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AkzoNobel Modern Slavery Statement 2017

This statement has been published in accordance with the UK Modern Slavery Act 2015 and the California Transparency in Supply Chains Act. It sets out the steps taken by Akzo Nobel N.V. and its subsidiaries, for and on behalf of all reporting entities within the AkzoNobel Group, up to December 31, 2017, to prevent modern slavery in its business and supply chain.

Introduction

Slavery, servitude, forced labor and human trafficking (modern slavery as defined in the UK Modern  Slavery Act 2015) are infringements of human rights which have a profound, negative impact on  people’s lives. AkzoNobel has a zero tolerance approach to modern slavery of any kind. We define  modern slavery within AkzoNobel to include child labor, debt bondage, forced labor, human  trafficking, servitude, slavery and slavery-like practices. 

At AkzoNobel, we understand that through our roles as employer, manufacturer, business partner and  member of many communities, we can potentially directly and indirectly impact the lives of millions of  people. While we are committed to making a positive impact through our products and our community  programs, we are aware of the potential negative impact we might cause, contribute to or be linked to.  We recognize our responsibility to respect the human rights of all stakeholders across our value chain  and are committed to actively and systematically assess (potential) human rights impacts and take  action where needed to ensure our impacts on people’s lives are as positive as possible.   

As part of our core principles and in line with the United Nations Guiding Principles on Business and  Human Rights (UNGPs), we are committed in our operations and across our value chains to  respecting all internationally recognized human rights as set out in the International Bill of Human  Rights (consisting of the Universal Declaration of Human Rights, the International Covenant on Civil  and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and in  the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.  We support the Organization for Economic Co-operation and Development (OECD) Guidelines for  Multinational Enterprises. We expect all our business partners to respect human rights and apply  equivalent principles, and we seek to support them actively in their implementation where needed. 

We encourage our colleagues, business partners and people affected by our activities or products to  raise complaints and grievances about any potential human rights concerns. We address these  complaints and grievances fairly, in confidence and in accordance with laws. You can raise  complaints and grievances through our Speak Up! website.  

Our business and supply chains 

AkzoNobel is a leading global paints and coatings company and a major producer of specialty  chemicals. We supply essential ingredients, essential protection and essential color to industries and  consumers worldwide. In 2017, the turnover for the group was 14.575 billion.       

Headquartered in Amsterdam, the Netherlands, we have approximately 45,400 people in around 80  countries, while our portfolio includes well-known brands such as Dulux, Sikkens, International,  Interpon and Eka. We are dedicated to energizing cities and communities while creating a protected,  colorful world where life is improved by what we do. 

AkzoNobel purchases and sells a wide array of diverse products catering to many customers in many  different markets all over the world. Our supply chains are long and often complex. As a result, the  company has tens of thousands of suppliers, large and small. While sourcing is partially centralized  and key products and large volume products are sourced company-wide, managing our supply chain  will continue to be a significant challenge. 

Policies and contractual controls 

AkzoNobel’s policies include principles on how its employees and business partners should respect  human rights. Our Code of Conduct states that we will not tolerate abuses of human rights, whether at  the company or across our value chain, and that we will take any adverse impacts on these rights  very seriously and act accordingly. Our contracts with suppliers require compliance with all applicable  laws. Policies are developed by experts at the company and signed off at Executive Committee level.  For example, we also have a specific policy on child labor and do not employ people under the age of  16, irrespective of whether local laws provide for a lower minimum age. Each year, management in  the organization needs to certify compliance with our Code of Conduct and policies. If deficiencies are  noted, they must set and execute actions to remedy them.                     

We operate a whistleblowing mechanism known as SpeakUp! with supporting processes and staff.  This mechanism is available for both employees and third parties, including suppliers and their  employees. People are encouraged to report any concerns of wrongdoing, including human rights  violations such as modern slavery. All reports are investigated and appropriate action is taken. 

All our business partners are required to sign and comply with our Business Partner Code of Conduct  (or confirm that they apply similar business principles) before engaging in business with us, which  includes a commitment to avoid impacting people’s human rights, and to apply principles of the  International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work.  The code explains, for example, that people should not be employed against their will, transported for  exploitation, engaged in slavery or servitude, nor deprived of their rights. In addition, legal minimum  age requirements – as outlined in the relevant ILO conventions and the laws of the countries of  operation – should be adhered to and children under the age of 16 should not be employed. The code  is available in 21 languages.           

A signing requirement of our Business Partner Code of Conduct was introduced and currently 97% of  the product related (PR) spend and 86% of the non-product related (NPR) spend are covered. 

In 2017, we rolled out a new Business Partner Compliance Framework (“the Framework”) throughout  the organization. The Framework will provide for a company-wide, risk-based screening of business  partners, both on the supply side and sales side. The scope for screening. which is supported by a  third-party screening system, includes adverse media which covers human rights and modern slavery  related issues.   

Due diligence and audits of suppliers and supply chain 

AkzoNobel is fully aware that multiple risks come with a complex and long supply chain, including the  risk that modern slavery may exist in these supply chains. The company has taken various initiatives  to address this risk and will continue to assess their effectiveness to ensure these risks continue to be  mitigated. 

Supplier sustainability framework

We work together with our suppliers to create a sustainable supply database. Our supplier  sustainability framework continuously monitors the sustainability level of our suppliers, including  human rights. The framework has three formal processes in place to ensure compliance, manage  risks and promote supplier development. Two of them include integral human rights monitoring  processes and are described below.  

(1) Supplier Support Visits (SSV) 

In 2007, the SSV program was introduced. It was designed to develop long-term local suppliers in  emerging markets by raising their capability and performance. The SSV program is an important  supplier management tool. The program is risk-based and focuses on critical suppliers. Supportive  visits are carried out by teams from Procurement, and Health, Safety and Environment (HSE). Formal  follow-up visits by these teams are conducted to verify implementation of agreed plans and overall  progress. In order to ensure continued development of sustainable supply chains in emerging  markets, selected approved SSV suppliers continue their sustainability journey by entering  AkzoNobel’s third party assessment and audit programs. Awareness of, and compliance with,  corporate social responsibility, including modern slavery, is monitored with continued support from  local, cross-functional AkzoNobel teams. 

(2)Together for Sustainability (TfS) 

TfS is an industry initiative made up of 20 leading global chemical companies and continues to  expand. It aims to improve sustainability practices within the global supply chains of the chemical  industry, building on established global principles such as the United Nations Global Compact, UN  Guiding Principles on Business and Human Rights and the Responsible Care Global Charter. With  TfS, we aim to implement effective, leading edge practices across the industry. We are implementing  standardized global sustainability assessments and continue to engage independent, third parties to  conduct announced audits of our suppliers, which incorporates a review of their social compliance  program, including respecting human rights.        


The results of our TfS assessments and audits allow us to identify common areas for improvement  and focus improvement activities relating to the suppliers that are assessed through the platform.  Improvement areas include the introduction of a formal reporting system on our suppliers’ sustainable  procurement performance and business ethics issues, including human rights. TfS assessment of our  suppliers covered more than 63% of spend in 2017, while the average score improved by 3%,  including a positive impact on the human rights score.   

Read more about our supplier sustainability framework in our annual report and on our business  partner engagement website.   

Assessment of modern slavery risk within our supply chain 

We are aware that multiple risks come with complex and long supply chains, including the risk that  modern slavery may occur in these supply chains. As an outcome of the human rights risk  assessment which resulted in our salient human rights issues, we recognize that there is an inherent  risk of modern slavery in global supply chains, including our own, and particularly as we move into tier  two and onwards (indirect) suppliers.    

In 2017, we started due diligence into several raw material supply chains that are identified as high- risk in impacting human rights, particularly in terms of (salient issues) health and safety, working  conditions and modern slavery. The current raw materials in scope – which we mostly procure  indirectly – are barite, cobalt, copper, cotton linters, mica minerals, palm oil, talc and tin. These  materials are prioritized and brought in scope with the help of information provided by NGOs. The  objective of this due diligence is to increase the traceability of the materials in scope back to the  smelter, refinery, mine of origin or plantation and assess whether our procured materials are sourced  in a sustainable manner with no adverse impacts on human rights.                 

Training 

Training on our Code of Conduct (which includes respect for human rights) and grievance mechanism  are mandatory to all employees of AkzoNobel. All employees must have completed our Code of  Conduct training and confirm that they have understood and acted in accordance with the Code of  Conduct in their annual performance evaluation form.  

Incentives 

Sustainable performance, which includes respect for human rights, is incentivized through the targets  set in AkzoNobel’s short term incentive for all executives and middle managers. This includes the  company’s efforts with regard to respect for human rights.          

This statement was approved by the Board of Management and Executive Committee of Akzo Nobel N.V. This statement covers Akzo Nobel N.V. and its group companies, with reporting companies proceeding with their own Board approvals according to the UK Modern Slavery Act.  It has been

adopted by the Board of J.P. McDougall & Co. Limited on 26th June 2018.


Signed,


Director

26th June 2018

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