locations co-located with manufacturing and those listed as contact locations in the annual report or on the company’s website. It does not include some very small locations such as home offices. These locations will have no material effect on the group’s overall GHG emissions, being estimated at considerably less than 0.1% of the group total.

GREENHOUSE GAS EMISSIONS

All known Scope 1 and Scope 2 emissions from manufacturing processes have been included. Specifically this covers (for Scope 1) direct GHG emissions from sources that are owned or controlled by Synthomer. These include emissions from fossil fuels burned on site, emissions from our own vehicles, and other direct sources such as estimates for the effects of the release of volatile organic compounds (VOCs) and refrigerant gases. For Scope 2 they include emissions associated with the generation of electricity, heating and cooling, or steam generated off-site but purchased by Synthomer, as well as other site services where these are provided by a third party (such as compressed air).

No estimate has been made of Scope 3 emissions, being those that would include indirect GHG emissions from sources not owned or directly controlled by Synthomer but related to our activities such as transmission and distribution losses for electricity purchased, employee travel, solid waste disposal, and wastewater treatment.

The only known direct emissions which have not been included are emissions of CO2 from on-site waste treatment facilities that are in place on several of our plants. Most sites in the Group do not use on-site biological treatment for their waste but generally use a mixture of on-site chemical treatment to reduce the concentration of the waste, followed by off-site biological treatment, often in municipal treatment plant where our effluent is mixed with other effluent streams. We currently have no data on this source of CO2 for either on-site or off-site releases, noting that releases from off-site treatment would not be regarded as Scope 1 or Scope 2. Estimation and/or measurement of these releases is a medium to long term objective as we work to further improve understanding of our total environmental impact footprint and work to reduce it.


Whilst a few sites have undertaken some fugitive emission work this has not been quantified at group level and these are not believed to have significant material impact on the overall figures reported.

The group have no known uses or releases of perfluorocarbons or sulphur hexafluoride. All releases of nitrous oxide or methane are associated with energy production and are not separately quantified, but are accounted for by the use of CO2e (equivalent) figures for the fuels in question.

The group continues to use emissions per production tonne as its intensity ratio. The data sources for emissions factors (CO2e) are those from DEFRA (dataset for 2016 reporting published in June 2016) and the IEA (International Energy Authority).

CALCULATION METHODSAll direct energy production from fossil fuels has been aggregated on a group wide basis and converted to CO2e by using the appropriate DEFRA emissions factors. No allowance has been made for possible country to country variation in calorific value or CO2 emission factors for primary fuels.

Electricity has been converted to CO2e on a country by country basis. For 2014 and 2015 figures, the factors provided by DEFRA for all operating countries were used. For 2016 factors from DEFRA were used for UK grid electricity and for overseas grid electricity factors have been taken from the 2016 IEA “World CO2 Emissions from Fuel Combustion” database.

As per UK Government guidance factors used for 2016 reporting are based on 2014 validated data. In preparing the 2016 annual report using the IEA emissions factors it has been noted that there is variance in some cases for the emissions from electricity factors used in previous years between DEFRA and IEA. However, figures for earlier reporting years have NOT been changed.

Several sites within the group now purchase certified “green” electricity. Electricity for these locations has been given a CO2e emissions factor of 0.00 in calculating energy related emissions totals. These sites were Oss in the Netherlands, Marl in Germany and the Ossett site in the UK.

Synthomer’s site in Stallingborough, UK takes most of its electricity from an exclusive contract with an adjacent waste incinerator operated by Newlincs. This electricity is certified as “Green” by the UK government. As a mixture of waste deemed both renewable and non-renewable it does not have a zero emission factor. For 2016 the applied emission factor for electricity from Newlincs is based around that determined for the site’s Climate Change Agreement (CCA) reporting of around 0.50 kg CO2e per kWh. Work is ongoing to validate the factors applied. The site is also provided with indirect heating in the form of hot water from Newlincs.

Greenhouse gas emissions continued

On a legacy site basis the Group saw a 9% reduction in total emissions and 6% reduction on a per tonne basis.

VOCs have been aggregated on a group basis and converted to CO2e using a factor of 11. This figure has been used by UK CIA member companies since 2005 and is at the upper end of the range for VOCs. Information on the release of refrigerant gases has been collected for 2011-2016. Releases of each individual gas have been aggregated each year to give a group release total and then converted to CO2e using the equivalence factors given by DEFRA for each gas. The emissions factors applicable to refrigerant release in 2016 have been updated in line with DEFRA’s adoption of the Global Warming Potential (GWP) factors from the IPCC 4th assessment report.

PERFORMANCE IN 2016The introduction into the Group of facilities that burn brown coal and heavy oil to generate heat and power has had a significant impact on our reporting emissions total. Compared to 2015 the overall emissions total (as tonnes of CO2 equivalent) increased by 48% and on a per tonne basis by 24%. If the Czech plant is taken out (whose emissions totalled over 90,000 tonnes CO2 equivalent), Group performance including the other sites acquired from Hexion would indicate a 4.9% increase in absolute emissions but a 12% improvement on a per tonne basis.

On a legacy site basis the Group saw a 9% reduction in total emissions and 6% reduction on a per tonne basis. This is part driven by the energy improvements noted on some sites, but also by changed grid electricity emissions factors. This reduction equates to almost 18,000 tonnes of CO2 equivalent emissions.

Changes in the emissions factors in different countries have a significant impact over which the company has no control. The latest IEA emissions factors used this year reflected the increasing proportion of renewable energy contributing to the overall energy mix in a number of countries. For 2016 reporting the emissions factor for Malaysia decreased by almost 8% and that for the UK by almost 11%. Only the Netherlands saw an increase in its grid emission factor.

Refrigerant losses in the larger Group were down compared to 2015, but owing to the refrigerants involved and changes to the emissions factors applied the CO2 equivalent total rose 10%.

Despite the addition of new sites, VOC emissions reduced by 17% in 2016 due mainly to better operation of the cryogenic VOC system in Harlow and the waste gas system in Pasir Gudang, Malaysia. Greenhouse gas equivalent losses related to VOCs are 90% lower than in 2012.


GLOBAL WARMING BURDEN (TONNES CO2 EQUIVALENT RELEASED PER PRODUCTION TONNE)

(INCLUDES CO2 FROM ENERGY GENERATION/USE)


05 06


07 09 11 13 15120806 1410 16

0.3

0.1

0.2

0.0

Actual (new)

REDUCTION OPPORTUNITIESSynthomer recognises the need to reduce GHG emissions and has set itself a target of reducing them by 4% (on a per tonne production basis) by 2020 against the new 2016 baseline, which is twice the rate at which we are targeting reductions in our energy use. The need to reduce GHG releases is underlined by the European Union’s Carbon Reduction Commitment (CRC), which requires a significant absolute reduction over the period to 2020 and then a minimum of an 80% reduction by 2050. Similarly Malaysia has set the target of growing their economies within current carbon emissions. As a company Synthomer plc remains committed to the control and reduction of all our GHG releases.

As part of this process we continue to look at opportunities to decarbonise our electricity supply, both in the UK and, based on availability, cost and reliability, in other territories where we operate.

Projects already identified for 2017 and beyond designed to improve energy efficiency and reduce emissions include installation of a new boiler at one UK site, several projects at one Malaysian site and processing changes at one German site that should yield annualised savings of over 25,000 tonnes per year of CO2 equivalent emissions.

ENVIRONMENTAL KPISThe UK Department for Environment, Food and Rural Affairs (DEFRA) first published guidelines for reporting environmental key performance indicators in 2006. The key measures suggested were energy use, emissions to air, waste disposal and water consumption, on an absolute and a per tonne basis. Synthomer has reported on these indicators for a number of years, and to aid transparency in environmental reporting we adopted DEFRA’s preferred format in 2008 for the annual report on our SD performance.

In 2013 DEFRA published updated guidelines for environmental KPIs and GHG reporting, in line with the new mandatory GHG reporting regulations and Synthomer data is produced according to this guidance.

Tables 1 and 2 on pages 25 and 26, present 2014-2016 KPIs and report on all the emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 (as previously published in the Annual Report) and other key metrics for water and waste.

Table 1 shows performance of the legacy business, whilst Table 2 reflects the new Synthomer business as of end 2016, with FY 2016 PAC site data included.

Notes explaining the basis of calculation for data in the table are included at the end, as are explanations of some adjustments to previously reported data following internal review.



LEGACY SITE PERFORMANCE 2016 2015

(restated)72014

(restated)7% change 2014 – 166

% change 2015 – 166

Energy consumption1

GJ 3,378,726 3,458,905 3,418,716 -1.2% -2.3%

Gas 662,374 701,901 737,416

Light oil 24,933 26,930 27,340

Heavy oil 0 0 0

Steam (metered) 776,768 746,797 701,117

Electricity (primary basis) 1,902,461 1,969,619 1,940,581

GJ/tonne production 2.629 2.618 2.634 -0.2% 0.4%

Emissions to air2

Carbon Dioxide (CO2) equiv. from Energy tonnes3 181,484 199,011 206,565 -12.1% -8.8%

Tonnes CO2 equivalent /tonne production 0.141 0.151 0.159 -11.3% -6.3%

Sulphur Dioxide (SO2) – (tonnes) 5.3 22.8 18.0 -70.8% -76.9%

Kilos SO2/tonne production 0.0041 0.0172 0.0139 -70.5% -76.3%

Nitrous Oxides (NOx) tonnes4 20.93 24.61 24.56 -14.8% -15.0%

Kilos NOx/tonne production 0.0163 0.0186 0.0189 -13.9% -12.6%

Volatile Organic Compounds (VOC) tonnes 151 222 185 -18.3% -32.0%

Kilos VOC/tonne production 0.118 0.168 0.143 -17.5% -30.0%

Refrigerant Releases (HCFC and others) Kgs 1,599 1,958 4,277 -62.6% -18.3%

Tonnes CO2 equivalent 5,719 5,383 11,816 -51.6% 6.2%

Kilos Refrigerant/tonne production 0.0012 0.0015 0.0033 -62.2% -16.0%

Total Carbon Dioxide (CO2) equiv. tonnes5 188,866 206,840 220,419 -14.3% -8.7%

Tonnes CO2 equivalent /tonne production 0.147 0.157 0.170 -13.4% -6.1%

Water usage

Cubic Metres (m3) 4,296,062 4,421,813 4,400,843 -2.4% -2.8%

Public potable supply 995,235 1,041,779 1,109,596

Raw water from river 1,732,558 1,835,948 1,739,245

Raw water from borehole 233,612 216,801 181,756

Raw water from other 1,334,657 1,327,286 1,370,247

m3/tonne production 3.343 3.347 3.390 -1.4% -0.1%

Waste management

Hazardous waste (tonnes) 7,947 7,547 8,523 -6.8% 5.3%

Hazardous waste sent off-site

Recycled – energy recovery 1,036 1,052 854

Recycled – separated – reprocessed 4,843 4,171 5,503

Incinerated – no energy recovery 621 1,010 878

Disposed by landfill 1,207 1,060 944 27.9% 13.9%

Other 196 198 239

Hazardous waste disposal on-site

Incinerated on-site with energy recovery 44 56 105

Haz. waste tonnes/tonne production 0.0062 0.0057 0.0066 -5.8% 8.2%

Non-hazardous waste (tonnes) 6,400 9,429 9,246 -30.8% -32.1%

Non-hazardous waste sent off-site


Recycled – separated, reprocessed 1,036 3,106 2,466

Incinerated – no energy recovery 2 3 4

Disposed by landfill 3,424 3,782 4,080

Other – municipality 903 1,486 1,822

Non-hazardous waste disposal on-site 0 0 0

Non-haz waste (tonnes/tonne production) 0.0050 0.0071 0.0071 -30.1% -30.2%

Total waste (tonnes/tonne production) 0.0112 0.0129 0.0137 -18.4% -13.1%

Production (tonnes) 1,285,117 1,321,070 1,298,158 -1.0% -2.7%



NEW SYNTHOMER PERFORMANCE (PAC SITE FY2016)2016 2015

(restated)72014

(restated)7% change 2014 – 166

% change 2015 – 166

Energy consumption1

GJ 5,328,447 3,458,905 3,418,716 55.9% 54.1%

Gas 1,375,411 701,901 737,416

Light oil 24,933 26,930 27,340

Heavy oil 4,452 0 0

Steam (metered) 792,785 746,797 701,117

Electricity (primary basis) 2,600,153 1,969,619 1,940,581

GJ/tonne production 3.374 2.618 2.634 28.1% 28.9%

Emissions to air2

Carbon Dioxide (CO2) equiv. from Energy tonnes3 299,123 199,011 206,565 44.8% 50.3%

Tonnes CO2 equivalent /tonne production 0.189 0.151 0.159 19.0% 25.7%

Sulphur Dioxide (SO2) – (tonnes) 140.6 22.8 18.0 681.3% 517.0%

Kilos SO2/tonne production 0.0890 0.0172 0.0139 542.2% 416.1%

Nitrous Oxides (NOx) tonnes4 112.54 24.61 24.56 358.2% 357.2%

Kilos NOx/tonne production 0.0713 0.0186 0.0189 276.6% 282.4%

Volatile Organic Compounds (VOC) tonnes 184 222 185 -0.5% -17.1%

Kilos VOC/tonne production 0.117 0.168 0.143 -18.2% -30.6%

Refrigerant Releases (HCFC and others) Kgs 1,681 1,958 4,277 -60.7% -14.1%

Tonnes CO2 equivalent 5,930 5,383 11,816 -49.8% 10.2%

Kilos Refrigerant/tonne production 0.0011 0.0015 0.0033 -67.7% -28.2%

Total Carbon Dioxide (CO2) equiv. tonnes5 307,081 206,840 220,419 39.3% 48.5%

Tonnes CO2 equivalent /tonne production 0.194 0.157 0.170 14.5% 24.2%

Water usage

Cubic Metres (m3) 6,060,411 4,421,813 4,400,843 37.7% 37.1%

Public potable supply 1,101,568 1,041,779 1,109,596

Raw water from river 3,003,354 1,835,948 1,739,245

Raw water from borehole 542,552 216,801 181,756

Raw water from other 1,334,657 1,327,286 1,370,247

m3/tonne production 3.837 3.347 3.390 13.2% 14.6%

Waste management

Hazardous waste (tonnes) 12,095 7,547 8,523 41.9% 60.3%

Hazardous waste sent off-site


Recycled – separated – reprocessed 5,017 4,171 5,503

Incinerated – no energy recovery 742 1,010 878

Disposed by landfill 775 1,060 944 -17.8% -26.9%

Other 4,294 198 239

Hazardous waste disposal on-site

Incinerated on-site with energy recovery 44 56 105

Haz. waste tonnes/tonne production 0.0077 0.0057 0.0066 16.7% 34.1%

Non-hazardous waste (tonnes) 10,549 9,429 9,246 14.1% 11.9%

Non-hazardous waste sent off-site


Recycled – separated, reprocessed 1,688 3,106 2,466

Incinerated – no energy recovery 19 3 4

Disposed by landfill 4,833 3,782 4,080 18.5% 27.8%

Other – municipality 1,073 1,486 1,822

Non-hazardous waste disposal on-site 6 0 0

Non-haz waste (tonnes/tonne production) 0.0067 0.0071 0.0071 -6.2% -6.4%

Total waste (tonnes/tonne production) 0.0143 0.0129 0.0137 4.7% 11.6%

Production (tonnes) 1,579,351 1,321,070 1,298,158 21.7% 19.6%



NOTES1. Data relates to site usage of all fuels, excluding transport of goods

to and from site and the movement of these vehicles on site. Internal transport on site is included.

2. Emissions to air have been calculated from the usage of all fuels, excluding transport fuel. They therefore include both direct emissions and indirect emissions related to bought-in electricity, steam, compressed air, cooling water etc., with the exception of transmission and distribution losses for electricity (These losses are in Scope 3, this report is for Scope 1 & 2 only).

3. CO2 equivalent emissions include contributions from CH4 and N2O associated with combustion.

4. NOx emissions are predominantly those from combustion processes. The CO2 equivalent Global Warming Potential contribution from these releases is already included in the CO2 from energy figure above.

5. The Total CO2e figure is the total of the CO2 equivalent from energy + the VOC contribution (assuming an average factor of 11 kg CO2e per kg VOC) + the refrigerant contribution.

6. Percentage changes are calculated from the base data and may differ slightly from changes calculated from the data in the tables because of rounding.

7. CO2e emissions for energy have been revised to more accurately reflect emissions linked to steam usage – the generic "heat and steam" emissions factors from DEFRA have been used for imported steam at our German and Finnish sites where exact data from the producer could not be obtained.


Synthomer PLC 45 Pall Mall London SW1Y 5JG United Kingdom

www.synthomer.com

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