Fiscal 2012 Sustainability Overview
automotive appearance products earth day NATRIANCE education natrosol™ hydroxyethylcellulose ™ extracts vision Responsible Care* monitoring and control system Valvoline NextGen™ ongUARD™ ENVIREZ™ ultrasonic water treatment unsaturated polyester resins SONOXIDE™ global motor oil ASHLAND specialty chemicals innovation adhesives Enviroshine™ environmental stewardship SOyad ™ community 2012 Sustainability Overview With good chemistry great things happen.™ Contents Profile........................................................................................................................................................................................................... 3 Strategy and Analysis............................................................................................................................................................................... 3 Organizational Profile............................................................................................................................................................................... 6 Report Parameters..................................................................................................................................................................................... 9 Governance, Commitments and Engagement........................................................................................................................... 10 Economic Summary......................................................................................................................................................................... 13 Economic Performance Indicators.................................................................................................................................................... 13 Environmental Summary............................................................................................................................................................ 15 Environmental Performance Indicators.......................................................................................................................................... 15 Labor Practices and Decent Work Summary............................................................................................................ 19 Labor Practices and Decent Work Performance Indicators.................................................................................................. 19 Human Rights Summary............................................................................................................................................................. 22 Human Rights Performance Indicators........................................................................................................................................... 22 Society Summary............................................................................................................................................................................... 23 Social Summary Performance Indicators....................................................................................................................................... 23 Product Responsibility Summary....................................................................................................................................... 25 Product Responsibility Summary....................................................................................................................................................... 25 GRI G3 Index........................................................................................................................................................................................... 26 Ashland Inc. Fiscal 2012 Sustainability Overview Profile 1 Strategy and Analysis 1.1 CEO statement Track record. It’s what sets apart good companies from the truly great. It’s the ability to deliver sustained sales and earnings growth, regardless of the economy or competition. And ultimately, it’s how our success will be measured in transforming Ashland into the world’s best specialty chemical company. But when we talk about the importance of building a track record, it extends well beyond Ashland’s financial performance. It goes to the very core of who we are and what we do as a responsible, highly ethical company. It centers on our commitment to the basic elements of sustainability – people, products and planet. To be viewed as the best, Ashland must be a socially responsible partner to our employees, our customers and our local communities. We are intent on building a legacy of meaningful contribution and progress in the area of sustainability. You will find tangible examples of that commitment demonstrated every day in our research labs, technical centers and manufacturing facilities around the world. It is there you will discover our global employee teams hard at work, developing breakthrough chemistries that help our customers succeed while operating more sustainably. Consider that Ashland Specialty Ingredients has received international recognition for a product that improves the freeze-thaw stability of paints. With this special surfactant, paint producers can lower or eliminate the glycol content in their formulations, making the paint more environmentally friendly. Within Ashland Water Technologies, our Soyad™ wood-bonding adhesive is helping a growing number of customers, including furniture makers, improve the sustainability of their products. Formulated using soy flour and containing no formaldehydes, Soyad is a past winner of a Presidential Green Chemistry Challenge Award by the U.S. Environmental Protection Agency. Promoting more efficient energy solutions is another opportunity. Ashland Performance Materials has joined a consortium of partners in launching the first grid-connected offshore wind turbine to be deployed off the coast of North America. The prototype turbine, called VolturnUS 1:8, is approximately 65 feet tall, with a composite tower constructed of Ashland’s Aropol™ resins. The wind turbine was built as part of a program aimed at reducing the cost of offshore wind energy so that it can compete more efficiently with other forms of electricity generation. Oct. 1, 2011, to Sept. 30, 2012 3 Fiscal 2012 Sustainability Overview Ashland Inc. Our Ashland Consumer Markets team expanded the availability of Valvoline NextGen™ motor oil to Canada and Australia in 2012. NextGen motor oil is formulated with 50-percent recycled oil, which reduces impact on the environment compared to oils made without recycled content. In addition, Eagle One introduced EnviroShine, a brand of car appearance products that perform to the highest standards without harmful phosphates, acids or petroleum solvents found in many other brands’ products. But our sustainability efforts go well beyond product innovation. We’re also working to become smarter, more efficient consumers of energy. In 2012, we completed dozens of projects aimed at cutting our energy use and reducing emissions. Through these efforts, we were able to save an estimated 2.5 million BTU and reduce our net carbon dioxide emissions by 223,000 tons. That’s enough energy to power nearly 23,000 Midwest homes for a year and enough CO2 to remove roughly 40,000 passenger cars from the road. We also reduced our hazardous waste generation by nearly 9 percent, or more than 10 million pounds, compared to the previous year. We execute this commitment through Ashland’s comprehensive Responsible Care* program, a global industry initiative introduced in the 1980s to advance the safe and secure management of chemical products and operations. Ashland was one of the early adopters of the Responsible Care Code of Management Practices in the 1980s. Within Ashland, this program today includes a global management system, employee involvement at every level of the organization, continuous improvement toward our goal of operating with zero incidents, achieving 100 percent compliance, and reducing our environmental, health, safety and security impact. The tenets of Responsible Care form a cornerstone of Ashland’s past, present and future. We’ve made good progress on our sustainability efforts, but we recognize that we can – and must – do more. We are in the midst of developing a formalized sustainability strategy, with well-defined goals and metrics. This will serve as the roadmap for responsibly managing our global environmental, health, safety and security obligations while also giving back to local communities where our employees live and work. Whether it’s helping protect public green space in Shanghai, China; sponsoring environmental education in Miszewo, Poland; or hosting a community-wide drive in Columbus, Ohio, to collect and properly dispose of household hazardous waste, Ashland employees are committed to doing all we can to protect our environment. At Ashland, we are nearly 15,000 people – from renowned scientists and research chemists to talented engineers and plant operators – working together to deliver sustainable value to stakeholders around the world. We look forward to sharing more information about our progress in the year ahead. James J. O’Brien Chairman and Chief Executive Officer 4 Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Ashland’s Basic Elements of Sustainability Products Quality Product Stewardship Sustainability People Safety Community Compliance Diversity and Inclusion Planet Environment Carbon Footprint Community Corporate responsibility Corporate responsibility and sustainability are important in all of Ashland’s business activities. This Sustainability Overview highlights Ashland’s efforts to find the best balance among environmental, social and economic needs. To prepare this document, Ashland followed the Global Reporting Initiative (GRI) guidelines, one of the world’s most widely used sustainability reporting frameworks. GRI Application Level C Ashland is moving forward with tracking and reporting sustainability metrics. This report is an overview of Ashland’s efforts using GRI’s 2006 G3 guidelines at Application Level C. Please refer to GRI’s website, www.globalreporting.org, for more details. See page 26 for a complete list of indicators. Oct. 1, 2011, to Sept. 30, 2012 5 Our vision What we seek to become. Our vision is to be viewed as the best specialty chemical company in the world. Our mission Why we are here. We satisfy our customers by delivering results through quality chemical products and services. Our desire to grow drives our passion to win in the marketplace. With a unified, low-cost operating structure, we’ll remain competitive across every business and in every geographic region. Our values Who we are. • We act with integrity and honesty. • We focus on customer and shareholder success and compete to win. • We recognize each person for the difference he or she makes. • We drive innovation and results by understanding the market and its opportunities. • We are committed to the values of responsibility, sustainability and transparency. • We create safe and health-conscious work environments, require compliance and embrace environmental stewardship. 2.0 Organizational Profile 2.1 Name of the organization Ashland Inc. 2.2 Primary brands, products and services Ashland Inc. (NYSE: ASH) is a global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets. Through our four commercial units – Ashland Specialty Ingredients, Ashland Water Technologies, Ashland Performance Materials and Ashland Consumer Markets – we use good chemistry to make great things happen for customers in more than 100 countries. Our innovative products and services add value to a variety of things that touch people’s lives every day. Our chemistries help whiten your teeth, protect you from the sun and make your medicine work more effectively. We help create cleaner water for industrial and commercial companies and help provide more sustainable building products and energy sources. We protect the environment through recycled, re-refined motor oils. Our ingredients can be found across a broad spectrum of applications, including architectural coatings, automotive, construction, energy, food and beverage, personal care, pharmaceutical, pulp and paper, and water treatment. Ashland Specialty Ingredients Ashland Specialty Ingredients offers industry-leading products, technologies and resources for solving formulation and productperformance challenges in key markets, including personal care, pharmaceutical, food and beverage, coatings, construction and energy. Using natural, synthetic and semi-synthetic polymers derived from plant and seed extract, cellulose ethers and vinyl pyrrolidones, Specialty Ingredients offers comprehensive and innovative solutions for today’s demanding consumer and industrial applications. 6 Ashland Water Technologies Ashland Water Technologies is a leading specialty chemicals supplier of process, utility and functional chemistries globally. It offers products and equipment technologies designed to help customers improve operational efficiencies, enhance product quality, protect plant assets and minimize environmental impact. Ashland Performance Materials Ashland Performance Materials is a global leader in unsaturated polyester resins and epoxy vinyl ester resins, gelcoats, pressuresensitive and structural adhesives, specialty coatings and elastomers. It also provides metal casting consumables and design services for effective foundry management through its 50 percent ownership in the ASK Chemicals LP joint venture. Ashland Consumer Markets Ashland Consumer Markets is a leading, worldwide producer and distributor of premium-branded automotive, commercial and industrial lubricants and car-care products. It operates and franchises approximately 900 Valvoline Instant Oil Change™ centers in the United States. Consumer Markets sells Valvoline™ lubricants and automotive chemicals; MaxLife™ lubricants for cars with higher-mileage engines; NextGen™ motor oil, created with 50 percent recycled, re-refined oil; SynPower™ synthetic motor oil; Eagle One™ and Car Brite™ automotive appearance products; and Zerex™ antifreeze. 2.3 Operational structure At the end of fiscal 2012, Ashland operated through four commercial units: Specialty Ingredients, which includes the majority of the former operations of International Specialty Products Inc., acquired in August 2011; Water Technologies; Performance Materials; and Consumer Markets, which includes the Valvoline™ family of products and services. Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview 2.4 Headquarters location Ashland is headquartered in Covington, Ky., USA, with regional offices in Shanghai, P.R. China; Barendrecht, Netherlands; Schaffhausen, Switzerland; Araçariguama, Brazil; Mumbai, India; Dublin, Ohio; Lexington, Ky.; Wayne, N.J.; and Wilmington, Del., USA. 2.5 Countries of operation In fiscal 2012, Ashland operated 93 manufacturing sites and 38 research, development and technical centers, serving customers in more than 100 countries on six continents. Ashland maintains major administrative offices in Brazil, Canada, China, the Netherlands, Switzerland and the United States. 2.6 Ownership structure Listed on the New York Stock Exchange under the ticker symbol ASH, Ashland Inc. is incorporated under the laws of the commonwealth of Kentucky (USA). Approximately 79 million shares were outstanding as of Sept. 30, 2012, and there were approximately 14,900 common stockholders of record. 2.7 Markets served The markets in which Ashland serves and competes are: • Automotive Lubricants and Chemicals • Biorefining • Building and Construction • Chemical Processing • Commercial and Institutional • Energy • Food and Beverage • General Manufacturing • Mining and Extraction • Municipal • Packaging, Converting and Printing • Paints and Coatings • • • • • • Personal Care Pharmaceutical Power Generation Pulp and Paper Specialties Transportation 2.8 Organization scale Ashland and its consolidated subsidiaries employed approximately 14,600 people worldwide at Sept. 30, 2012. This compares with approximately 15,000 at fiscal year-end 2011. For the fiscal year ended Sept. 30, 2012, Ashland reported sales of $8.2 billion, as compared with $6.5 billion in fiscal 2011. During fiscal 2012, Specialty Ingredients sold an average of $11.4 million per shipping day. Water Technologies sold $6.9 million per shipping day, and Performance Materials sold $6.2 million per shipping day. Consumer Markets sold a total of 158.7 million gallons of lubricants. During the prior fiscal year, Specialty Ingredients sold an average of $4.3 million per shipping day; Water Technologies, $7.5 million per shipping day; and Performance Materials, $5.2 million per shipping day. Consumer Markets sold a total of 171.3 million gallons of lubricants in fiscal 2011. Additional information about Ashland may be found in its annual report on Form 10-K for fiscal 2012, available on the company’s website at http://investor.ashland.com or by contacting Ashland Inc., Investor Relations, P.O. Box 391, Covington, Ky., (USA) 410120391 (phone: +1 815-4454). 2.9 Significant operational changes There were no significant operational changes in 2012. North America Manufacturing Sites: 51 R&D/Tech Centers: 12 Employees: ~9,000 Latin America and Other Manufacturing Sites: 5 R&D/Tech Centers: 4 Employees: ~600 Oct. 1, 2011, to Sept. 30, 2012 Europe Manufacturing Sites: R&D/Tech Centers: Employees: 26 15 ~3,100 Asia Pacific Manufacturing Sites: R&D/Tech Centers: Employees: Worldwide Manufacturing Sites: R&D/Tech Centers: Employees: 11 7 ~1,900 93 38 ~14,600 7 Fiscal 2012 Sustainability Overview Ashland Inc. Ashland 2012 Specialty Ingredients Sales by Market Sales by Product Sales by Region Specialty Cellulosics 31% Performance 25% Industrial 23% Personal Care 21% Pharmaceutical/ Nutrition 18% Coatings 13% Solvents/ North America 37% Intermediates 18% PVP 15% Guar 12% Vinyl Ethers 5% Actives 5% Biocides 4% Other 10% Asia Pacific 17% Water Technologies Sales by Market Sales by Product Europe 37% Latin America/Other 9% Sales by Region Paper 58% Functional 44% North America 45% Industrial1 33% Utility 29% Europe 34% Municipal 9% Process 27% Asia Pacific 12% Latin America/Other 1 9% Includes pulp markets Performance Materials Sales by Market Sales by Product Sales by Region Construction 48% Composites 54% North America 70% Industrial 28% Residential 14% Infrastructure 6% Transportation 28% Packaging & Converting 15% Marine 9% Elastomers 25% Europe 18% Adhesives 21% Asia Pacific 8% Consumer Markets Sales by Market Latin America/Other 4% Sales by Product International Sales by Region1 Do-It-For-Me 36% Lubricants 85% Asia Pacific 57% Installer Channel 21% Valvoline Instant Oil Change 15% Do-It-Yourself 32% Valvoline International 32% Chemicals 8% Australia 25% Other Asia Pacific 32% Europe 27% Latin America/ Other 16% Antifreeze 5% Filters 2% Includes nonconsolidated joint ventures 1 8 Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. 2.10 Awards In May 2012, ASI received the 2012 Ringier Technology Innovation Award for Coatings Industry for Strodex™ FT 428, which aims to improve freeze-thaw stability of paints. This product does not include alkylphenol ethoxylates (APEO) and can significantly eliminate volatile organic compounds (VOCs). With this special surfactant, paint producers can lower or eliminate the glycol content in their formulations, making the paint more environmentally friendly. Launched in 2006, the Ringier Technology Innovation Award honors those who have made significant contributions to advancing China’s coatings industry through technical innovation, increased productivity, economic efficiency and market development. Ashland’s manufacturing facility in Texas City, Texas, received a “Best in Texas” safety award from the Texas Chemical Council and Association of Chemical Industry of Texas (TCC/ACIT). The annual award, which is the trade associations’ highest honor, recognizes outstanding safety performance for facilities in four size categories. Ashland’s Texas City facility was named as the 2012 winner in the category for 61-200 employees. Criteria included performance and leadership in employee and contractor safety programs, as well as participation in TCC activities and annual training seminars. In November 2012, Ashland Specialty Ingredients (ASI) received the Best Service Award 2012 from AkzoNobel, the world’s largest coatings manufacturer. The award recognized Ashland’s outstanding achievements in delivering high-quality coating additives solutions while fulfilling application requirements. In October 2012, Ashland was named Best Chemical Supplier of the Year for the Pulp and Paper segment by the Brazilian Pulp & Paper Association (ABTCP). This award was the result of a survey conducted among the pulp and paper companies in Brazil. Ashland Water Technologies was chosen for its innovative products, technical support, and problem-solving skills. Two Ashland facilities that support Water Technologies customers received Responsible Care Energy Efficiency “Exceptional Merit” awards from the American Chemistry Council. Member companies are required to consider operational energy efficiency as well as waste minimization, reuse and recycling when developing their environmental, health, safety and security plans. The Ashland plant in Franklin, Va., was recognized for environmental impact reduction for natural gas fired boiler installation, and our customer facility in Pine Bluffs, Ark., was recognized for non-manufacturing improvements. For the first time this year, the ACC presented “Waste Minimization, Reuse and Recycling” awards. The Ashland Performance Materials (APM) site in Port Neches, Texas, was one of 13 member companies recognized in this inaugural year for the award. Valvoline Instant Oil Change (VIOC) received an American Society for Training & Development (ASTD) 2012 BEST Award and a Brandon Hall Gold Award for Excellence in Talent Management. VIOC was among 30 organizations from Bahrain, Canada, India and the United States to receive a 2012 ASTD BEST Award, which recognizes organizations that demonstrate enterprise-wide success through employee learning and development. Oct. 1, 2011, to Sept. 30, 2012 Fiscal 2012 Sustainability Overview In April 2012, AEP Ohio, a unit of American Electric Power, recognized Valvoline Instant Oil Change for its commitment to energy efficiency and the environment. VIOC participated in AEP’s savings incentives program, with the goal of reducing energy use by more than 615,000 kilowatt hours per year and slashing CO2 emissions by nearly 530 tons. This equates to removing as many as 83 cars from the road per year. In April 2012, Ashland’s manufacturing facility in Columbus, Ohio, received the “Excellence in Environmental, Health and Security Performance” award from the Ohio Chemistry Technology Council. The award reflects the site’s commitment to excellence in operations, as well as its strong environmental and safety performance in 2011. 3.0 Report Parameters 3.1 Reporting period Ashland’s fiscal and reporting year is Oct. 1, 2011, to Sept. 30, 2012. This overview covers metrics and activities during Ashland’s fiscal year, unless otherwise stated. 3.2 Most recent reports This is Ashland’s third report using the GRI guidelines. Ashland’s prior report was published in 2012, covering fiscal-year 2011 data. 3.3 Reporting cycle The reporting cycle will be annual and based on Ashland’s fiscal year. 3.4 Contact point Gary Rhodes Director, Corporate Communications Ashland Inc. 50 E. RiverCenter Blvd. Covington, KY (USA) 41011 +1 (859) 815-3047 firstname.lastname@example.org 3.5 Report content defined Ashland has reported its sustainability performance for the last three years, following the Global Reporting Initiative (GRI) framework. The content of this report is based on the GRI’s economic, environmental, labor practice, human rights, societal and product-responsibility guidelines. Our primary audience for this report includes, but is not limited to: • Current shareholders and prospective investors; • Customers interested in our sustainability policies and practices; • Current and prospective employees seeking to work for a sustainability-minded company; • Communities where we operate that want to understand how we manage and operate our business as a responsible corporate citizen; • Suppliers with whom we partner, who are critical to our operations; and • Governmental/non-governmental agencies that have an interest in our business and operations. 9 Fiscal 2012 Sustainability Overview 3.6 Report boundary The report covers only Ashland’s majority-owned facilities and operations as of Sept. 30, 2012, unless otherwise noted. 3.7 Limitations of boundary The data included in this report was readily available at the time of preparation. Future reports will contain data for a broader set of indicators as it becomes available. 3.8 Non-majority-owned enterprises No joint ventures, subsidiaries, leased facilities, outsourced operations or enterprises are included in this overview unless they are majority owned. 3.9 Data measurement techniques and bases of calculations Ashland collects information through several data-management systems that were developed to meet specific data-collection requirements. Our Corporate Environmental, Health, Safety and Product Regulatory Department collects data on energy use and emissions, environmental, health and safety incidents, and processsafety incidents for use in tracking and reporting our performance. 3.10 Restatements of previous information There are no restatements. 3.11 Significant changes from previous reports There are no significant changes from previous reporting periods. 3.12 GRI content index of standard disclosures The GRI Index is provided at the end of this report. 4.0 Governance, commitments and engagements 4.1 and 4.3 Governance structure and highest governance body For the first four months of fiscal 2012, Ashland was governed by a 10-member board of directors, nine of whom were independent directors under New York Stock Exchange guidelines. Mr. Theodore Solso retired from the Ashland board in January 2012, reducing board membership to nine members, eight of whom were independent. Mr. Brendan M. Cummins and Dr. Janice J. Teal joined the board as independent directors in May 2012 and September 2012, respectively. As a result, the board consisted of 11 members, 10 of whom were independent. For fiscal 2012, the board maintained the following four committees, each consisting entirely of independent directors: Audit – Assists the board in fulfilling its oversight responsibilities relating primarily to: (a) the integrity of Ashland’s financial statements and financial reporting process; (b) the integrity of the systems of internal accounting and financial controls; (c) the performance of the internal audit function and independent auditors; (d) independent auditors’ qualifications and independence and the audit of Ashland’s financial statements; (e) risk-management policies and processes; (f) financial affairs; and (g) legal and regulatory compliance requirements. Environmental, Health & Safety (EHS) – Reviews and oversees EHS policies, programs and practices and product-quality compliance that affect, or could affect, employees, customers, shareholders and neighboring communities. 10 Ashland Inc. Governance & Nominating – Assists the board in: identifying qualified individuals to become board members; determining the composition of the board and its committees; developing and implementing corporate governance guidelines; and in ensuring the independence of the board as it exercises its corporate governance and oversight roles. Personnel & Compensation – Assists the board in discharging its duties related to: executive compensation; succession; and the adoption, amendment and termination of employee benefit plans sponsored, maintained or contributed to by Ashland, its subsidiaries and affiliates. The board recognizes the company’s responsibility to protect the health and safety of its employees and the public and to sustain the quality of the environment for future generations. The board monitors public issues that have an impact on the company and maintains oversight of Ashland’s EHS compliance practices. The primary responsibility for assuring compliance with EHS laws and regulations lies with operating management. During fiscal 2012, Ashland’s day-to-day operations were managed by a three-member executive committee and an 11-member operating committee. 4.2 Governance chair James J. O’Brien, chairman and chief executive officer, is an executive officer, a member of the executive and operating committees and the board of directors. Ashland believes the combined position of chairman and chief executive officer provides clarity of leadership and is in the best interests of Ashland and its shareholders at this time. Ashland also has a lead independent director who coordinates the activities of the company’s independent directors. 4.4 Mechanisms for recommendations Ashland shareholders as of the declared record date are entitled to vote upon matters that come before the company’s annual meeting of shareholders held in January each year. Each Ashland proxy statement provides information as to: (1) how shareholders may submit proposals for consideration at the following year’s annual meeting; (2) how shareholders can make recommendations for director candidates; and (3) the process by which shareholders and other interested parties may communicate with the board. In addition, Ashland’s external website provides a feedback form for contacting the Investor Relations Department and a mechanism to sign up for email notifications about Ashland’s financial information. Ashland employees are provided numerous opportunities to engage with executive management, including via worldwide corporate, commercial-unit and resource-group town hall meetings and regional and /facility-based employee meetings. All such communication channels incorporate a question-and-answer period. Additional engagement resources include global/regional executive email boxes, facility-suggestion boxes and a variety of surveys through which employees can provide feedback, suggestions and new product ideas to company management. 4.12 Externally developed economic, environmental, and social charters, principles or other initiatives to which the organization subscribes or endorses Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Commitment to Responsible Care* As a member of the American Chemistry Council, Ashland was one of the early adopters of the Responsible Care Code of Management Practices, which were initiated in the early 1980s. We continuously assess and evaluate our operations and products and implement plans to reduce risk and impact on human health and the environment. Ashland continues to implement the Responsible Care Management System throughout its worldwide operations. We are committed to continuous improvement of the environmental, health and safety performance of our operations and products. Commitment to energy efficiency Ashland is committed to reducing its environmental footprint and employing initiatives to conserve and use energy efficiently in our operations. Ashland also participates in the Carbon Disclosure Project, where we publicly report our overall greenhouse gas data and associated risks/opportunities. Commitment to safety and security of operations Ashland is committed to protecting the safety and security of its employees and follows the following security policies as applicable to specific facilities and operations: • • • • American Chemistry Council’s Responsible Care Security Code Department of Homeland Security Chemical Facilities Anti-Terrorism Standards United States Coast Guard Maritime Transportation Security Act Customs-Trade Partnership Against Terrorism 4.13 Memberships in associations and/or national or international advocacy organizations Ashland participates in many associations and trade groups at the regional, national and international levels. Primary association memberships include: • • • • • • • American Chemistry Council (ACC) Carbon Disclosure Project (CDP) Conference Board European Chemical Industry Council (CEFIC) The Nature Conservancy Society of Chemical Manufacturers and Affiliates (SOCMA) Wildlife Habitat Council • • • • • • Automotive Specialty Product Alliance (ASPA) Chemistry Industry Association of Canada (CIAC) Consumer Specialty Product Association (CSPA) Global Environmental Management Initiative (GEMI) Supplier Ethical Data Exchange (SEDEX) United Kingdom Chemical Industry Council (CIA) 4.14 Stakeholder groups Stakeholder engagement at Ashland is a constant, ongoing activity, occurring at all levels of our organization. Ashland seeks to establish and maintain productive relationships with all of its key stakeholders, encompassing employees, customers, suppliers, government officials, investors and residents of communities in which Ashland operates. The table below summarizes who we engage with and how. Stakeholder Group Employees Customers Suppliers/contractors Shareholders and the investment community Governments and regulators Communities Philanthropic and non-profit organizations Oct. 1, 2011, to Sept. 30, 2012 Methods of Engagement (Including but not limited to) CEO-led company wide town hall meetings, company webcasts, daily intranet articles, regular employee communications from executives and business leaders, training sessions, employee surveys, employee networks, employee hotline, work councils and union interactions Direct contact through sales and customer-relationship managers, customer service call centers, trade shows, technical applications and support, training sessions/workshops One-on-one meetings, contract negotiations, performance reviews, webinars, auditing Annual report, annual meeting of shareholders, investor updates, press releases, quarterly results presentations, direct contact Government affairs liaison, visits to elected officials and agencies, industry and trade associations, direct contact, plant tours and site visits for government officials, grass roots advocacy Interaction with civic organizations, business groups, public education support and interaction, local sponsorships, community meetings and events, community volunteerism, Community Advisory Panels (CAPs), visits by community emergency services, city, state, industrial park association memberships Charitable contributions and employee-giving programs, employee volunteerism, direct contact, dialogue, collaborative partnerships 11 Fiscal 2012 Sustainability Overview Ashland Inc. The first step to sustainabile composites Ashland’s award winning Envirez™ unsaturated polyester resin (UPR) is the first commercially available UPR composed of rapidly renewable materials. Envirez resins are manufactured using an innovative patented process. The Envirez technology incorporates a variety of renewable sourced materials, including vegetable oils, ethanol and other bio-based derived glycols in the formulation. The product line has been expanded to include resins with recycled content to provide for a number sustainable resin options. Envirez resins are used in a wide variety of processes and applications within the construction, marine, transportation and energy markets. Ashland is continually evaluating renewable and recycled raw materials with the goal of helping more of our customers meet the demands of their markets and reach their environmental goals. 4.15 Stakeholder engagement Ashland employees are vital to the company’s success and are offered frequent opportunities to participate in open-dialogue meetings with the organization’s top management. During these meetings, employees are invited and encouraged to participate in questionand-answer sessions. Jim O’Brien, chairman and CEO, biannually updates all employees in a town hall format that ends with an open question-and-answer period. Those who cannot attend in person can participate remotely by way of online video streaming or teleconference. Sales, marketing and research groups throughout Ashland’s commercial units engage their customers, identify their needs and align research-and-development programs to create innovative solutions centered on cost reduction, sustainability and quality. This is achieved by creating relationships based on mutual trust, with a focus on combined success. To promote transparency and two-way dialogue, Ashland proactively engages with community officials and neighbors where the company operates. Ashland’s major campuses and facilities address various community needs by developing annual community relations plans that focus on: education, with an emphasis on STEM (Science, Technology, Engineering and Math); the environment; and health and human services. Information gathered from community stakeholders and employee feedback is used to develop local community relations plans. In addition, Ashland’s community relations and contributions program managers make recommendations on the areas and organizations for Ashland to support with money and/or volunteer hours. 12 Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Economic summary Ashland’s 2012 performance For the fiscal year ended Sept. 30, 2012, Ashland’s net income amounted to $26 million, or $.33 per diluted share, as compared with $414 million, or $5.17 per diluted share, for fiscal 2011. Ashland’s operating income amounted to $302 million, and the company achieved adjusted EBITDA of $1.359 million in fiscal 2012. This compares with operating income of $130 million and adjusted EBITDA of $1.159 million in fiscal 2011. For fiscal 2012, Ashland generated cash flows from operating activities from continuing operations of $385 million as compared with $243 million for fiscal 2011. Ashland uses a company-wide process to assess risks in all areas relating to sustainability, including climate change, water resources, waste generation, environmental impact and social concerns. This process covers all types of risks and opportunities, including regulatory, financial and reputational. At the board level, this process is carried out by the Environmental, Health, Safety, and Product Compliance Committee, which serves as the governance body for EHS&PR and sustainability. The board committee meets at least quarterly. The EHS&PR function provides company-wide support throughout the year to all Ashland businesses as they assess these risks to their operations. Sales to external customers worldwide were $8.2 billion in fiscal 2012 as compared with $6.5 billion in fiscal 2011. Global property, plant and equipment assets totaled a net $2.8 billion in fiscal 2012 as compared with $2.9 billion in fiscal 2011. Ashland has publicly reported about these risks and opportunities to the Carbon Disclosure Project every year since 2006. These statements were also incorporated in the Ashland annual report on Form 10-K for the 2012 fiscal year. EC2 Financial implications and other risks and opportunities due to climate change As noted above, under Items 4.1 and 4.3, Ashland maintains a board-level committee that monitors public issues having an impact on the company and oversees Ashland’s Environmental, Health, Safety, and Product Regulatory (EHS&PR) compliance practices. The vice president of EHS&PR presents potential climate-change impacts and greenhouse-gas (GHG) emissions estimates to the board. Physical risks have the potential to affect Ashland sites in areas prone to sea-level rise or extreme weather events, much as they do the general public and other businesses. However, the company anticipates only minor damage to its sites, and most are expected to be able to return to operation after restoration of utilities. This was our experience in 2012 with Superstorm Sandy and other significant weather events. Resource shortages resulting from these physical risks are also expected to have a similar effect on Ashland as they will on other businesses. A natural choice in building products Soyad™ adhesive technology is a patented, formaldehyde free adhesive system from Ashland that is widely used to manufacture environmentally friendly hardwood plywood and composite panels such as particle board and medium-density fiberboard (MDF). Hardwood plywood is used extensively in the production of indoor furnishings and is made of multiple layers of highquality wood veneers glued together to create a strong, stable decorative panel. Our formaldehyde-free Soyad adhesives are water-based products formulated with soy flour and a proprietary cross-linking resin. When blended together the resin reacts with the protein in the soy flour to form a durable water-resistant thermoset adhesive. Based primarily on soybeans, a natural and renewable resource, Soyad has the highest level of bio-based content of any adhesive used in the industry. Today, Soyad is the adhesive of choice for leading manufacturers of furniture, kitchen cabinetry and other wood composite materials who want to stay ahead of formaldehyde regulations and help improve the quality of indoor air for their workers and customers. Oct. 1, 2011, to Sept. 30, 2012 13 Fiscal 2012 Sustainability Overview The main regulatory risks to the company involve regulatory controls, such as cap-and-trade, permitting, and emissionreporting regulations that unfavorably affect Ashland and all of industry. While these regulatory burdens do not affect most of Ashland’s facilities directly, due to their low GHG emission rates, Ashland operates several facilities that are subject to GHGemissions reporting or permitting requirements. Ashland also expects to be indirectly affected by the impact on suppliers and customers. Ashland participates in several markets that have developed as a result of climate change. Ashland’s products have been used for years to create lightweight composites for the automotive industry, which improve fuel efficiency, and for the production of wind turbine blades. Other Ashland products have been used in the development of composite building and construction materials, which can replace traditional concrete and steel construction, provide longer structure life, reduce maintenance requirements and improve energy efficiency. Ashland has also been producing products made from bio-renewable resources Ashland Inc. for several years and continues to increase those capacities. One Ashland business unit has innovatively utilized and marketed recycled engine lubricating oils. In addition to currently manufactured products, Ashland is constantly evaluating adjacent market opportunities that develop as alternative technologies expand and evolve. EC3 Coverage of the organization’s defined benefit plans Ashland and its subsidiaries sponsor noncontributory qualified and nonqualified, defined-benefit pension plans that cover many employees in the United States and in a number of other countries. The company also sponsors unfunded post-retirement benefit plans, which provide health care and life insurance for eligible employees who retire or are disabled. Ashland funds its share of the costs of the post-retirement benefit plans as the benefits are paid. The accumulated benefit obligation for all pension plans was $4.7 billion in fiscal 2012 and $4.1 billion in fiscal 2011. The projected benefit obligation for all pension plans was $4.9 billion in fiscal 2012 and $4.2 billion in fiscal 2011. Introducing another first for the environment In early 2011, the innovators at Ashland launched an entirely new motor oil category with their latest technology breakthrough: Valvoline NextGen™, the first oil that’s 50 percent recycled oil and 100 percent Valvoline™ performance. In 2012, Ashland achieved another first through its EagleOne™ brand with the launch of the Enviroshine™ line of “green” automotive appearance products. In the U.S. alone, more than 32 million pounds of household cleaning products that may contain harmful chemicals are poured down drains each day. In the new Enviroshine line of products, commonly used petroleum-based chemicals have been replaced with ingredients that are safer for the environment. These new formulas are free of harsh acids, solvents, phosphates and petroleum distillates that can be harmful to humans and animals. The EnviroShine car wash, wheel cleaner, and glass cleaner formulas are also biodegradable and will not produce run-off that could harm aquatic life or the water system, or fumes that may affect air quality or the ozone layer. 14 Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Environmental summary As a worldwide enterprise, Ashland operates in a number of different environments around the world. To minimize the impact of our operations and products, we have implemented environmental, health and safety management systems through our Responsible Care* program to ensure that all Ashland operations achieve and maintain a high level of EHS performance. Our goals, which are embodied in our Responsible Care* policy, include: Operate with zero incidents. We care about the health and safety of our employees and promote safe and secure operations together with our business community partners. We support a zero incident culture where environmental, health, safety and security incidents are preventable. Achieve 100 percent compliance. We require compliance with applicable environmental, health, safety and security laws, regulations and internal standards, while adhering to high ethical standards. Reduce environmental, health, safety and security impact. We are committed to providing products and services that involve minimum risk to people and the environment throughout their life cycle, while best meeting the needs of our customers. EN2 Percentage of materials used that are recycled input material Ashland attempts to incorporate recycled materials, where possible, in the production and packaging of its products. For example: Ashland Performance Materials used in excess of 14.2 million pounds of recycled polyethylene terephthalate, polypropylene glycol, and dimethylformamide, as well as reconditioned drums and totes. Overall, recycled content represented approximately 1.4 percent of total input materials used by Performance Materials. Ashland Consumer Markets reported that overall its products contained 5.2 percent recycled content, based on tons of recycled materials, including cardboard, plastics, reconditioned drums and re-refined base oils, as compared with tons of product shipped. Ashland Consumer Markets’ NextGen™ motor oils are made with 50 percent re-refined oil and contribute significantly to recycled content. EN3 and EN4 Direct and indirect energy consumption by primary energy sources During fiscal 2012, Ashland’s global operations consumed the amount of energy shown in the table below. Direct energy includes consumption of fuels by both process and mobile equipment, including natural gas, liquefied petroleum gas, diesel/ fuel oil and gasoline. The increase in direct energy consumption from FY11 was due to the acquisition of International Specialty Products (ISP). Direct process energy sources include all fuels used by Ashland plants to prepare goods for consumption, sale and transport, as well as to provide comfort heating for all employees. Direct mobile energy sources include fuels that are combusted in Ashland-owned vehicles, such as fleet cars, light-duty vehicles and product-delivery fleets driven by Ashland employees. Use of indirect energy, primarily electricity and steam, also increased from FY11 due to the acquisition of ISP. Note that FY12 data incorporates CY12 data for the ISP manufacturing plants. Direct Energy Indirect Energy Ashland FY11 7,260,000 gigajoules 3,960,000 gigajoules Note: A gigajoule is the derived metric measurement unit of energy used in the international system of units. EN5 and EN7 Energy conservation and efficiency improvements (direct and indirect) Ashland has made great strides in improving energy efficiency. In 2012, we completed dozens of projects aimed at improving energy efficiency and reducing emissions, as summarized below. Activity type Energy efficiency of building services Energy efficiency of building services Energy efficiency of manufacturing processes Description of activity Completed lighting upgrades at 11 production and warehouse sites supporting ACM and APM operations Completed lighting upgrades at VIOC stores Transportation improvement Total improvement Co-located manufacturing operations at customer location, eliminating 270+ tractor-trailer trips Installed two new high-efficiency boilers at Franklin, Va., facility supporting AWT customers Oct. 1, 2011, to Sept. 30, 2012 Ashland FY12 10,840,000 gigajoules 6,590,000 gigajoules Estimated annualized Estimated Annualized Net CO2 Energy Reduction Emissions Reduction (MMBtu/Yr.) (Tons CO2 Equiv) 8,288 517 2,104 131 2,500,000 220,000 12,000 881 2,522,392 221,529 15 Fiscal 2012 Sustainability Overview Ashland Inc. EN8 Total water withdrawal by source In fiscal 2012, Ashland’s facilities consumed 22.21 million cubic meters of water globally, with the largest percentage used for noncontact cooling water. The 2012 decrease in water withdrawal was primarily associated with the divestiture of a plant in Louisiana, Mo. Water usage also reflects the integration of former ISP facilities into Ashland Inc. The following table provides information as required by Performance Indicator EN8: Water Withdrawal by Source (in millions of cubic meters) Municipal water Surface water (lakes, rivers, etc.) Groundwater Total Water Usage (continuing operations) FY2012 FY2011 8.02 9.46 4.73 8.95 9.46 6.06 22.21 24.47 EN9 Water sources significantly affected by withdrawal of water In 2012, Ashland’s Franklin, Va., facility withdrew 1.34 million cubic meters of groundwater from the Potomac Aquifer. This represents an 18 percent decline in water usage compared to 2011. Water levels in the aquifer recently appear to have stabilized and other users have resumed operations. Ashland’s facility in Savannah, Ga., used 0.8 million cubic meters of groundwater from the Upper Floridian Aquifer Red Zone in 2012. This aquifer is experiencing significant saltwater intrusion. In April 2012, Georgia Department of Natural Resources, Environmental Protection Division (GAEPD) notified all groundwater withdrawal permit holders and held meetings to discuss the seriousness of the saltwater intrusion. The GAEPD reported that a 96.6 percent reduction from 2012 water withdrawals would be required to eliminate the salt water intrusion. EN16 Total direct and indirect greenhouse gas emissions by weight Ashland’s fiscal 2012 GHG emissions in carbon-dioxide equivalents (CO2-E) from global operations are listed in the table below. This information is based on best available data and follows the standards and methodologies of the World Resource Institute/World Business Council for Sustainable Development’s GHG Protocol. All GHG emissions are calculated using published conversion and emission factors. Scope 1 Scope 2 Ashland FY121 724,000 MT 467,000 MT Ashland FY11 453,000 MT 269,000 MT FY12 results reflect Ashland’s acquisition of International Specialty Products (ISP). 1 EN22 Total weight of waste by type and disposal method Ashland has extensive global programs for waste minimization, recycling and treatment or disposal of generated wastes. We manage our hazardous waste in accordance with governmental 16 regulations and internal policies and procedures. While Ashland does not currently collect data regarding its global, nonhazardous waste generation, this information will be included in future reports. In 2012, Ashland generated 118.1 million pounds of hazardous waste, a reduction of 8.8 percent when compared to 129.9 million pounds generated in 2011. EN23 Total number and volume of significant spills Ashland did not have any significant spills that could or would have had significant negative impacts on the surrounding environment or human health. In the United States, Ashland is required to report its Toxic Release Inventory (TRI) to the U.S. Environmental Protection Agency (USEPA). The reported data is available on the USEPA’s public website. The table below summarizes Ashland’s TRI releases for CY 2012 and 2011. U.S. TRI Waste and Emissions (millions of pounds) 2012 2011 Deepwell Disposal 1.38 1.43 Releases to Air 1.31 1.53 Releases to Water 0.06 0.07 Releases to Land 0 0.06 Offsite Transfers 19.28 19.94 Releases and Transfers 22.03 23.02 Total 44.06 46.05 EN25 Biodiversity effect on water bodies by discharges of water Wastewater at the majority of Ashland’s sites is processed through publicly owned treatment works (POTWs) prior to discharge to water bodies. Where wastewater is not discharged to a POTW, Ashland has obtained and complies with applicable permits to minimize impact on receiving waters. Therefore, Ashland’s discharges do not significantly affect the biodiversity value of water bodies and related habitats beyond those found in typical developed areas. Habitats protected or restored As part of projects at Ashland facilities and remediation sites, wildlife habitat is restored to meet or exceed the requirements of laws and regulations. These efforts include the restoration and enhancement of wetlands and protection of endangered species. Plans for managing impacts on biodiversity Ashland is an active member of the Wildlife Habitat Council (WHC), a nonprofit, non-lobbying group of corporations, conservation organizations and individuals dedicated to restoring and enhancing wildlife habitats. WHC’s programs take corporate sustainability objectives and convert them to tangible, measurable, on-the-ground action. As part of its membership, Ashland works with the WHC to identify and implement projects that will have a positive impact on biodiversity. Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Earth Day As part of Earth Day 2012, hundreds of employees throughout Ashland took part in various volunteer activities that included the collection of trash and debris near company facilities; the cleanup of roadways and watersheds; tree and shrub planting; wildlife habitat restoration; household hazardous waste collection, and recycling drives. Partnering with the Delaware Center for Horticulture (DCH) and the University of Delaware College of Agriculture and Natural Resources, more than 50 Wilmington, Del., employees participated in a two-day event to create a wildlife habitat at the Wilmington office location. The project involved almost a year of planning and preparation, starting with a visit and a report issued from the WHC. Employees planted more than 160 plants and trees, and work is ongoing as the site strives to achieve certification with WHC through its Corporate Wildlife Habitat Certification/International Accreditation Program. EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation Ashland believes that protecting the environment is a key element of our environmental sustainability program. As a part of our commitment to environmental protection, we work to minimize environmental impacts from our operations and products through a number of assessment processes. Ashland uses stage-gated product-development systems in its New Product Development process, where new products are evaluated. Potential environmental impact and other environmental concerns must be addressed before the product can move to the next phase of development. As part of its product development program, Ashland proactively seeks alternative raw materials that have less impact on the environment. In 2004, Ashland made a commitment to the American Chemistry Council (ACC) to adopt and implement the new Responsible Care Management System (RCMS) in the U.S., including its mandatory, Oct. 1, 2011, to Sept. 30, 2012 third-party certification. Ashland has made the commitment to implement RCMS at its worldwide operations. Prior to adopting the new management system, Ashland implemented the ACC Product Safety Code, which requires a system to manage product stewardship. Today, Ashland’s Product Regulatory team conducts product safety reviews to help minimize potential adverse effects our products may have on the environment and human health. The team also ensures a product’s specific regulatory requirements are met or exceeded. Other examples of Ashland’s commitment to product stewardship include participation in the U.S. EPA’s High Product Volume (HPV) chemical testing program and the European Union’s Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) initiative. HPV is a voluntary program and requires participants to make publicly available health and environmental “effects” data on chemicals produced or imported in the U.S. in quantities greater than 1 million pounds per year. REACH requires companies to make health and environmental assessments for the chemicals they produce. The two main requirements of REACH are to determine the hazards of chemicals and to carry out comprehensive risk-assessments to protect human health and the environment. Ashland also evaluates environmental protection through its chemical process safety program. Operational changes, including all capital expenditures that finance new products, require a formal assessment of the potential environmental, health and safety impact these changes may have on our operations. 17 Fiscal 2012 Sustainability Overview EN27 Percentage of products sold and their packaging materials that are reclaimed by category Ashland sells its product into a broad range of markets and applications, some of which are intermediate to be used in further processing. Ashland products are sold in a variety of packaging, in accordance with distribution regulations. Ashland does not currently maintain data related to downstream product reclamation. EN28 Monetary value of significant fines and total number of nonmonetary sanctions for noncompliance with environmental laws and regulations Penalties and fines assessed against Ashland vary. Criteria include the nature and significance of the alleged violation, the Ashland Inc. complexity of the facility, and mitigation efforts undertaken, including self-reporting and remedial measures. Correspondingly, the amount paid each year will vary. Year 2009 2010 2011 2012 Environmental Fines2 ($USD) <$100,0003 <$100,0003 $455,500 $175,000 These values take into account only the more significant matters. Smaller penalty amounts haven’t been included. 3 These values are estimates and are composed of insignificant penalties that have been added together for this report. 2 Using nature’s best for more beautiful skin Advanced skin care technology has never come easily or inexpensively. For centuries, humans have traveled to the far corners of the Earth in search of new ways to attain younger-looking more beautiful skin. Today, with Ashland’s Natriance™ line of skin care ingredients, consumers everywhere can effortlessly get younger-looking and more pampered skin thanks to a variety of ingredients found in nature. Natriance extracts are derived from natural sources – such as pea, flaxseed, corn, bran and soybean – and are formulated into a variety of creams, lotions, serums and other products for the mass market. Because they are developed using vegetable-derived ingredients, the Natriance ingredients are giving formulators greater options for creating the latest in natural skin care products, while helping deliver a new level of protection and performance to consumers around the world. Simply essential, inspired by Nature™ 18 Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Labor practices and decent work summary Diversity and equal opportunity As a global specialty chemical company, Ashlandâ€™s does business in more than 100 countries. We have a significant presence in Australia, Brazil, Canada, China, Germany, Netherlands, Russia, Spain, the United States and many other countries. Our employees operate across cultures, functions, language barriers and time zones to solve the technical and logistical challenges created by a worldwide customer base. Ashland employees differ in age, gender, race, nationality and language, as well as in personality, behavior, sexual orientation and religious beliefs. They have varying skills and abilities, including education, experience and functional capability. Their diversity reflects the countries and communities where they live and work, as well as the customers and constituencies they serve. Ashland is committed to actively creating an environment where each team member feels empowered to learn, grow and maximize his or her personal contribution. By leveraging the similarities and differences that shape each individual, we encourage and promote innovative thinking and drive the kind of sustainable, competitive advantage that will help Ashland grow and create new value for our stakeholders. To foster a more diverse and inclusive culture, Ashland is focused on the following areas: promoting leadership awareness and engagement; building organizational awareness, skills and behaviors; engaging and retaining a diverse workforce; and sourcing and hiring. All employees are encouraged to help foster Oct. 1, 2011, to Sept. 30, 2012 a culture of inclusion. In 2011, Ashland launched two employeeled networking groups, the Ashland Womenâ€™s International Network (AWIN) and the African-American Leadership Network (AALN). The networking groups provide members with a forum to communicate and exchange ideas, build a network of relationships across the company and pursue personal and professional development. Membership in any employee networking group is open to all employees. Human rights training Ashland is committed to maintaining a work environment where people are treated with respect. Ashland does not tolerate the harassment of employees or applicants by anyone, including any supervisor, coworker or third party. All U.S. and designated non-U.S. employees are required to periodically complete an anti-harassment training course. In fiscal year 2012, Ashland provided 4,205 online harassment awareness training courses to 3,421 employees (some employees, such as managers, take multiple courses due to their roles). This program was introduced to global employees in fiscal year 2010 and was completed by more than 7,500 Ashland employees. Commitment to safety Ashlandâ€™s highest priority is the safety and health of employees, customers and the communities where we live and operate. The company believes that all accidents are preventable, and preventing workplace incidents is an integral part of our business strategy. Ashland requires employees to comply with all 19 Fiscal 2012 Sustainability Overview applicable laws and regulations, as well as with Ashlandâ€™s safety and health policies. All employees must abide by Ashlandâ€™s 10 Safety Expectations and proactively promote our zero incident culture. By incorporating a zero incident culture, our employees take responsibility for their actions around safety, because they are empowered to make informed decisions. Success depends on genuine commitment, basic operating principles, well-communicated visions and most importantly, a business atmosphere where all employees care for each other. Ashland employee benefits During fiscal 2012, Ashland employed nearly 15,000 individuals worldwide on six continents. The great majority of full-time U.S. employees in all major operational areas (excluding Valvoline Instant Oil Change hourly workers), are offered the following benefits: 401(k) savings; medical and dental insurance; Health Savings Account (HSA); vision cost assistance; flexible spending accounts; voluntary and occupational accidental death and dismemberment insurance; business travel accident insurance; employee, spouse and child life insurance; long-term disability and long-term care insurance; group legal; and group auto and home insurance. Part-time exempt employees working at least 20 hours, but not more than 24 hours, per week receive the same benefits, but pay different rates (2x) for medical and dental insurance. Part-time exempt employees working more than 24 hours a week receive the same benefits, but also pay different rates (1.5x) for medical and dental insurance. Executives receive financial planning services, non-qualified retirement benefits, and long-term incentives. Ashland also has some employees in unions whose benefit options differ slightly, in accordance with the terms of their collective bargaining agreements. Employee benefits in countries outside the United States are largely governed by national legislation and are often supplemented by a variety of company-sponsored plans, depending on the country. LA1 Total workforce by employment type, contract and region Ashland reported approximately 14,600 employees as of fiscal year-end 2012. Of these, approximately 94 percent were full-time employees. Regionally, approximately 61 percent were located in 20 Ashland Inc. North America; 21 percent in Europe, the Middle East and Africa; 13 percent in the Asia Pacific region; and the remaining 5 percent in Latin America. LA4 Percentage of employees covered by collective bargaining agreements In North America, during fiscal 2012, approximately 1,255 fulltime-equivalent employees were covered by collective bargaining agreements at 23 work locations. This represented approximately 14.5 percent of the total North American workforce. In the U.S., most non-supervisory employees are able to organize and bargain collectively on wages, hours and terms and conditions of employment pursuant to the National Labor Relations Act (NLRA). Under the NLRA, Ashland may voluntarily recognize the union or request an election by secret ballot. Ashlandâ€™s labor philosophy promotes non-union representation as the company provides competitive wages and benefits for its employees. In addition, Ashland promotes open dialogue and reasonable workplace practices and policies for its employees without the intervention of a third party. However, for the locations that are unionized, Ashland recognizes the respective union as the exclusive representative of the employees in the bargaining unit and complies with all resulting legal and contractual obligations. LA5 Minimum notice period(s) regarding significant operational changes, including whether specified in collective agreements If the applicable Management Rights clause or provisions that specifically waive the negotiations process are absent, the NLRA would require that Ashland and the union meet prior to operational changes that affect or impact wages, hours, and terms and conditions of employment. There is no specific timing for such discussions, and actual time will vary based upon the complexity of the issue. Time specification is not required under law to be incorporated within a collective bargaining agreement, and none of the Ashland collective bargaining agreements provide for a specific period of time. All Ashland collective bargaining agreements contain a Savings Clause provision, which requires Ashland and the union to renegotiate any contractual provision during the term of the agreement if such provision is declared invalid due to changes in law. Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview LA7 Rates of injury, occupational diseases, lost days and absenteeism, and number of work related fatalities by region Total Recordable Injuries and Illnesses Ashland North America (without VIOC) Europe/Middle East/Africa Asia Pacific South America Valvoline Instant Oil Change (VIOC) Lost Workday Cases Ashland North America (without VIOC) Europe/Middle East/Africa Asia Pacific South America Valvoline Instant Oil Change Fatalities 4 Occupational Health and Safety Data 2012 Cases # 2012 TRR4 170 1.13 59 0.83 25 0.83 13 0.59 5 0.76 68 2012 Cases # 66 14 15 5 4 28 0 3.30 2012 DAWIR5 0.44 0.20 0.50 0.23 0.61 1.36 0.00 2011 Cases # 147 64 26 12 6 2011 TRR4 1.11 1.00 1.08 0.59 1.40 39 2011 Cases # 56 17 15 8 3 13 0 1.99 2011 DAWIR5 0.42 0.27 0.62 0.40 0.70 0.66 0.00 Total Recordable Rate Days Away From Work Incident Rate 5 FY 2012: Includes ISP acquisition FY 2011: Includes Ashland Distribution and ASK sites prior to divestiture in FY 2011 LA8 Programs in place to assist employees regarding serious diseases The two categories within Ashland Medical Affairs are occupational medical compliance and personal health and wellness. Both provide opportunities for education and appropriate medical examinations for workers and, in some cases, their families. The medical compliance programs are designed to assure full compliance with governmental programs related to worker health and occupational exposures. In addition to providing medical exams, education is incorporated to assure the workforce is properly trained to understand and control risks in the workplace. For some specific risks, parallel medical treatments are made available at the worksite to expedite treatment when necessary. In the personal health and wellness category, an employee assistance program is offered at no cost to employees and families in Canada and the United States to deal with substance abuse and mental health issues. Other programs include weight reduction, smoking cessation, flu shots, health-risk appraisals and assistance with biological issues such as avian influenza, severe acute respiratory syndrome (SARS) and malaria. While many of the above programs are available to North America employees only, Ashland Medical Affairs continues to globalize its initiatives. Development of the following, additional programs now gives Medical Affairs the ability “to reach out and touch any medical issue, any time, any place in the world.” • Automatic External Defibrillator management program, now available globally; • Health First, a health and wellness initiative, provides a health risk appraisal in 25 languages; and • International SOS, which provides global medical support for: (a) all employees traveling internationally; (b) severely injured workers outside the US; and (c) various medical issues that may arise in the course of global business. LA10 Average hours of training per year per employee The company’s online Learning Management System (LMS), which tracks some, but not all, global training, offered 821 courses to employees, representing 1,067 available training hours, in fiscal 2012. This compares with 829 active courses and 1,579 available training hours in fiscal 2011. Full-time Ashland employees completed 236,922 hours of LMS-provided training during fiscal 2012, an average of 21.39 hours per fulltime employee. This compares with 213,862 hours of training during fiscal 2011, an average of 17.55 hours per full-time employee. There were 258,756 course completions during fiscal 2012, an average of 23.36 course completions per full-time employee. This compares with 224,797 course completions and an average of 18.5 course completions per full-time employee, in fiscal 2011. Oct. 1, 2011, to Sept. 30, 2012 21 Fiscal 2012 Sustainability Overview Part-time Ashland employees completed 9,621 hours of training during fiscal 2012, with an average of 15.85 hours spent per parttime employee. This represented 18,224 course completions, with an average of 30 course completions per part-time employee. This compares with 10,225 hours of training during fiscal 2011, with an average of 13.33 hours spent per part-time employee. This represented 21,497 course completions in fiscal 2011, with an average of 28 course completions per part-time employee. (Data by region was not readily available.) Ashland also provided tuition assistance for U.S. employees enrolled in higher education programs directed at improving their job performance or helping them prepare for a future job within the company. Sixty-seven full-time employees participated in the program during the second half of fiscal 2012. LA11 Skill development and lifelong learning for employees Ashland’s Learning Management System provides employees Ashland Inc. with required training classes in 13 languages and offers optional classes to further employee development. Classes are available addressing such topics as safety, compliance, customer service, business skills, product training, management skills and professional effectiveness. LA 12 Percentage of employees receiving performance reviews During fiscal 2012, 75.26 percent of Ashland’s employees worldwide, excluding those covered by collective bargaining units, received annual performance appraisals. This compares with 78 percent during fiscal 2011 and 2010. More than 98 percent of salaried, non-manufacturing employees received performance ratings in 2012. In addition to performing annual performance appraisals, Ashland managers are expected to review progress toward achieving annual goals with their employees on a quarterly basis. Human rights summary Human Rights Summary Ashland believes in treating people with dignity and respect, including those outside the company. We are firmly committed to conducting business throughout the world in accordance with the highest legal and ethical rules and principles. Ashland’s Global Standards of Business Conduct is the cornerstone of this commitment and sets the standards for our actions. It was established as a guide to help employees understand the company’s expectations and alert them to potential legal and ethical issues. Employees are encouraged to promptly report any potential violations of our Code of Business Conduct to the Law Department or through our Employee Hotline. Ashland is committed to maintaining a professional and safe work environment, free from violence, intimidation, discrimination and harassment. HR 6 Child labor Ashland abides by child labor laws and does not employ underage workers in its worldwide operations. HR7 Forced and compulsory labor None of Ashland’s operations employ forced or compulsory labor. HR9 Total number of incidents of violations involving rights of indigenous people and actions taken Ashland has no violations involving the rights of indigenous people. 22 Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Society summary Supporting our communities Community partnerships enable Ashland to combine resources with organizations to maximize impact and outcomes. Ashland encourages and assists employee volunteers in their community-building activities. Through Ashland’s Dollars for Doers program in the U.S., employees who volunteer at least 20 hours with a nonprofit organization can apply for a $250 grant to support the organization they’ve served. Since 1988, Ashland has recognized outstanding Kentucky (USA) teachers with its Teacher Achievement Awards. In 2001, Ashland began a partnership with the Kentucky Department of Education that combined the best elements of the Teacher Achievement Awards and the state Teacher of the Year program. Through these programs, Ashland has awarded more than $658,000 to nearly 450 teachers of grades kindergarten through 12. At times, Ashland is able to combine its focus on education and the environment. For example, in many plants and facilities our employees partner with local schools to help support sustainability efforts, such as recycling and proper disposal of chemical products. For approximately 20 years, the company has hosted a community-wide event at its campus in Dublin, Ohio, to collect and properly dispose of household hazardous waste. Since 2003, employees of Ashland’s gelcoat plant in Miszewo, Poland, have worked with schoolchildren on environmental education. The students collect plastic bottles throughout the school year, and Ashland redeems the bottles for trees that are planted throughout the community. Through its Valvoline packaging plant in Hernando, Miss., Ashland participates in Ability Works, a program through the state of Mississippi designed to help train and enable people who do not have the skills, history and/or ability to find and maintain employment. Some of these individuals are physically handicapped, and others may be mentally or developmentally challenged. In Shanghai, China, Ashland renewed its greenland adoption commitment. Since 2005, Ashland has maintained a public green space to raise awareness for environmental protection, build a solid platform for a low-carbon economy in Shanghai and offset/ reduce carbon emissions generated from the Shanghai World Expo construction. Through greenland adoption, Ashland helps conserve land for parks, gardens and other natural places to ensure enjoyable communities for future generations. In India, we reached out to a school in Hyderabad to assist with the ability to educate their students. In Ohio, Ashland supports programs that take science and chemistry education from the museum to classrooms throughout Ohio and Kentucky. In Delaware and New Jersey, we have supported programs aimed at teaching scientific method and Oct. 1, 2011, to Sept. 30, 2012 water conservation to students and a teach-the-teachers program to enhance teachers’ knowledge of science and math. As a Responsible Care* company, Ashland proactively supports local communities where we have facilities. For example, as part of Earth Day 2012, employee volunteers enhanced areas surrounding their facilities and many local communities by picking up trash and safely disposing of hazardous materials. Ashland facilities around the world support and address local health and human needs as well. Investments for the public good In the United States, Ashland supports community health and human services organizations through an annual Employee Giving Campaign. The campaign offers employees the ability to direct donations to a number of organizations; in turn, Ashland provides a company match. During the past 12 years, Ashland has contributed more than $6 million in matching funds. For Ashland’s fiscal 2012 campaign, employees could choose to support the American Cancer Society, American Diabetes Association, American Heart Association, American Red Cross, Big Brothers Big Sisters of America, Community Health Charities, Earth Share, Feeding America, Global Impact, Habitat for Humanity or the United Way. Ashland believes offering a variety of options lets employees direct funding to organizations that are meaningful to them and provides a means of helping the greatest number of people – in their neighborhoods and around the world. Corruption Wherever Ashland does business, it must comply with the terms of its consent decree with the U.S. Securities and Exchange Commission and all anticorruption laws. This includes the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits, among other things, the payment of money, gifts or other things of value to influence foreign officials. The United States, like nearly all countries, outlaws bribing its own government officials. All of Ashland’s business units are analyzed for risks related to corruption. SO3 Percentage of employees trained in anticorruption policies The Global Standards of Business Conduct booklet is the foundation of Ashland’s comprehensive compliance program. The booklet has been translated into 11 languages and underscores Ashland’s commitment to the law and high ethical standards. The board of directors has designated the general counsel as Ashland’s chief compliance officer and chair of the Ethics and Compliance Committee to oversee the ethics and compliance program. All Ashland employees worldwide are required to complete annual training on the legal and ethical standards presented in the Global Standards of Business Conduct. In 2012, more than 3,420 individual completions were recorded for online training 23 Fiscal 2012 Sustainability Overview Ashland Inc. COSI For more than 20 years Ashland has partnered with The Center for Science and Industry (COSI) in Columbus, Ohio. COSI provides an interactive destination where people can come and discover exciting new facts about science, industry, health and history through exhibits, demonstrations, educational activities and events. Employees volunteer to assist school aged children with team building activities, classroom demonstrations and chemistry experiments. Some of these fun activities included making liquid nitrogen ice cream, making â€œmooglueâ€? (glue made from milk) and experimenting with super-absorbent polymers used in diapers and optical brighteners. courses covering antitrust, bribery, corruption, the U.S. Foreign Corrupt Practices Act and competition laws around the world. Certain online courses are required from year to year, while others are taken based on supervisor directive or personal initiative. These online courses are available in multiple languages. Additionally, 192 instructor-led course completions were recorded covering the same topics. Instructor-led courses are conducted by the Law Department as needed to provide training. Specific corporate policies and procedures also support the Global Standards of Business Conduct and are accessible through the employee intranet. 24 SO6 Total value of financial and in-kind contributions to political parties, politicians and related institutions by country Ashland corporate policy prohibits the use of corporate funds to make campaign contributions. Ashland maintains two federal political action committees (PACs) in the United States: the Ashland Inc. Political Action Committee for Employees (PACE) and the Hercules Incorporated Voluntary Political Action Committee, as well as two state PACs in Kentucky and Ohio. Oct. 1, 2011, to Sept. 30, 2012 Ashland Inc. Fiscal 2012 Sustainability Overview Product responsibility summary Product Responsibility Summary Ashland offers quality products and services that provide added value to its customers. These products can be used and processed, and services performed, in a safe manner. Product stewardship summaries are provided to the public via the Ashland website and give more information about certain chemicals contained in various Ashland products. Ashland strives to improve the products it sells by reducing any product risk associated with use or consumption, while maintaining value derived by the customer. PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement and percentage of significant products and services categories subject to such procedures Ashland reviews its products for potential impact to the environment, health and safety. These reviews help identify adverse effects on human health and the environment from exposure during each stage of the product life cycle. Ashland reviews new products through a stage-gate process that considers environmental, health and safety impacts through each product-development stage. Ashland’s process starts with product conception and continues through product commercialization, including disposal. All identified environmental, health and safety concerns are addressed before a product advances to the next stage and ultimately to commercialization. Ashland reviews existing products when new hazard or regulatory information becomes known. In addition, existing products are reviewed when product composition is adjusted or when a product is extended to new regions or applications. These new processes enable Ashland to address potential hazards and reduce risk of use in intended applications. PR3 Type of product and service information required by procedures and percentage of significant products and services subject to information requirements Ashland provides Safety Data Sheets (SDS) and labels for all Ashland products. These documents comply with all local regulatory requirements for the regions where the products are sold. Ashland’s hazard communication system supports 41 languages for these documents. Ashland also provides product information to its customers where required, such as the origin of components of the product, guidance for safe use of the product, identification of contents that might produce any environmental impact and disposal of products. This information is accessible through our SDS and, where additional information is required, through customer-service support. Ashland also provides regulatory data for many products via regulatory data sheets. Oct. 1, 2011, to Sept. 30, 2012 PR5 Practices related to customer satisfaction Ashland’s commercial units conduct market research as appropriate to measure customer satisfaction and foster continuous improvement. As an example, Ashland Performance Materials surveys its customers annually to understand their perspectives on Performance Materials’ strengths and opportunities. The electronic survey is emailed to key individual contacts for more than 500 customers and includes questions about such critical areas as quality, innovation and customer service. Using customer feedback, coupled with year-over-year analysis, Performance Materials develops action plans for improving alignment with its overarching philosophy that investments in people, processes and products must continue to focus on meeting the needs of customers both now and in the future. Ashland’s Valvoline Instant Oil Change business unit solicits feedback on an ongoing basis from customers at approximately 900 company-operated and franchised automotive service centers. Store managers use this customer feedback to improve service levels and recognize team members for outstanding performance. Executives use the customer satisfaction data in combination with other key performance indicators to gain insight into emerging business trends. Valvoline Instant Oil Change also conducts other types of market research to better understand both consumers’ needs and its brand equity in the competitive marketplace. Additionally, customer feedback is welcomed via the Valvoline Instant Oil Change website and its call center, where trained customer-care agents respond to customer questions and resolve any issues that arise. Ashland also provides a mechanism, via a “Contact Us” form on its public website, www.ashland.com, whereby customers, investors/potential investors, employees/potential employees, the media, retirees and other stakeholders can submit a comment, question or complaint. These messages are relayed to appropriate personnel for response. PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data None of Ashland’s commercial units, resource groups or information technology-supported networks and systems has received any substantiated complaints relating to breach of customer privacy and/or loss of customer data. 25 Fiscal 2012 Sustainability Overview Indicator Description 1.1 CEO statement Ashland Inc. Page Indicator Description Page 3 EN22 Total weight of waste by type and disposal method 16 Organizational Profile 6 EN23 Total number and volume of significant spills 16 2.1 Organization name 6 EN25 Biodiversity effect on water bodies by discharges of water 16 2.2 Primary brands, products and/or services 6 EN 26 17 2.3 Operational structure 6 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation 2.4 Headquarters location 7 EN27 18 2.5 Countries of operation 7 Percentage of products sold and their packaging materials that are reclaimed by category 2.6 Ownership structure 7 EN28 18 2.7 Markets served 7 Monetary value of significant fines and total number of nonmonetary sanctions for noncompliance with environmental laws and regulations 2.8 Organization scale 7 Labor Performance Indicators 2.9 Significant operational changes 7 LA1 Total workforce by employment type, contract and region 20 2.10 Awards 9 LA4 20 3.1 Reporting period 9 Percentage of employees covered by collective bargaining agreements 3.2 Most recent reports 9 LA5 20 3.3 Reporting cycle 9 Minimum notice periods regarding significant operational changes, including whether specified in collective agreements 3.4 Contact point 9 LA7 21 3.5 Report content defined 9 Rates of injury, occupational diseases, lost days and absenteeism, and total number of work-related fatalities by region 3.6 Report boundary 10 LA8 21 3.7 Limitations of boundary 10 Programs in place to assist employees regarding serious diseases 3.8 Non-majority-owned enterprises 10 LA10 Average hours of training per year per employee 21 3.10 Restatements of previous information 10 LA11 Skill development and lifelong learning for employees 22 3.11 Significant changes from previous reports 10 LA12 Percentage of employees receiving performance reviews 22 3.12 GRI content index of standard disclosures 10 Human Rights Performance Indicators 4.1 and 4.3 Governance structure and highest governance body 10 4.2 Governance chair 10 4.4 Mechanisms for recommendations 10 4.12 Externally developed economic, environmental and social charters to which the organization subscribes or endorses 10 4.13 Memberships in associations and/or national/international advocacy organizations 11 4.14 Stakeholder groups 11 4.15 Stakeholder engagement 12 Performance Indicators HR6 Child labor 22 HR7 Forced and compulsory labor 22 HR9 Total number of incidents of violations involving rights of indigenous people and actions taken 22 Society Performance Indicators SO3 Percentage of employees trained in anticorruption policies 23 SO6 Total value of financial and in kind contributions to political parties, politicians, and related institutions by country 24 Product Responsibility Performance Indicators PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement and percentage of significant products and services categories to such procedures 25 PR3 Type of product and service information required by procedures and significant products and services subject to such information requirements 25 EC2 Financial implications and other risks and opportunities due to climate change 13 EC3 Coverage of Ashlandâ€™s defined benefit plans 14 EN2 Percentage of materials used that are recycled input materials 15 EN3 Direct energy consumption by primary energy sources 15 PR5 Practices related to customer satisfaction 25 EN4 Indirect energy consumption by primary energy sources 15 PR8 25 EN5 and EN 7 Energy conservation and efficiency improvements (direct and indirect) 15 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data EN8 Total water withdrawal by source 16 EN9 Water sources significantly affected by withdrawal of water 16 EN16 Total direct and indirect greenhouse gas emissions by weight 16 26 Oct. 1, 2011, to Sept. 30, 2012 Global headquarters Ashland Inc. 50 East RiverCenter Blvd. P.O. Box 391 Covington, KY 41012-0391 +1 859 815 3333 Asia Pacific Shanghai, China +86 21 2402 4888 Europe, Middle East, Africa Barendrecht, Netherlands +31 10 497 5000 Schaffhausen, Switzerland +41 52 560 55 00 Central, South America São Paulo, Brazil +55 11 3089 9220 ashland.com ® Registered trademark, Ashland or its subsidiaries, registered in various countries ™ Trademark, Ashland or its subsidiaries, registered in various countries * Trademark owned by a third party © 2013, Ashland PC-12509 All statements, information and data presented herein are believed to be accurate and reliable, but are not to be taken as a guarantee, an express warranty, or an implied warranty of merchantability or fitness for a particular purpose, or representation, express or implied, for which Ashland Inc. and its subsidiaries assume legal responsibility. Infinite possibilities. At Ashland, we are passionate about the possibilities created through good chemistry. We believe chemistry is about innovative, differentiated science — and also about the way people come together to solve problems. From the speed at which a call or email is returned to the lengths we go to in order to develop solutions that solve a specific customer need, good chemistry is what makes Ashland different and what makes us better. That’s why Ashland is one of the world’s leading specialty chemical companies. In more than 100 countries, we provide the specialty chemicals, technologies and insights to help customers create new and improved products for today and sustainable solutions for tomorrow. People encounter our chemistries in a wide variety of markets and applications, including architectural coatings, automotive, construction, energy, personal care, pharmaceutical, tissue and towel, and water treatment. Through our deep industry knowledge and customer-focused innovation, we make great things happen every day. Visit ashland.com to learn more.