Corporate Social Responsibility

Introduction
2010 marked the end of the first period of Yule Catto’s commitment to the Chemical Industries’ Sustainable Development goals and therefore provides an opportunity to look back over a longer period at the Company’s environmental and safety performance. The commitments were signed in 2005 but related to our performance over the first decade of the 21st Century. Over that period the Group’s performance has sharply improved: in 2010 we emitted less than 1% of the sulphur dioxide we released in 2000; our personal safety performance as measured by Reportable Lost Time Accidents (those involving over 3 days absence from work) has improved by a factor of 3 over the decade; our performance on all lost time accidents is now over 25% better to that achieved on average by the European Chemical Industry; and our energy consumption per tonne has reduced by a third. On all the Sustainable Development measures used by the Group, the decade ended with performance significantly better than the targets set. All of this is a tribute to the hard work done by our employees to ensure ever safer working on our sites and continuing improvements in the Group’s environmental performance.

Progress was maintained in many areas in 2010 with further improvements in measures such as ‘Near Miss’ reporting, water use and the release of both sulphur dioxide and nitrogen oxides to the atmosphere. However on a number of other measures our performance did not keep up the rate of improvement seen in recent years and on energy and reportable accidents, performance was slightly worse in 2010 compared to 2009.

Our Policy Commitments
Yule Catto remains committed to both the global chemical industries’ Responsible Care® initiative and to the principles of Sustainable Development as set out in the UK Chemical Industries Association (‘CIA’) Sustainable Development (‘SD’) guiding principles.

Responsible Care® aims to improve and enhance the chemical industry’s Safety, Health and Environmental (‘SHE’) performance, year on year. Yule Catto has been committed to Responsible Care® since the 1990s and this commitment remains at the core of our efforts towards excellence in Corporate Social Responsibility. All Yule Catto sites are required to adhere to these principles and actively support the Group’s efforts to achieve continuous improvement in our SHE performance.

The Yule Catto Group has been committed to the CIA’s SD guiding principles since they were published in 2005 and we have reported annually against the targets set out in those principles each year since then. The commitment was reconfirmed in 2010 when the SD principles were re-signed by the current Chief Executive and the Chairman of the Yule Catto Board. The SD principles are followed by the Group’s sites around the world and are used both to set annual improvement targets, especially for our environmental performance, and to help the Group to define its route to a safe and sustainable business. Yule Catto’s principles include a strong commitment to open reporting of our environmental performance, reflected in this annual report, and full respect for the people and communities amongst whom we work.

SHE performance and achievements during 2010
The long-term performance of Yule Catto against our targets and metrics remains very good although the performance in 2010 slipped back in a number of areas when compared to the excellent results achieved in 2009. Of the five ‘headline’ measures used to monitor Group performance two showed improvement in 2010 whilst three fell slightly, though all would have been ‘best ever’ performance 2-3 years ago. ‘Near Miss’ reporting – a leading indicator of both staff involvement and sites’ intent to spot and remove hazards – improved again with all sites achieving over 3 ‘Near Miss’ reports per employee during the year. Over the Group as a whole the rate improved to nearly 5 ‘Near Misses’ per member of staff – an excellent performance. Our consumption of water also fell both in absolute terms and as measured by usage per tonne of production. The Group’s water usage is now only half what it was at the beginning of the decade.

The number of Reportable Lost Time Accidents (‘RLTA’) increased compared to 2009 with the Group’s RLTA frequency rate increasing to 0.36 per 100,000 hours worked. The quantity of waste disposed to landfill increased significantly as we remediated a number of sites and sent material previously located on site for off-site disposal. We anticipate this situation will continue into 2011. Excluding this one-off situation waste from ongoing operations declined again in 2010. The Group’s energy consumption increased somewhat during the year, though the performance still gave the Group its second best performance ever and meant that the Group as a whole produced over 3 tonnes of product using the same quantity of energy used to produce 2 tonnes of product in 2000.

On many other measures environmental performance improved: our measured discharges of heavy metals are only 25% of what they were in 2008 and less than 4% of the figures for 2000; our releases of acid gases to atmosphere reduced again and are now much less than 1% of their 2000 values; and our releases of both carbon (as carbon oxygen demand) and phosphorous to water were lower than ever before.

Following improvements to our measurement systems and increased output our recorded discharge of Volatile Organic Compounds (‘VOC’s’) has increased again in 2010. Projects to abate these releases are at an advanced design stage and the abatement plants should be fully operational by the end of 2012.

The Yule Catto Board and the Group Executive Committee continue to monitor performance in all these areas and provide leadership in driving the Group to continued improvements across all aspects of SHE performance.

Managing Safety and Environmental performance
Safety and environmental performance is fully integrated into Yule Catto’s management structure and is always a line management responsibility. Staff at all levels have to manage their own health and safety performance and take care of those around them, as well as managing the SHE performance of all those for whom they are responsible. To assist in this management process, the Group has a set of SHE Management policies and Procedures which make up the Yule Catto SHE Management System (‘SHEMS’). This system has been extensively revised and extended in 2010 to cover most areas of SHE performance and now provides comprehensive coverage of the procedures Yule Catto expects all sites to have in place. During 2011 and 2012 sites will be implementing policies and procedures which ensure these practices meet the Yule Catto SHEMS expectations.

The Group also has an Accident and Incident Management System (‘AIMS’) to assist in the management of all actual events and all ‘Near Misses’ throughout the Group. The system provides automatic e-mail alerts to senior management of significant events, and provides a mechanism for storing and sharing the learning gained from accident and incident investigations.

SHE performance is always a primary duty for management at all levels in the Group. The practices adopted in previous years remain a cornerstone of our efforts towards continuous improvement in SHE performance. The practices include:

Health, Safety and Accident performance
The Group’s performance on Reportable Lost Time Accidents (‘RLTAs’) declined in 2010. There were 15 RLTAs in the year resulting in a rise in the Group’s RLTA frequency rate from 0.235 to 0.36 per 100,000 hours worked (100,000 hours is, very broadly, a working lifetime). However, even this rise meant that 2010 was the third best year in Yule Catto’s history. In 2010 a Yule Catto employee was three times less likely to have a reportable accident than they were in 2000. The number of accidents resulting in less than 3 days lost time (‘LTA’s’) did not change between 2009 and 2010, which meant that the Group was still comfortably below the frequency rate for all lost time accidents reported by the European Chemical Industry Confederation, (‘Cefic’). The UK chemical industry remains amongst the safest manufacturing industries in the world and the Chemical Industries Association (‘CIA’) collects data on its member’s performance. Yule Catto aims to be at or below the average frequency rate for CIA member companies, in all our operations around the world.

Process Safety and reportable safety incidents
Although already at low levels in 2009 there was a fall in the number of significant, reportable safety incidents in 2010. By definition process safety incidents have the potential to be damaging to people, plant and the environment and are always subject to rigorous investigation.

The four process safety incidents which occurred in 2010 included a fire at Synthomer’s Stallingborough plant; a nonstandard reaction in a reactor at Synthomer’s plant in Vietnam, which caused the contents of a vessel to be relieved through the emergency vents; the loss of a significant amount of flammable material when a valve was left open at the base of an vessel during a filling operation; and a decomposition in a drier at William Blythe, which released a significant volume of oxygen into the plant. There were no personnel injuries in these incidents and only minor product releases which caused no lasting damage to the environment. Recognising the importance of process safety, staff in South Africa and Malaysia attended the UK Institution of Chemical Engineers (‘IChemE’) Process Safety training course when it was run in those countries. Yule Catto participated in the production of this course which was run in-house for 25 members of staff from across our European and Saudi Arabian operations. Two further in-house courses have been arranged for 2011 in Europe.

Major safety improvement projects were implemented during the year in Vietnam and South Africa. These projects upgraded and significantly improved the reactor venting systems on both plants and will enable both sites to operate with an enhanced level of safety in the future.

Yule Catto participated in the production of a new Process Safety course by the UK Institution of Chemical Engineers (IChemE). IChemE ran the course several times during the year and Yule Catto sent a number of delegates to attend. Further staff training will be carried out in 2010.


Occupational Health & Hygiene
For the second year in a row there were no cases of occupational disease reported by our sites around the world. This is an excellent result especially as a number of the materials handled on our sites, notably in Pharmaceutical Division, are known to be potent sensitising agents. We achieve this by limiting the exposure of our staff to the chemicals they handle, using the standard hierarchy of removal, reduction, control and protection. Given the complex and precise chemistry of our processes it will never be possible to remove all hazardous chemicals from our sites and this means that control of exposure by engineering means, backed up by the extensive use of Personal Protective Equipment (‘PPE’), will always be a major concern for operational and SHE staff on our sites. To assist in the correct assessment of chemical exposure risk the Group’s assessment program, based on the principles of the UK Control of Substances Hazardous to Health regulations has continued to be rolled out to our sites in all divisions. Assessment of the adequacy of controls at site level, and the provision of advice on how to improve controls on chemical exposure, has continued to be a matter of discussion during the Group SHE audits.

The health of our staff is monitored by a comprehensive set of medical arrangements on all of our sites. Staff who work with chemicals are provided with regular medical examinations by trained occupational health nurses or doctors. Whilst always respecting medical confidentiality, the doctors who provide the service in each country inform the local company in the case of a reportable disease which could be caused by a work activity. They are also asked to inform the company if their overview of the health of our staff causes them concern.

Audit programme
The SHE performance of all Yule Catto sites is audited by an in-house team on a 2-year rolling cycle to provide senior management – at site, Divisional and Group level – with a picture of the fundamental SHE performance of Group operations. The audits, which incorporate a scoring system, are based on the principles of Responsible Care® management and are used to provide guidance to sites on areas for improvement. The results of the audits are monitored closely by the Group Executive Committee who are committed to achieving high standards of SHE performance on all Yule Catto sites. During 2010 additional resources were allocated to the audit process to ensure that problems were adequately assessed and in 2011 additional resources are being allocated at both site and Group level, to improve performance where problems have been identified.

Asset protection and insurance inspections
An incident at Langelsheim in late 2009 and the fire at Stallingborough in 2010 meant that, for the first time for a number of years, the Group has had significant insured losses. These losses have been carefully managed with our insurers, a process which has been considerably helped by the close co-operative work carried out between Yule Catto and our insurer’s surveying team, who visit our sites on a 2-year cycle.

These biennial insurance surveys serve as a ‘sense check’ on our own internal audits and have pointed out a number of areas for possible improvement on Group sites. Many of the possible improvements have been addressed, allowing an improvement in our insurer’s rating of our risk profile. This improvement, and a commitment to continuing to improve over the next few years, has helped to keep control of the future cost of our global risk insurance, which has fallen by one third over the past six years.

Regulatory Affairs: REACH and GHS
The Registration, Evaluation, Authorisation and Restriction of Chemicals (‘REACH’) regulations have been in force for over 2 years now and their impact has begun to be felt not only by the chemical industry in Europe but also by the users of our products. 2010 saw the first of the registration deadlines come into force with all chemicals manufactured at over 1000 tonnes per annum requiring to be registered, as well as a series of chemicals which were regarded as being of ‘high concern’. Although the great majority of Yule Catto’s products were exempt from the registration requirements, being polymers, we did have to register some materials either because they were monomers used in products imported into the EU or because they were directly manufactured materials. All of the registrations required by each of the Divisions were completed successfully, and the registrations confirmed by the responsible body, the European Chemicals Agency (‘ECHA’).

The first registration deadline in REACH was also the first deadline for notification of the hazard classification and the labelling of all materials sold in the European Union under a second European Directive. This directive, which was implemented across the EU as the Classification, Packaging and Labelling (‘CLP’) regulations, came into force on 20 January 2010 and implemented the United Nations Globally Harmonised System (‘GHS’) for the classification and labelling of all chemicals. Under the regulations, all hazardous chemicals sold in the EU had to be notified to ECHA, together with their hazard classification and the labels which would be attached to all packages of the material. At the same time the rules for classification were changed, as were the symbols which must be used to convey hazard information. Polymer dispersions and the latex emulsions produced by the Group are classified as mixtures and are not therefore within the scope of the regulations until 2015. This meant that Polymer Division only had to notify 52 raw materials and 1 manufactured substance by the 1 December deadline but essentially all the products of the other Divisions had to be re-assessed, re-labelled and notified. Group Companies had to modify their internal processes to deal with all the revised information coming from our suppliers, and give extensive training to staff who have to deal with chemicals which now have different labels attached. This was done successfully.

GHS is being introduced in most other countries around the world over the next few years and a number of countries are introducing systems similar to REACH. Our experience in Europe, dealing with REACH and GHS, puts the Group in a good position to deal with these changes as they occur.

Sustainable Development Performance Report 2010

Managing Our Environmental Responsibilities
Yule Catto is firmly committed to the concepts of SD. As a company, Yule Catto was one of the initial group of signatories to the programme of SD goals put forward by UK CIA to its member companies in 2005. The Company’s commitment to these SD goals has been shown by a continuous record of investment in environmental improvement and a continuous record of achievement against the targets set. This has led to a significant reduction of our environmental impacts since 2000. Although we are now at the end of this 10 year improvement cycle, Yule Catto remain committed to continuing advances in SD performance and the Company will be proposing a further set of targets for the next 5 year period during 2011.

Not all of the Group’s measures of our SD performance are recorded in the graphs presented here. A good number of the other measures which we use internally also show very significant improvement over the last 10 years. As examples: our releases of nitrogen oxides to air have fallen by more than 80% per production tonne over the last 10 years; our releases of phosphorous to water have fallen by over 75% over the same period; and our releases of heavy metals are down from 4.5 gm/tonne to 0.147 gm/tonne, a better than 96% reduction. All of these have been achieved by incremental improvement in the operational systems on our sites, investment in improved equipment for environmental control, and of course everimproving performance by our site staff, to give better quality product, produced with more carefully husbanded resources, whilst producing less waste.

This record of success is reflected in all of our SD measures which have improved considerably since 2000; indeed all are well ahead of the targets we set for improvement over this period. However, on 3 measures the Group performed less well in 2010 than in 2009, though the performance was still considerably better than in earlier years and below target. The measures which performed less well were waste production, energy use and VOC releases. In the case of VOC releases this reflects the improved measurement methods used from 2009 which give a much better estimate of actual releases from our processes; and in the case of waste it reflects the need to deal with legacy wastes, dating back 40 years, on one of our sites.

Energy
Although 2010 saw an increase in energy use per tonne compared to 2009, it was still easily the second best year ever for energy consumption across Yule Catto. Over the 10 year period the Group’s energy consumption per tonne has improved such that the energy used to make 2 tonnes in 2000 now makes over 3 tonnes of product. Compared to our 10-year SD commitment energy consumption was 30% better than the target set. The increase in energy use was widely distributed across most of the Group’s sites. It partly reflects lower volumes and changing products mix but this is an area where Yule Catto remains committed to further significant improvements in both specific energy use and de-carbonisation of our energy supplies. We will be proposing new Group energy targets during 2011 for the next 5 year period which will reflect these commitments.



Global warming
Both of the main contributors to Yule Catto’s global warming performance moved adversely in 2010: the Group’s energy performance per tonne was worse than 2009 (discussed above) and the quantity of VOCs released also increased. The quantity of VOCs increased for the second year in a row, mainly due to an increase in the production of nitrile rubber for the gloves market in Malaysia. The manufacture of this grade of latex is inherently more likely to give rise to the release of VOCs than other materials we produce. There were also higher releases at our Stallingborough plant in the UK, again associated with the grades of material being produced and higher production levels. Although these releases contribute to the environmental cost of the Group’s operations we have not been able to detect any adverse environmental consequences locally from the materials released. None the less at both of these plants there are active projects to abate the releases and these are expected to be fully implemented by the end of 2012.

Although the performance in 2010 was disappointing the longer term picture is still of continuing improvement in the Group’s releases of greenhouse gases with only the period from 2007-2009 being better than the figure for 2010. Yule Catto beat its 10-year target by 16% and improved by 37% over the decade.


Atmospheric Acidification
The Group’s contribution to atmospheric acidification was reduced by a further 2.6% in 2010 compared to 2009. Although the absolute change is small compared to the very large decreases in previous years – achieved by significant capital investment in flue gas scrubbing at the Holiday Pigment’s sites which Yule Catto formerly owned – it represents a further 750 kg reduction in sulphurous gases emitted by Group sites. The Group emissions are less than 0.8% of what they were at the beginning of the decade and less than 1.6% of the 10 year target for 2010. The emissions which remain are concentrated at two of our sites: these releases represent 90% of the Group total. The Group will be examining these releases in 2011 to see if abatement systems would be appropriate or if other measures can be taken to reduce them.


Water use
Yule Catto’s water consumption fell again in 2010, both in the absolute quantity of water used and by a further 2.75% on a per tonne basis. This reduction helps to ensure the long-term sustainability of our business as water is an increasingly important and sometimes scarce resource in many regions of the world. Water supply can be a significant constraint on both industry and agriculture. Yule Catto sites are generally in areas where water supply is not a constraint and we are fortunate to have relatively reliable sources of both potable and process water for our sites. This security of supply is especially important for Polymer Division where water is not only vital to the safety of our processes but where the great majority of our product is sold as a dispersion in water. Water supplies were a constraint during the year at our Malaysian site and action has been taken to ensure that a reliable piped supply will always be available in future. In a number of cases our supplies of water come from our own renewable sources. Where we have this type of supply we monitor the source carefully so that we can be certain that it is not being depleted.


Waste disposal
As noted above hazardous waste disposal increased in 2010 as we rectified historical issues. Despite this setback the hazardous waste disposal to landfill from Group sites in 2010 was still only 27% of 2000 levels and only 35% of our SD target. This long term achievement is more impressive when the re-classification of many formerly non-hazardous wastes as hazardous waste is taken into account.


The cessation of use of the on-site landfill at Kluang, Malaysia in February 2010, which was only used for non-hazardous waste, meant that the quantity of non-hazardous waste sent to landfill dropped by over 60% in 2010. Alternative methods of disposal have had to be found and these have generally involved off-site disposal with waste streams sent as hazardous waste. However the excellent work done by sites in finding alternative outlets for material previously sent to landfill, which in one case has even involved the recovery of previously dumped material, has reduced the quantity disposed of in this way by 85% compared to 2000.


Environmental incidents
The number of environmental reportable incidents increased slightly between 2009 and 2010. The incidents reported are either unforeseen releases, mainly spillages on site which have managed to circumvent the site’s containment system; or are routine releases from our Effluent Treatment Plants (‘ETP’) which have breached their permitted limits. All these incidents have been investigated and appropriate remedial actions taken to reduce the chance of the incident being repeated. Although all such incidents are matters of concern to Yule Catto, none of the incidents in 2010 have led to any noticeable environmental damage being reported to any Group company. Two of the incidents were in Durban, South Africa where the site has plans to construct new ETP during the coming year. This will considerably improve the quality of the effluent routinely released and reduce the chances of exceeding the release limits in future, even if the local authorities further tighten the permitted releases from the plant.


Environmental KPIs
The UK Department for Environment, Food and Rural Affairs (‘DEFRA’) 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. Yule Catto has reported on these indicators for a number of years, and to aid transparency in environmental performance reporting Yule Catto adopted DEFRA’s preferred format in 2008 for the report on our 2007 performance. This format is used in the table below which gives the data for the period 2008-2010.