Sustainability Report 2019

Sustainability Report 2019

A Message From Our CEO, Mike Barry that help our customers stay ahead • Innovations and reach their own sustainability goals; our communities through • Supporting volunteering and charitable giving; and

the diversity of our colleagues and • Embracing supporting their growth.

In August 2019, Quaker Chemical Corporation (Quaker) and Houghton International combined to create Quaker Houghton (NYSE: KWR), the global leader in industrial process fluids to the primary metals and metalworking markets. Since then, our teams have been integrating to form one company working for a shared purpose – one that creates long-term sustainable value for our customers, our colleagues, our communities, and our shareholders.

How We Work At Quaker Houghton, we believe there are three key drivers to ensuring the sustainability and ultimate success of our business: our principles, our performance, and our people. These drivers guide our decisions with the external world, including supporting sustainability by investing in areas like: Health and safety of our people;

• excellence (including improving the • Operational environmental footprint and process safety of our operations);

environmental, health, and safety • Considering factors throughout the entire product life cycle; 2

Our focus on sustainability continues to evolve along with our company. Five years ago, Quaker made the commitment to improve our environmental footprint by reducing energy, waste, and water usage across our operations, and we are pleased to share that progress as part of this report. In 2019, as part of the Quaker Houghton integration, we further enhanced our sustainability efforts and improved our safety programs by introducing an aligned set of “Lifesaving Rules” aimed at preventing serious injuries and fatalities in our global workforce. We also invested in several state-of-the-art platforms for safety training, incident management, and product regulatory compliance; and are strengthening the oversight of our sustainability efforts with the appointment of our new VP of EHS, Product Stewardship, and Sustainability.

Today, I am pleased to announce that in 2020, we will introduce two new sustainability committees – one at our executive management level and the other as a part of our Board of Directors. Together, these bodies will set direction and help guide our progress across all aspects of sustainability as we establish a new set of goals through 2025.

Amplifying Our Impact for a Brighter Future Through the combination, Quaker Houghton has doubled in size and multiplied our potential for positive impact. As one company, we now have a much broader and diverse customer base, supporting more than 15,000 customers around the world in the aerospace, aluminum, automotive, machinery, can manufacturing, industrial parts manufacturing, mining, offshore, steel, and tube 2019 Sustainability Report

and pipe industries. Those customers depend on Quaker Houghton to help them achieve their own sustainability goals. Our experts partner with our customers to deliver more sustainable solutions that reduce the environmental footprint of our customer’s manufacturing operations, minimize chemical consumption, support a safer work environment, while also optimizing their operations and reducing costs.

One of the biggest benefits of our combination is the diversity of knowledge and experience of our people. Bringing together our global R&D and strategic business organizations, we are now better able to capitalize on that global knowledge and dedicate more resources to exploring the near and long-term challenges our customers are facing. That information helps us prioritize our own innovation pipeline – ensuring our customers are prepared to lead through the changes that come with a dynamic global climate, evolving regulatory landscape, and the fluctuating needs of areas like transportation and infrastructure.

We are also using our expanded reach to make a difference in the communities we live and operate in. Through volunteering and charitable giving, our colleagues and our company make an impact by supporting events like beach cleanups, education days for local schools, and charity drives.

Forward Together™ Today, we are building a company that fundamentally believes in doing the right thing, protecting what matters most, and working for a shared purpose. I would like to thank all our colleagues around the world for their efforts in making Quaker Houghton a successful and more sustainable company. By uniting our resources, Quaker Houghton and its colleagues are able to drive progress and do more together than ever before to make the world a better, safer place tomorrow. quakerhoughton.com

Contents 2019 Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4

Our Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6 Using our EHS principles as a guide, we are working to bring our products to market in the most responsible way that we can.

And by setting strategic targets, we’ve reduced our carbon and ecological impact.

Our Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8 We succeed when our customers succeed. It’s why we innovate to provide solutions that make a difference for them in areas like sustainability, process improvements, and technology.

Our People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10

People are the heart of our business. Investing in colleague development and engagement, embracing diversity, and giving back to the community is part of how we build long-term sustainability.

Our Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13 Sustainability is rooted in Quaker Houghton’s 250+ year combined history. Our vision for the future sets the stage for how we move Forward Together™.

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2019 Highlights Environmental, Health, and Safety 721 mj

of fuel per ton produced down from 865 in 2014*

.76 TRIR

total recordable incident rate exceeded .85 target set

15+

94%

11 kg

of all sites achieved zero recordables**

265 kg

of waste per ton produced down from 13 in 2014*

of waste water per ton

produced down from 274 in 2014*

8,034

63 kwh

of electricity per ton produced down from 64 in 2014*

awards from customers for our EHS and quality excellence

Palm oil credits booked

802 kg

of water per ton produced down from 951 in 2014*

*From 2014-2019 we implemented a formal program to reduce water, waste, fuel, electricity, and waste water at our legacy Quaker-owned manufacturing locations. **All Quaker Houghton and QH FLUIDCARE™ sites

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Our People 4,000

5/10/25+

43%

10

more active users in our e-learning system vs. 2018

average years colleagues tenure

dedicated colleagues

300+

colleagues recycled their business and personal items as part of our rebranding campaign

15k

customers

5

35

Our Company

r&d technology centers

34

manufacturing facilities

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$1.6 billion in sales

115

countries served around the world quakerhoughton.com

Our Principles Using our EHS principles as a guide, we are working to bring our products to market in the most responsible way that we can.

And by setting strategic targets, we’ve reduced our carbon and ecological impact.

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EHS Guiding Principles Dedication to making improvements in our health, safety, and environmental performance takes a variety of forms in our day-to-day operations. In this past year we kicked off a global Live Safe campaign, introduced global Lifesaving Rules, released a next generation safety training program, and built new platforms to track our metrics and performance. The following factors guide our path forward: Accident and injury prevention

• ompliance with letter and spirit of our legal requirements and ethical • Ccommitments • Environmentally conscious operations and services • Product stewardship • Risk identification and prioritization • Continuous improvement and integrated management systems • Open and transparent communication that builds trust

Responsible Product Stewardship Our global product stewardship program is a clear display of how Quaker Houghton ensures that environmental, health, and safety factors are considered throughout the value chain of our products and solutions. We integrate product stewardship early into our business strategy and product development processes, ensuring that we go above regulation and actively considering ways to identify less hazardous and more sustainable alternatives right from the start.

As new classification information emerges, we work closely with our suppliers and our technology team to align on interpretations, as well finding safer

alternatives to newly classified hazardous materials. Our global and regional product stewardship teams work routinely with the business to respond to inquiries and requests for information as well as train them periodically on emerging technology at special events like our 2019 Automotive Summit.

But we do not stop there. Our specialists go the extra mile and engage directly with our customers and distributors to provide in-person training and outreach programs on developing regulations and technical information based on the latest science. Their success is our success. Whether providing data on our website or through communications with our staff, Quaker Houghton is dedicated to providing the most accurate information available on the safe and secure transport, use, and disposal of our products in a fully transparent manner.

Reducing Environmental Impact Quaker Houghton strategically works to integrate sustainability into the way we operate across the board. As a result, we meet – and sometimes exceed – today’s environmental regulations and have taken additional steps to reduce our impact across the globe.

From 2014-2019, we committed to reducing water, waste, fuel, electricity, and wastewater by investing in new technology and innovation, and adjusting working norms, to make our sites run more sustainably. We achieved total reduction per ton produced of water by 16%, wastewater by 3%, fuel by 17%, electricity by 1%, and waste by 13%. These results are from our legacy Quaker sites that participated in the 5-year sustainability campaign.

Reducing Environmental Impact: Project Highlights In Bera, Spain, beginning in May 2019, our manufacturing site transitioned to a green energy supplier to source electricity.

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In Tradate, Italy, we achieved a 35% reduction in water usage and wastewater generation from 2014 to 2018 by coordinating production of similar products reducing unnecessary cleaning processes.

In Qingpu, China, we reduced water usage by 26% and wastewater by 16% through investments in new systems and improving production processes. For this, we received the “Water-saving Enterprise Award” from the Chinese government in 2016 and 2018.

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Also in Qingpu, we reduced fuel consumption by 17% by upgrading to more efficient boiler and heating systems.

In Monterrey, Mexico, we achieved a 16% reduction in water usage from 2014 to 2019 with projects such as a new waterless sanitation system.

In Ohio, USA we reduced electricity usage by 9% through a series of operational improvements.

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Our Performance We succeed when our customers succeed. It’s why we innovate to provide solutions that make a difference for them in areas like sustainability, process improvements, and technology.

Sustainable Partnerships Quaker Houghton focuses on providing customer solutions that reduce waste, energy, water usage, and chemical consumption, while improving operational processes and tool life, and supporting safe work environments. These are several highlights of how we’ve helped our customers reduce total cost of ownership, improve performance and process, and lower their ecological impacts: Best Environmental Improvement Award – We helped a producer of high-precision diesel fuel injection system components reduce wastewater production by 635 tons and save 620 tons of deionized (purified) water. By optimizing the customer’s usage of our maintenance cleaner and managing their waste water recycling equipment, the customer saved USD $500,000, in 2018 alone. As a result, the customer awarded us a Best Environmental Improvement Award in January 2019.

2019 Zero Waste to Landfill Award – Through our QH FLUIDCARE™ service program, we partnered with a customer to divert 90% of their waste, including wastewater, oil, hazardous materials, metal scrap, and more. As part of a zero waste to landfill initiative, our team refined internal processes and worked with third parties to recycle and/or give waste a second life. As a result of our teams’ dedication, resourcefulness, and innovation, the customer awarded the local team with a 2019 Zero Waste to Landfill Award.

Reducing Waste, Supporting Safe Work Areas – By switching to a Quaker Houghton coolant, one customer saved USD $490,000 and realized additional EHS improvements, including: Reduced water usage

• • Lowered exposure to bacteria, and decreased filter waste sump life, eliminating the need for partial dumps and • Increased waste treatment • A cleaner work environment with less chance of slips and falls

We have introduced new technology and hardware that monitors, measures, and adjusts fluids to maintain their optimal levels and reduce chemical waste.

Decreased Chemical and Water Usage – By converting to our product, a customer in the automotive industry eliminated bacteria, odor, misting, and foam, which supported a safer and cleaner working environment for their operators. In addition, their product consumption was significantly reduced by over 30%. Other benefits include lower chemical and water usage.

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Innovating for a Better Tomorrow With the Quaker Houghton combination in 2019, we have realigned our strategy and organizational structure to focus additional resources on new product development, platforms, and industries. As a result, approximately 20% of all R&D spend is now dedicated to innovation. We collaborate with our Product Stewardship, Sustainability, and Global Strategic organizations for each innovation research project we develop to more positively influence the entire product life cycle.

This past year our steel and metalworking technology teams in Europe worked together with Product Stewardship to identify new chemistry which reduced overall hazardous raw materials by 8% in 2019 (vs 2018), while maintaining high performance at a competitive price. We continue to develop new technology using renewable and recycled raw materials, as well as reduce the hazard profile of our current portfolio.

Working with our customers, we aim to provide products and engineering solutions that lead to: Longer service times where products like our emulsifiable metal removable fluids are extended through recycling technologies that result in less product consumed and waste generated

•

• Responsible sourcing like our use of re-refined base oils • Reduced energy use with cleaners that run at lower temperatures 9

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Our People Our people are the heart of our business.

Investing in colleague development and engagement, embracing diversity, and giving back to the community is part of how we build long-term sustainability.

Engagement and Retention In 2019, we launched a global campaign to engage our colleagues with Quaker Houghton’s core values – the guiding principles for everything that we do. Beyond living these values, we want our colleagues to be heard and contribute in decisionmaking. We implemented global “listening surveys” as a conduit for colleague feedback during the Quaker Houghton integration.

From the results and feedback, our leaders create action plans that help build an engaged workforce.

Quaker Houghton sustains an environment where people want to show up to work and do great things together. It’s why the average tenure of our colleagues is nearly 10 years. One research scientist who has been with the company for 42 years says it best: “To make a company special, it has to be more than just a place where you work and do your job. It has to be a place where you feel you belong, one where you feel you can make a difference […] To me, our company has always been such a place.”

Training and Development Our performance sets us apart from the competition and helps Quaker Houghton attract and retain talent. To achieve sustained, high performance we invest in the development, safety, and wellbeing of our colleagues.

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In 2019, as part of our integration efforts, we aligned global training and development practices with the introduction of: Quaker Houghton’s “Lifesaving Rules”, increasing our emphasis on promoting health and safety to prevent serious injuries

•

common safety training and incident • One reporting system, with rollouts continuing into 2020

global performance and development • Aprogram that guides colleagues toward productivity, professional growth, and continuous improvement.

global learning management system • Aleveraging e-learning as well as additional tools for skill development

Embracing Diversity At Quaker Houghton, we benefit from the diverse experience and knowledge of our global colleagues. In 2019, the Research and Technology team combined for three global technical exchange summits. These summits joined colleagues from around the world to encourage collaboration, innovation, and fully benefit from a diverse range of experience within the team. This knowledge-sharing forum is one way we explore the near and long-term trends our customers face.

Elsewhere, our women’s affinity groups continued to grow and thrive throughout 2019. These groups were formed and operate to promote self-development by connecting, educating, and supporting women in their Quaker Houghton careers.

And in celebration of International Women’s Day in 2019, Quaker Houghton’s facilities held on-site events and awards to recognize the achievements of their colleagues. quakerhoughton.com

Community Engagement Highlights

Testimonial: Local Education Partner

Beyond financial resources, we know that engagement is at the heart of our responsibility to our communities. Through volunteering, Quaker Houghton encourages its colleagues around the globe to use their talents to make their communities better places to live and work. While our volunteering program guidelines vary by country and local culture, we are proud of the community engagement demonstrated by our colleagues around the world. In 2019, our people supported education, innovation, and local communities through activities like: Career days with local middle schools

“Volunteer groups from Quaker Houghton are always so energetic and enthusiastic, regardless of the task. Your efforts directly impact the day to day lives of the children that live and learn on our campus.”

-DEVELOPMENT OFFICER | LOCAL EDUCATION PARTNER

• various STEM programs with • Supporting resources and volunteering approximately 500kg of debris • Clearing from the North Sea coastline in the Netherlands

student tours at our facilities and • Hosting labs

with students at the Middletown, • Engaging USA Chamber of Commerce Pathways to Professions Fair

Hosting the International Congress of • Chemical Engineering, a student group in Mexico

Packing winter kits with Your Way Home, • an organization in the US, that serves the homeless

and packing donations with • Sorting Cradles to Crayons in the US, to provide basic necessities to children

• Local park and site cleanups

Volunteers clear debris from the North Sea coastline.

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Our Future

A Conversation with Ria Scheuren Our VP of Global EHS, PS, and Sustainability

Sustainability is quite a complex topic with a variety of definitions in the marketplace, but what exactly does it mean at Quaker Houghton?

Sustainability, at its core, focuses on meeting the needs of the present while managing environmental, social, and economic concerns in a responsible and ethical manner so that future generations are healthy and successful. For us, it means balancing short-term decisions against longer-term initiatives, so we can not only minimize any possible negative impacts of what we do, but create positive impacts for our people, our communities, our business, and society as a whole.

Quaker Houghton’s long-standing 250+ year combined history has the concept of sustainability rooted in its core values. Operating responsibly and ethically is embedded in the DNA of both legacy companies. As we move forward together as one company, the concepts of sustainability are further threaded throughout our new core values and the way we operate.

What can we expect to see in 2020?

We understand the importance of data transparency and public disclosure. So, this year Quaker Houghton will increase visibility of our sustainability activities and achievements by ensuring up-to-date information is readily accessible through our website and other communication channels on topics like CO2 emissions and colleague safety indicators.

This year, we have also committed additional dedicated resources in the EHS group to focus on sustainability, as well as creating Board and Executive oversight committees.

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What does the future of sustainability at Quaker Houghton look like in the next five years?

As we look to the future, Quaker Houghton will continue to expand our commitment and response to today’s environmental, social, and economic challenges while creating value for our stakeholders by aligning our sustainability goals with our business strategy. As our company doubled in size in 2019, we have more opportunities to seek ways to minimize our environmental footprint by reducing CO2 emissions, as well as promoting minimization programs around water usage, waste water and waste generation. We will create more development and engagement opportunities for our colleagues and will expand our volunteering and community engagement initiatives.

As the industries we support continue to move towards more sustainable business practices, Quaker Houghton will be there with more innovative and sustainable solutions. We will focus on helping our customers reduce their environmental footprint through improvements that extend the in-use lifetime of our fluids, minimize the quantity of fluids used, as well as promote advanced recycling programs. We will explore opportunities to design fluids that have a lower hazard profile and/or utilize renewable resources. We will also continue to work with our suppliers and business partners to assess their sustainability performance and identify improvement initiatives along our supply chain.

The next five years promise to be an exciting time as Quaker Houghton embraces a new vision for sustainability.

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Forward-Looking Statements This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified because they do not relate strictly to historical or current facts, and include statements as to our intents or beliefs, among other things. We caution you not to place undue reliance on our forward-looking statements. Our forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its operations that are subject to change based on various important factors, many of which are beyond our control. A major risk is that demand for the Company’s products and services is largely derived from the demand for its customers’ products, which subjects the Company to uncertainties related to their businesses, including our customers’ willingness to participate in our sustainability initiatives and our ability to devote adequate resources to such initiatives. Other major risks and uncertainties include, but are not limited to, significant increases in raw material costs, worldwide economic and political conditions, and other factors related to the Combination, other acquisitions and integration efforts.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, as amended, and in our quarterly and other reports filed from time to time with the SEC. We do not intend to update or revise any forward-looking statements to reflect new information or future events or for any other reason.

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Forward Together ™

Global Headquarters 901 E. Hector Street Conshohocken, PA 19428-2380 U.S.A. +1.610.832.4000

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