Corporate Social Responsibility Report 2017

SMIT & ZOON | CSR REPORT 2017

Corporate Social Responsibility Report 2017 1

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CONTENTS

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SMIT & ZOON | CSR REPORT 2017

FOREWORD

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STRATEGY

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FOOTPRINT

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SAFETY & HEALTH

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CATALYSING

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OUR PEOPLE

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THE KOORNZAAYER FOUNDATION

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FACTS IN FIGURES

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ANNEXES

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SMIT & ZOON | CSR REPORT 2017

A tangible evidence for the need of transparency is the Smit & zoon Product Passport, which was launched in May 2017 - for which we received a large amount of positive feedback from the market. In order to produce high quality leather with a minimal environmental impact, we ourselves as well as our customers, the tanneries, need to understand the effects of the chemicals they use on their waste stream. The Smit & zoon Product Passport provides just that.

FOREWORD

Watch a video of our acquisition of Codyeco: https://www.youtube.com/watch?v=BLWio0Yayss&sns=em

Next to our leather chemicals business, which makes up around 80% of our business, we also have a Functional Oils (FO) division that supplies processed omega-3 fish oils. The synergy between our FO business and our leather chemicals business decreased in the last couple of years, which led to our decision to divest the FO business unit. In order to provide a healthy future for our FO business, starting January 1, 2018, this division was sold to IQI B.V., a supplier of pet food ingredients such as fish meal and fish oil. The expectancy is that both organisations, which both have a wide product pallet, will have a stronger position in the pet-food market when they are combined.

Where the Product Passport provides tanneries with insights on their waste stream, our latest product launch, the Syntan ZLR 100, can truly help tanneries minimize their waste stream. This chrome-free, cationic retanning agent, based on the mineral zeolite, ensures a high uptake of all retanning chemicals, fatliquors and dyes used in the leather crusting process. This reduces the volume of chemicals needed and the volume of chemicals potentially ending up in the waste water.

Dear reader,

We are once again pleased to present to you our corporate social responsibility (CSR) report. This is already the fifth

We are constantly working on bringing innovative, new, sustainable products to the market. Our Research and Development team plays an important role in that. In September 2017, we filed a European patent application on bio-based retanning chemicals. This is a great first step towards a series of environmentally friendly, lignin-based leather chemicals.

year that we publish this report, in order to give you an insight in our achievements as well as our challenges in the

All and all, 2017 has been a very exciting year for us. The abovementioned highlights only represent the metaphorical top of the iceberg. More details and other interesting projects we are working on can be found in this report. We whole heartedly want to thank everyone who has supported us with this and very much look forward to continuing these exciting times in the year(s) to come.

areas of sustainability and corporate responsibility. We strongly believe that transparency is the most important principle for this, hence this annual report.

Marc Smit

Hans van Haarst

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Another way of broadening and improving our product portfolio is by acquiring other companies. In line with our growth strategy we completed the acquisition of Italian leather chemicals producer Codyeco in November 2017. Thanks to this acquisition, both Smit & zoon and Codyeco customers can benefit from a broader product portfolio, joint strengths in regards to product innovations, and a strong focus on making the leather value chain more sustainable.

Marc Smit

7th generation owner

Hans van Haarst CEO

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SMIT & ZOON | CSR REPORT 2017

STRATEGY

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STRATEGY STRATEGY STRATEGY STRATEGY & &VALUE VALUE & &VALUE CREATION: VALUE CREATION: CREATION: CREATION: CONTINUITY CONTINUITY CONTINUITY CONTINUITY

SMIT & ZOON | CSR REPORT 2017

195 195 YEARS YEARS 195 195 of always YEARS of YEARS always searching searching of always offoralways solutions for searching solutions searching with forwith positive solutions forpositive solutions lasting with lasting with impact positive positive impact lasting lasting impact impact

MISSION MISSION It’sMISSION It’s our MISSION our mission mission It’s It’s our to be our to mission your be mission your preferred topreferred be to be your partner, your preferred partner, preferred providing providing partner, partner, excellent providing excellent providing products excellent products excellent andproducts and services, products services, and today and services, today services, andand tomorrow today tomorrow today andand tomorrow tomorrow

STRATEGY

INPUT INPUT INPUT INPUT KEYKEY STAKEHOLDERS STAKEHOLDERS KEYKEY STAKEHOLDERS STAKEHOLDERS STRATEGY STRATEGY STRATEGY STRATEGY Internal Internal

Shareholder Shareholder / Shareholder / Shareholder / / Company Company Company Company

• Skilled • Skilled staff &staff excellent & excellent • Skilled • Skilled staff &staff excellent & excellent technical technical team team technical technical team team • Consistent • Consistent productproduct quality • Consistent quality • Consistent product product qualityquality • Long• term Longrelations term relations • Long • term Longrelations term relations • Financially • Financially strong strong • positive Financially • Financially strong strongimpact for solutions with lasting • World • World class facilities class facilities •& logistics World •& logistics World class facilities class facilities & logistics & logistics Customer Customer • Global • Global presence presence through • through Global agent • Global presence agent network presence network through through agent agent network network • Dedicated • Dedicated to leather to leather • Dedicated • Dedicated to leather to leather

STRATEGY & VALUE Strategy & 195 YEARS of always searching Value Creation MISSION MISSION

Internal Internal

CREATION: CONTINUITY

Customer Customer

CONSISTENT CONSISTENT CONSISTENT CONSISTENT KEY STAKEHOLDERS

• Skilled staff & excellent technical team • Consistent product quality • Long term relations • Financially strong • World class facilities & logistics • Global presence through agent network • Dedicated to leather

AGILE AGILE

AGILEAGILE

INNOVATIVE INNOVATIVE

INNOVATIVE INNOVATIVE

Shareholder / Company External External External External • • • • •

STRATEGY

Employee Employee Employee Employee

• Continuity • Continuity • Continuity • Continuity

We create We create value to value ourWe to customers our create We customers create value value to ourtocustomers our customers

EVA Growth We create value to our customers and company to secure our future

• Governmental • Governmental restrictions •restrictions Governmental • Governmental restrictions restrictions LONG TERM FOCUS CONSISTENT

Room for individual growth We enable our employees to grow & develop

INNOVATIVE

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CREATED VALUE

• • • • •

Confidence • Confidence (worry(worry •free) Confidence •free) Confidence (worry(worry free) free) Safety • Safety • Safety • Safety Efficiency • Efficiency • Efficiency • Efficiency Innovative • Innovative solutions solutions • Innovative • Innovative solutions solutions Sustainable • Sustainable leather leather • production Sustainable • production Sustainable leather leather production production

Room for individual Room for growth individual growth Room for individual Room growth for individual growth • Employability • Employability• Employability • Employability We enable We enable our employees our employees We enable toWe grow enable toour &grow develop employees our & develop employees to grow to grow & develop & •develop Competent • Competent • Competent • Competent

Increasing • Increasing customer customer •demands Increasing •demands Increasing customer customer demands demands Society - - Society Society Society - Increasing • Increasing brand brand & OEM • Increasing &influence OEM • Increasing influence brandbrand & OEM& influence OEM influence nextnext generation generation generation nextnext generation Sustainability • Sustainability as qualifier •as Sustainability qualifier •forSustainability business for business as qualifier as qualifier for business for business Consolidation • Consolidation • Consolidation • Consolidation Partner in value creation Customer Volatility • Volatility in exchange in exchange • rates Volatility • &rates Volatility in &exchange in exchange rates rates & & We create value to our customers raw material raw material pricingpricing raw material raw material pricingpricing

Employee

Continuity • Continuity • Continuity • Continuity Profit • Profit • Profit • Profit Growth • Growth • Growth • Growth Leadership • Leadership role role • Leadership • Leadership role role Success • Success • Success • Success Pride • Pride • Pride • Pride

Partner in value Partner creation in value creation Partner in value creation Partner in value creation• Leadership • Leadership role role • Leadership • Leadership role role

LONG LONG TERM TERM FOCUSFOCUS LONGLONG TERMTERM FOCUSFOCUS

Internal

AGILE

• • • We create We create value to value ourWe to customers our create We customers create value and value toand ourtocustomers our customers and and • company company to secure to secure ourcompany future ourcompany future to secure to secure our future our future • •

GrowthEVAEVA Growth EVAEVA Growth Growth

It’s our mission to be your preferred partner, providing excellent products and services, today and tomorrow

It’s our mission to be your preferred partner, INPUTproviding excellent products and services, today and tomorrow

CREATED CREATED VALUE CREATED VALUE CREATED VALUE VALUE

• • • • • •

Continuity Profit Growth Leadership role Success Pride

• Involved • Involved & engaged & engaged • Involved • Involved & engaged & engaged • Being • Being part ofpart theoffamily •the Being family • Being part of part theoffamily the family

• Trust • Trust

• Trust • Trust

Sustainable Sustainable Value ChainValue Chain Sustainable Value Sustainable Chain Value Chain• Quality • Quality of lifeof life• Quality • Quality of lifeof life

• Safety • Safety • Safety • Safety We contribute We contribute to a sustainable to We a sustainable contribute Wesociety, contribute society, toina sustainable line to in a sustainable line society, society, in line in line • Continuity • Confidence • Confidence (worry(worry •free) Confidence •free) Confidence (worry(worry free) free) with our with CSR ourambition CSR ambition with to play our with toaCSR play catalyzing ourambition aCSR catalyzing ambition to playtoaplay catalyzing a catalyzing • Leadership role • largely Continuity • Continuity • Continuity • Continuity role inrole making in making the leather the role leather value inrole making chain value in making the chain largely leather the largely leather value value chain chain largely •sustainable Confidence (worry free) • Availability • Availability of leather of•leather Availability as•aAvailability as a of leather of leather as a as a sustainable by 2025 by 2025 sustainable sustainable by 2025 by 2025 • • • •

Safety Efficiency Innovative solutions Sustainable leather production

• • • •

Employability Competent Involved & engaged Being part of the family

sustainable sustainable sourcesource sustainable sustainable source source

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STRATEGY

WHY, MISSION & VALUES

Our Philosophy

WHY

We think about the next generation

Always searching for solutions with positive lasting impact

As a 7th generation family business we naturally think about the next generation. That is why we offer our customers sustainable solutions that meet the latest quality and safety standards. In our own research and application labs our highly qualified chemists and leather technicians continuously search for quality improvements and environmentally friendly innovations that support the sustainability of our customer’s business. We believe that their future is our future.

2025 Strategy The heart of our strategy is to ensure the continuity of our family owned company, building on its rich history since 1821. In this context, ‘taking care of the next generation’ is not only relevant in the family setting, but it is also something that will speak to all of our customers, industry partners, and stakeholders.

The basis of our business strategy lies in our purpose (why) and mission. In 2017 we set-up our strategic business goals towards 2025, in which we defined our growth ambition and set-up an overall roadmap on how to reach the desired growth for each of our business areas and segments.

In 2018, our business area managers will make strategic plans for their respective business area.

Smit & zoon’s values and code of conduct will continue to form guidance in all strategic plans.

MISSION

To be your preferred partner, providing excellent products and services, today and tomorrow

VALUES • Long

term focus • Innovative

• Agile • Consistent

SMIT & ZOON | CSR REPORT 2017

2017 Business Milestones JANUARY

Kick-off investment plan regarding the extension of our Syntans factory in Amersfoort, the Netherlands

APRIL

Smit & zoon opens a sales office in Chennai, India

Smit & zoon launches Syntan ZLR 100, an innovative chrome free retanning agent based on the mineral zeolite (page 14)

MAY

Smit & zoon launches Product Passport (page 14)

JULY

Smit & zoon opens application lab in Novo Hamburgo, Brazil

AUGUST

Smit & zoon hands out 50,000 EUR of funding to its agents for CSR related projects (page 24)

CSR Strategy To realize our CSR ambitions we are focusing on three main themes: Footprint, Safety & Health and Catalysing. In this document we will report on these three focus areas and their activities and achievements in 2017.

Smit & zoon files patent application on bio-based leather retanning chemicals (page 15)

OCTOBER

Decision on divestment Functional Oils Business

By 2025, Smit & zoon will be a recognized leader in safety & health, with outstanding standards in our own company and involvement of our partners in the value chain.

NOVEMBER

Smit & zoon acquires Italian leather chemicals company Codyeco

CATALYSING SUB AMBITION

DECEMBER

Finishing plant (Montorso, Italy) OHSAS certified (page 20)

FOOTPRINT SUB AMBITION

By 2025, Smit & zoon will be a recognized leader in reducing the footprint in its value chain.

CSR AMBITION:

Smit & zoon plays a catalysing role in making the leather value chain largely sustainable by 2025.

SEPTEMBER Excellent scores on customer satisfaction survey 2017 (page 26)

SAFETY & HEALTH SUB AMBITION

By 2025, Smit & zoon will be a recognized leader in accelerating the CSR flywheel within the leather value chain.

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FOOTPRINT

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SMIT & ZOON | CSR REPORT 2017

AMBITION By 2025, Smit & zoon will be a recognized leader in reducing the footprint in its value chain.

FOOTPRINT

Milestones 2017 Syntan ZLR 100

After several years of analysing our key wet-end products, we are very pleased to be able to share these valuable data with our customers now. This broad level of insights into a leather chemical’s performance on leather and especially on a tannery’s waste stream, is unique. The Product Passport is another step in the reduction of the leather industry’s footprint.

Dirick von Behr, Strategical Leather Manager

Bio-based platform Dr. Yujie Ma, R&D scientist, and Ms. Petra Berends, Product technologist, both member of the Bio-based platform within Smit & zoon’s research department, lead the research on using lignin in retanning agents.

Smit & zoon’s Bio-based platform aims to increase the bio-based content and the degree of biodegradability in the company’s leather chemical portfolio.

Product development

OBJECTIVE: Reduce waste in the leather value chain

Tanneries consume large amounts of water in their processes.

One of our objectives is to reduce the amount of water used in the

In April 2017 we launched Syntan ZLR 100, an innovative chrome free retanning agent based on the mineral zeolite. Syntan ZLR 100 ensures an increased affinity of anionic chemicals and a high uptake of all retanning chemicals, fatliquors and dyes. This reduces the volume of chemicals needed and the volume of chemicals ending up in the waste water, thus saving tanneries costs, both on the purchasing as well as on the effluent treatment side.

leather value chain. Our Simplicity

During tests with Syntan ZLR 100 in Asia, we saw that this product can increase the cutting yield with 3-5% and reduce the amount of dyestuff needed with up to 25%.

Luis Baptista, Marketing/Sales Manager at Smit & zoon Wet-end

concept supports tanners with that.

Equally important to us is improving the uptake of chemicals in order to reduce the volume of chemicals in the waste water.

Product Passport OBJECTIVE: Reduce waste in the leather value chain In May 2017 we launched our Product Passport; an easy to use overview with data on the performance of Smit & zoon’s wet-end chemicals on both leather and on the environment. Based on the data in the Product Passport, tanneries are able to choose their wet-end chemicals more wisely, enabling them to produce beautiful leather while reducing their environmental footprint. Since the launch of the ‘Product Passport’, we have shared it with many tanneries and brands and we’ve received very positive feedback on it.

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OBJECTIVE: All products to comply with (M)RSL Watch a video of the Smit & zoon Product Passport: https://www.youtube.com/watch?v=NKtcO_FfXfo&sns=em

Restricted Substances List Since 2016, Smit & zoon has its own Restricted Substances List (RSL), a list of substances that shall not be present in any of our products.

A steering group reviews and updates the Smit & zoon RSL each year; taking into account the following sources and criteria: Candidate List of Substances of Very High Concern (ECHA); Authorization List (Annexes XIV of REACh); List of Restrictions (Annexes XVIII of REACh); Manufacturing Restricted Substances List (ZDHC). All our wet-end products comply with the RSL. In the near future, we aim to have achieved the same for our finishing products.

Patent application bio-based retanning agents OBJECTIVE: Reduce waste in the leather value chain Lignin-based products In September 2017 we filed a European patent application for ‘lignin modified polyphenolic leather chemicals’. The patent describes the smart utilization of industrial lignin to mix with phenol in the production of otherwise 100% petro-based polyphenolic retanning chemicals. Part of the phenol in the concerning products is replaced by lignin during the chemical conversion process. This makes Smit & zoon the first leather chemical company to use lignin modified polyphenolic in its products.

These lignin-based products are currently tested by our product development team and are expected to come to the market in 2018.

Product Development Finishing One of the steps we are currently taking in order to make our finishing products compliant with our RSL is to have the raw material nonylphenol, which was present in some of our pigments in very small quantities, removed from the products. In 2017 we managed to successfully remove nonylphenol from these products.

A natural polymer Lignin is a natural cross-linked polyphenol derived from biomass that is formed in the cell walls of wood or agricultural crops and plants providing structural strength. Lignin constitutes about 2035% of the mass of every tree or plant and is the most abundant natural aromatic resource. As a by-product from the pulp and paper industry, lignin is currently mainly burned to generate energy.

In 2015, Smit & zoon started several projects to replace the raw materials containing N-ethyl-2-pyrrolidone (NEP) in a number of its products.

End of 2017 we finalized the largest part of these projects and we have managed to remove NEP from most products, while the products still maintain their qualitative effect on leather.

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FOOTPRINT

SMIT & ZOON | CSR REPORT 2017

In 2017 we also worked on a new concept of formaldehyde free finishing products. These cationic products are currently being tested in our internal application lab to understand all their features and benefits.

FACT: Smit & zoon uses polyethylene drums made of 65% recycled material. This way we achieve an annual reduction of 34% or 583,000 metric tons of CO2 emissions, equivalent to the CO2 emissions of 323 Dutch inhabitants.

LIFE Biopol OBJECTIVE: Reduce waste in the leather value chain

Outlook 2018

In November 2017 Smit & zoon acquired Codyeco. Codyeco is one of the partners and project coordinator of the LIFE Biopol project, a project cofinanced by the European Union as part of the LIFE 2014-2020 program.

The main target of this project is the synthesis of a new class of biopolymers that represent an innovative, eco-friendly, and suitable alternative to traditional products based on petrochemicals, currently used in leather manufacturing.

In 2018 we will start local production in India for which a plant in Chennai will open in the first quarter of 2018. This will decrease the amount of CO2e1 on shipping from the Netherlands with 513 tons.

Our Product Passport also remains to be an important focus area. In 2018 we will extend it with additional products.

Improvements at our own premises OBJECTIVE: No negative impact from the Smit & zoon production process and reduced CO2 footprint from our logistical process

After the success of Syntan ZLR 100, we also expect to add additional zeolite based products to our product portfolio.

Greening electricity and gas In 2017 we started a partnership with the Climate Neutral Group to green all electricity and gas that we use at our sites worldwide. We convert our electricity consumption into ‘European Wind Guarantee of Origin’ certificates. By doing so, we invest in European wind energy. Via ‘Gold Standard CO2’ certificates, our gas usage is converted into projects leading to clean energy and local sustainable development. In our own case, this is a wind energy project in Turkey. The issuance of and payment for Gold Standard credits are closely monitored; each credit may only be used once.

CO2e: Carbon dioxide equivalent or the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas.

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Reducing the number of transport kilometres In February 2017 we completed a trial to transport the drums that we use as packaging for our fatliquors, with Longer and Heavier Vehicle combinations (LHVs) from the supplier to our plant in Weesp. By doing so, we are reducing the number of transport kilometres for drums by 30,000 km annually, equivalent to roughly 27,000 kg of CO2 emissions.

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SAFETY & HEALTH

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SAFETY & HEALTH

AMBITION By 2025, Smit & zoon will be a recognized leader in Safety & Health with outstanding standards in our own company and involvement of our partners in the value chain.

Milestones 2017 Safe use of chemicals campaign

Upgrade environment management systems to ISO 14001:2015 standard

Vitality project OBJECTIVE: Wellbeing for employees

OBJECTIVE: World-class processes In 2017, the environmental management systems of our Netherlands sites and our Finishing facilities in Italy were upgraded to the new risk based 2015 version of the ISO 14001 standard. This was also achieved for the ISO 9001 quality management standard. Our Chinese site in Nanjing already attained this in 2016.

The wellbeing of our employees is important to us. For example, we focus on prevention by promoting a healthy lifestyle. In 2017, Smit & zoon continued its Vitality project in the Netherlands. Besides initiatives like free fruit for all employees and a low cost gym membership, various sports activities were organised for Smit & zoon’s Dutch employees, including a well-attended boxing and stand up paddling workshop.

Improving safety at our own premises

Outlook 2018

OBJECTIVE: Minimal adverse effects of our products on S&H anywhere downstream the value chain Every leather product, be it a shoe, a bag, or a leather sofa, is man-made.

It takes many experienced workers to create the perfect leather product from operators in a chemical plant

In 2017, we continued our Safe use of Chemicals campaign. Its focus was on educating our own technical staff in order to get more ambassadors for this program. During our Global Leather Meeting in May 2017, our sales – and technical staff attended various workshops on topics like: Safety in the Tannery; LWG Chemicals Management Module; Zero Discharge of Hazardous Chemicals (ZDHC).

This experience helps them share this information with their customers.

to tannery workers and craftsmen in

Chemicals Management

a shoe factory. As these people fulfil

OBJECTIVE: Minimal adverse effects of our products on S&H anywhere downstream the value chain

such an important role, we continue to strive that they should work in safe and healthy conditions and be treated with respect. Safe use of chemicals is an important aspect of that.

In 2017, Smit & zoon supported the release of a Chemicals Management Module (CMM) by the Leather Working Group (LWG). Currently the CMM is voluntary for tanneries; however it is expected to become a part of the LWG Audit Protocol from January 1, 2020 onwards. The CMM assists tanneries to manage information on the large number of chemicals and chemical substances that are used in leather production and so further improve safety and health for everyone in the leather value chain.

OHSAS 18001 certificate for Finishing plant OBJECTIVE: World-class processes In December, 2017, we attained certification to Occupational Health and Safety Assessment Series (OHSAS) 18001 for our Finishing facilities in Montorso, Italy. This global standard recognizes systems that enable continuous improvement in the area of occupational health and safety. In 2016, our Nanjing (China) plant already attained this certification whereas our Dutch plants are currently working towards this certification as well. An overview of all our certifications can be found on our website www.smitzoon.com 21

OBJECTIVE: No cases of occupational illnesses, accidents and injuries within the company

In the years to come, Smit & zoon will continue to train its employees and agents to facilitate customers in implementing new developments like the LWG CMM and improve the S&H conditions in tanneries.

Risk Identification and Evaluation (RI&E) In 2016 an external party in The Netherlands carried out an RI&E on behalf of Smit & zoon to inventory potential risks and, most importantly, to further improve the safety on our premises. Based on the resulting report, our SHE steering group drafted an action plan. Some small first actions from this plan have already been rolled out. In 2018, we expect to further roll out the action plan, which will be an important step towards OHSAS 18001 certification of our Dutch plants.

In 2018, we will begin local production in India for which a plant in Chennai will open in the first quarter of 2018. From the start of this project, we have incorporated high SHE and social responsibility standards in the planning for the technical project and the set up of the organisation.

Furthermore, we will develop plans to harmonize SHE standards between Smit & zoon and Codyeco at an ambitious level in 2018.

Hearts & Minds Hearts & Minds is a safety program developed by SHELL and is based on 20 years of university research. At the end of 2016, Smit & zoon’s Dutch plants held workshops to measure its safety culture. Based on the results, an international follow-up program was set-up in 2017.

Within this program, we organised workshops in 2017 to implement tools from the Hearts & Minds toolbox to improve the elements with a relatively lower score from the culture measurement such as learning from incidents.

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CATALYSING

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AMBITION By 2025 Smit & zoon will be a recognized leader in accelerating the CSR flywheel within the leather value chain.

CATALYSING

Milestones 2017

cannot know whether the companies are complying with these standards. With the Tannery of the Future tool tanneries can carry out self-assessments. The tool includes a number of indicators which can be used to help improve sustainability of the leather industry along its value chain and it can contribute to enhancing the transparency of the industry and improving its image among consumers.

Therefore, in 2017, we developed a Business Partner Code of Conduct, an integral part of the business agreement between us and our business partners. The document sets a standard on topics like human rights, environment, and fair operating practices. In 2018 we will share this Code of Conduct with Smit & zoon partners: our agents, distributors, and key suppliers.

50,000 EUR funding for CSR projects agents

Ivan Kral, UNIDO

OBJECTIVE: Accelerate the CSR flywheel within the leather value chain

The leather industry is big and we cannot change it on our own.

However, with our long-term focus in mind, our experience and agility as one of our core strengths, we believe our role should be that of a catalyst.

At the 2017 Agent Day in Shanghai on August 29th, Smit & zoon handed out a total amount of € 50.000, - to CSR related projects as proposed by its agents. At the beginning of each year, Smit & zoon asks its agents to hand in a proposal that clearly indicates which results they intend to reach that year in order to improve in the areas of Safety & Health, Footprint and Catalysing (the 3 pillars of Smit & zoon’s CSR strategy). In 2017 the following agents were awarded: • Gos Deri Kimya San. Ve. Tic. - Turkey • Jinan Nuxoin Rixin Chemicals Co., Ltd. - China • Minikin - Bangladesh • MOA - Egypt

Safety & Health Footprint Catalyzing Encouragement for Safety & Health

In Egypt, Safety & Health is more and more on the agenda for tanneries.

For example, some of our customers are, setting up new buildings that improve safe working conditions. However, there is, definitely still room for improvement.

Raising awareness is an important first step to further improve local working conditions. By providing us with useful promotional materials, Smit & zoon supports us in playing our role in this.“

Waleed Youssef, Chairman at MOA (Smit & zoon agent for Egypt)

Business partner code of conduct OBJECTIVE: CSR is in the mind-set of all Smit & zoon employees and partners Compliance of all our business partners to the laws of the countries in which we operate or do business with is essential to us, but it’s not enough. We want all our business partners to follow the same high standards in regards to corporate social responsibility as we have to ourselves.

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Watch a video interview with Antoinette Gast and Egbert Dikkers of ‘Tannery of the Future’: https://www.youtube.com/watch?v=vRLbzlhqptU&sns=em

‘Tannery of the Future’ tool OBJECTIVE: Accelerate the CSR flywheel within the leather value chain

The ‘Tannery of the Future’ tool can be found here: www.tanneryofthefuture.org

Increased demands for high quality leather products to be made in conditions that are good for the environment and for people, are putting pressure on tanneries to create a futureproof, socially responsible industry.

The online ‘Tannery of the Future’ CSR self-assessment, co-developed by Smit & zoon, supports them to achieve this. This tool helps tanneries to understand the status quo and can act as a prelude to full certification, e.g. from the Leather Working Group. In 2017, several presentations were given at international industry events. The tool was translated in Hindi and Mandarin in 2017. Furthermore, it is now financially sponsored by all major chemical companies and endorsed by well known organisations like UNIDO.

Safety poster OBJECTIVE: Accelerate the CSR flywheel within the leather value chain Smit & zoon was one of the initiators to develop a poster on the safe use of chemicals together with other chemical companies (organized in TEGEWA). The poster was designed with easy-to-understand safety pictograms to guide those working in tanneries in order to take the right safety measures during their daily work. Since 2017 the poster is available in the following languages: English, Mandarin, Bangla, Tamil, Hindi, Thai.

Transparency is a major challenge in the leather industry.

A lot has been achieved in recent years, especially thanks to the Leather Working Group, which has helped improve tanneries’ performance while reducing their environmental impact. Yet, there are still many companies around the world experiencing difficulties in meeting international environmental and safety standards. Due to the complexity of the leather value chain, consumers, in some cases, 26

CATALYSING

SMIT & ZOON | CSR REPORT 2017

Outlook 2018

Leather Naturally OBJECTIVE: Accelerate the CSR flywheel within the leather value chain

In 2018 we will proceed to intensify existing and build new relations to collaborate in making the leather value chain largely sustainable.

The tools we co-founded and developed in the last few years will be very useful in increasing the awareness to do better within our agent network and key suppliers including fashion brands. Especially our extensive agent network will be facilitated to show examples in working safe with chemicals and to reduce the environmental footprint of producing leather.

Leather Naturally is an initiative that promotes the use of globally-manufactured sustainable leather and seeks to inspire and inform designers, creators, and consumers about its beauty, quality, and versatility. Smit & zoon is an active member of and financial contributor to the Leather Naturally steering committee. Since 2017 Smit & zoon’s Leader of Innovation & Sustainability is the chairman of Leather Naturally. Leather Naturally focussed on challenging wrong factual statements made about leather and on marketing leather in 2017: its new website went live, an advertising campaign was set-up, and promotional materials were developed.

In 2018 Leather Naturally will continue and strengthen its marketing efforts.

www.leathernaturally.org

Excellent results customer survey OBJECTIVE: Smit & zoon is a recognized leader in CSR in the field of Safety & Health and Footprint In line with our mission and values, we want to support our customers by being their long-term partner, providing excellent products and services.

In the summer of 2017 Smit & zoon conducted a survey among our customers and agents to get insights in how they perceive customer experience within Smit & zoon. Overall customer satisfaction scored 8.4. Customers strongly recognize Smit & zoon’s core values: agile, innovative, consistent, long term focus. These values also form an important driver for doing business with Smit & zoon. In combination with a high net promotor score (used to test the loyalty of customers) and a high competitive advantage score, this is an excellent result.

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OUR PEOPLE

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Focus areas & trends

OUR PEOPLE

Sustainable Employability

We want our employees to be safe, healthy, and engaged in their work, now and in the future. Enabling our employees to develop and grow is an important aspect of that.

The international labour market is constantly changing. This demands adaptation by employers and their employees. Motivated and sustainable employable staff is very important for a future proof organization. This asks for a clear path and an inspiring way of managing employees in which structure, continuity, and a continuous dialogue are key. We need to make a plan on how to mobilize managers and employees to take sustainable measures for long-term, healthy, enjoyable and productive participation in the labour process. Managers and employees share responsibility for this, where employees take control of their own career development and employers providing support.

Results: More people stay healthy and work longer for our company.

Talent Management and Succession Planning Smit & zoon wants to attract and retain highly qualified employees, people with high potential who are willing to be inspired to perform at their peak. We want to build and renew the workforce for both the mid-term and the long term; to develop employees from within and to be able to restructure when the context changes. We want to secure succession for key-roles and to create an organization climate where professional and personal development is a driver of success. Therefore, an International Succession & Talent Management Program will be developed and implemented to start mid-2018.

31

Male

(Full-time equivalent)

Employee Engagement Smit & zoon strives to be a good employer. Skilled and committed employees are of key importance to success, now and in the future, as well as to making a contribution to society. Enabling our employees to develop and grow is an important aspect of that. Improving skills or competences is just as important to us as increasing knowledge.

Our people are our greatest asset.

Employees Smit & zoon total TOTAL 191,3

TOTAL 199.9

TOTAL 211.1

43.8

46

50.5

147.5

153.9

2015

2016

Germany

Netherlands TOTAL 127.5

TOTAL 135.4

TOTAL 139.2

26.8

29.2

29.6

100.7

106.2

109.6

160.6

2017

2015

TOTAL 6

TOTAL 6

TOTAL 6

1 5

1 5

1 5

2015

2016

2017

TRAINING AND EDUCATION

Italy

2016

2017

Female

China

TOTAL 32.8

TOTAL 32.4

TOTAL 36.9

TOTAL 25

TOTAL 26

7.0 25.8

6.8 25.8

8.9 28

9 16

9 17

2015

2016

2017

2015

2016

TOTAL 29

11 18

2017

Supervised workers MALE

2015: 13

2016: 16

2017: 13

FEMALE 2015: 1

2016: 1

2017: 0

SMIT & ZOON TOTAL

NETHERLANDS

Figures Codyeco not yet included.

ITALY

CHINA

Average hours Male

27

20

25

25

18

22

15

13

15

45

36

57

Average hours Female

30

20

32

24

7

25

13

21

16

53

54

67

2015

2016

2017

2015

2016

2017

2015

2016

2017

2015

2016

2017

32

OUR PEOPLE

SMIT & ZOON | CSR REPORT 2017

Milestones 2017 •

•

Competence program In 2017 we rolled out our Competence program to all employees in The Netherlands. The goal of this extensive training program is to enable employees to work ‘the Smit way’, which includes working according to the company’s core values, being able to maintain a healthy work-life balance, and give and receive feedback properly. The ‘Competence program’ includes 3 days of training and coaching for all employees in The Netherlands. We offer our managers 8 days of training and coaching.

Employees want to be more involved when it comes to developments within the company by means of communication.

Employees request more visibility of the management to better understand what is going on in the workplace.

In 2018 the Management Team and all departments will work on their top priorities to improve the work environment for their people. Our next employee engagement survey is scheduled for 2019.

Outlook 2018

Employee engagement survey In September 2017 we conducted a survey to monitor how engaged our people are and how satisfied they are with us as an employer. In 2018 the Management Team and all departments will work on their top priorities to improve the work environment for their people. Our next employee engagement survey is scheduled for 2019.

Focus areas for 2018 (as mentioned above): Talent management / Succession planning, continuation, completing and securing in the organisation of the Competence Program. Make a program for sustainable employability together with employees.

Overall Results: Positively noted results: • According to the high scores on commitment, company pride and willingness to change, there is a vibrant atmosphere within a challenging work environment.

• Employees support the organisational goals of Smit & zoon and are prepared to personally contribute in order to achieve these goals together.

• Employees indicate that there are enough possibilities for individual growth and development within the organisation.

Points of attention: • Employees indicated to experience in-efficiencies standing in the way of their daily routine and that this does not contribute to more positive energy.

33

34

SMIT & ZOON | CSR REPORT 2017

THE KOORNZAAYER FOUNDATION

35

36

SMIT & ZOON | CSR REPORT 2017

THE KOORNZAAYER FOUNDATION

Joining forces In 2014 the Koornzaayer Foundation and Smit & zoon decided to further strengthen their ties.

This resulted in the start of the scholarship program in North Uganda

Tertiary Education Support Program Since 2015 a committee of three Smit & zoon employees select a maximum of eight scholarship students per year who are part of a bigger preselected group. The first selection is done by Link to Progress (LTP) on the basis of their applications, motivation letters, and recommendations. In total, Smit & zoon and the Koornzaayer Foundation now support 24 students and in July 2017 the first four scholarship students graduated.

In 1967 Joost Smit, 6th generation then owner of Smit & zoon, set up the Koorn-

A video interview with Hilde Klok, Director of the Koornzaayer Foundation, can be found on the Smit & zoon YouTube channel: https://youtu.be/F5wB2K_nP1s

zaayer Foundation. This foundation supports local initiatives on education and health care projects in Kenya and Uganda. Education gives children an opportunity to make changes in their own country that will also benefit the next generation. In order to be able to learn and go to school, children have to be healthy.

37

38

FACTS & FIGURES

SMIT & ZOON | CSR REPORT 2017

Water consumption

Surface water

(m3/ton of product produced)

Smit & zoon total

0.41 5.22

9.85

2015

0.42 5.21

10.35

2016

Netherlands

0.44

0.34

0.35

5.38

6.04

6.07

11.22

2017

11.38

12.08

2015

2016

Ground water

Italy

Waste

Tap water

China

Smit & zoon total

13.22

2017

1.00

0.97

0.95

0.79

0.76

0.77

0

0

0

0

0

0

TOTAL 7.49 1.85

0

0

0

17.42 0

0 12.94

17.12 0

5.17

2015

2016

2017

2015

2016

2017

2015

TOTAL 13.61 5.49 7.65

2016

2015

2016

2017

TOTAL 12.22

TOTAL 5.73

8.21

1.23

3.64

4.34

2017

2015

TOTAL 12.22 4.53 7.45

2016

TOTAL 20.55

TOTAL 27.86

2.06

11.78

TOTAL 11.27 18.49

8.36

16.08

TOTAL 22.51

4.94

17.57

2.81

2017

2015

2016

2017

Netherlands

Italy

China

Smit & zoon total

0.07

0.07

0.07

2015

2016

2017

2015 39

0.33

2016

0.33

2017

59.36

68.91

Netherlands

52,96

2015

2016

0.24

2017

42.35

2015

40.64

2016

31.09

2017

47.04

2015

TOTAL 11.87

TOTAL 9.82

9.79

10.68

2.32

9.34

1.19

0.48

2015

2016

2017

54.57

Italy

45.43

2016

Non-renewable

China

64.64

0.37 0.27

TOTAL 12.12

Renewable

(%)

0.35

0.10

China

Raw materials

57.65

0.11

Italy

6.34

(m3/ton of product produced)

0.11

Netherlands

Hazardous waste

0.37

Water discharge Smit & zoon total

Non-hazardous waste

(kg/ton of product produced)

99.04

98.36

98.60

99.91

99.92

99.93

0.96

1.64

1.40

0.09

0.08

0.07

2015

2016

2017

2015

2016

2017

35.36

2017 40

FACTS & FIGURES

SMIT & ZOON | CSR REPORT 2017

Energy consumption

Scope 1: Direct Emissions

(GJ/ton of product produced)

Smit & zoon total

TOTAL 1.93 0.90

1.04

2015

TOTAL 1.93 0.88

1.05

2016

TOTAL 1.42 0.19

1.23

2017

Netherlands

TOTAL 1.98 0.81

1.17

2015

TOTAL 2.01 0.81

1.20

2016

Italy

TOTAL 2.33

TOTAL 2.01

0.90

TOTAL 1.27

TOTAL 1.32

TOTAL 1.32

1.43

0.95

1.00

0.99

0.32

0.32

0.34

2015

2016

2017

2017

33.42

2015

65.33

34.67

2016

57.38

42.62

2017

2.01

Netherlands

66.33

33.67

2015

64.23

35.77

2016

62.37

44.84

37.63

2017

2015 41

60.17

39.83

2016

TOTAL 1.61

TOTAL 1.46

1.46

0

0

0

2015

2016

2017

Italy

55.16

SPILLS

1.61

Renewable

(%)

Smit & zoon total

Safety & Health

China

Packaging

66.58

Scope 2: Indirect Emissions

Non-renewable

China

56.38 82.88

82.58

87.06

17.42

12.94

17.12

2015

2016

2017

SMIT & ZOON TOTAL

NETHERLANDS

CHINA

Category 1: Spill of a pollutant in a smaller quantity than categories 2 and 3

45

57

70

43

52

59

2

4

4

0

1

7

Category 2: Spill of • 500 kg - 50,000 kg non-hazardous substances • 100 kg - 5,000 kg hazardous substances • 1 kg - 100 kg of toxic substances

8

1

0

3

1

0

5

0

0

0

0

0

Category 3: Potentially catastrophic release of highly hazardous substances.

Spill of more than: • > 50,000 kg of non hazardous substances (i.e. vegetable or fish oil) • > 5,000 kg hazardous substances ADR 1-9, except ADR 6 or GHS word ‘danger’ or ‘warning’ • > 100 kg toxic substances (ADR 6)

0

0

0

0

0

0

0

0

0

0

0

0

2015

2016

2017

2015

2016

2017

2015

2016

2017

2015

2016

2017

43.62

2017

ITALY

42

FACTS & FIGURES

SMIT & ZOON | CSR REPORT 2017

Emissions

Safety & Health

(Co2/ton of product produced) EMISSIONS

Emissions to air

NETHERLANDS

ITALY

SAFETY & HEALTH

CHINA

0,06

0,06

0,07

0,07

0,07

0,08

0,02

0,02

0,02

0

0

0

IR = Injury Rate

Fuel (diesel - scope 1)

0

0

0

0

0

0

0

0

0

0

0

0

LWD = Lost Work Days

Fuel (gasoline – scope 1)

0

0

0

0

0

0

0

0

0

0

0

0

AR = Absentee Rate

Fuel (LPG – scoop 1)

0

0

0

0

0

0

0

0

0

0

0

0

Methane (scope 1)

0

0

0

0

0

0

0

0

0

0

0

0

Nitrous Oxide (scope 1)

0

0

0

0

0

0

0

0

0

0

0

0

Emission CFK’s (scope 1)

0

0

0

0

0

0

0

0

0

0

0

0

Total GHG Scope 1

0,06

0,06

0,07

0,07

0,07

0,08

0,02

0,02

0,02

0,00

0,00

0,00

Electricity (scope 2)

0,06

0,06

0,08

0,06

0,06

0,07

0,07

0,07

0,07

0,07

0,06

0,07

Purchased heat (scope 2)

0,01

0

0

0

0

0

0

0

0

0,07

0,05

0,04

Scope 2

0,07

0,07

0,07

0,06

0,06

0,07

0,07

0,07

0,07

0,14

0,11

0,10

Total Scope 1 + 2

0,13

0,12

0,14

0,13

0,13

0,15

0,09

0,09

0,09

0,14

0,11

0,10

Emission NOx

1,65

1,81

2,08

1,65

1,81

2,08

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Gas (scope 1)

Direct Greenhouse Gas (GHG) emissions in tons Cx eq

SMIT & ZOON TOTAL

Emission Phenol

Emission Formaldehyde

0

0

0

0

0

0

0

0

0

0

0

0

2015

2016

2017

2015

2016

2017

2015

2016

2017

2015

2016

2017

Emission of Phenol and Formaldehyde is no longer measured since 2015.

43

SMIT & ZOON TOTAL

NETHERLANDS

ITALY

CHINA

0,99

1,92

0,46

1,50

2,87

0,69

0,00

0,00

0,00

0,00

0,00

0,00

126,87

29,01

34,76

191,42

43,40

51,93

0,00

0,00

0,00

0,00

0,00

0,00

4,31

3,33

3,51

5,73

3,98

4,64

1,27

1,52

1,53

1,31

3,05

0,81

2015

2016

2017

2015

2016

2017

2015

2016

2017

2015

2016

2017

Compliance

(Stakeholder complaints) COMPLIANCE

SMIT & ZOON TOTAL

NETHERLANDS

ITALY

CHINA

Documented complaints from external stakeholders

3

4

6

3

4

6

0

0

0

0

0

0

Category 2: Environmental incidents: • Exceeding permits • Public complaints • Off-site incidents during transport or transit

9

9

4

9

9

4

0

0

0

0

0

0

Category 3: Environmental incidents with serious effects: • Soil pollution • Visible damage • Unusually high number of complaints

0

0

0

0

0

0

0

0

0

0

0

0

2015

2016

2017

2015

2016

2017

2015

2016

2017

2015

2016

2017

External complaints

Environmental incidents

44

SMIT & ZOON | CSR REPORT 2017

ANNEXES

45

46

COMPANY PROFILE

SMIT & ZOON | CSR REPORT 2017

Business Units and brands

Codyeco In November 2017, Smit & zoon acquired Italian leather chemicals company Codyeco. Codyeco is an Italian producer of leather tanning chemicals, headquartered in Santa Croce sull’Arno, Italy. Codyeco’s product portfolio includes beamhouse, wet-end and finishing products.

In 2016, Codyeco acquired Kemiter, which is now also part of Smit & zoon’s brand and product portfolio. (More info: www.codyeco.com)

Smit & zoon Wet-end Smit & zoon Wet-end supports tanneries with performance products and technical advice for wet-end operations. These operations constitute the third step in the process of producing leather (after the beamhouse and tanning). During the wet-end process, the leather is given its haptic properties (such as softness and tightness) while the required colour is introduced by the application of dyestuffs. Tanneries use our fatliquors and syntans to make leather suitable, e.g. for hiking boots (by waterproofing), garments (by softening), upholstery or automotive use (by ensuring low emissions). (more info: www.smitwet-end.com)

1 WEESP: Headquarters, Plant, Leather Application Centre

6 NOVO HAMBURGO, BRAZIL: Leather Application Centre

2 AMERSFOORT: R&D Wet-end, Plant

7 RANIPET, INDIA: Leather Application Centre

3 MÜNSING, GERMANY: Sales office

8 CHENNAI, INDIA: Sales office, Plant

4 MONTORSO, ITALY: R&D Finishing, Plant

9 NANJING: Plant

5 SANTA CROCE SULL’ARNO: Codyeco and Kemiter Sales office, Plant, Leather Application Centre

Global operations

Smit & zoon Finishing Smit & zoon Finishing develops and produces leather chemicals for the final step in the tanning process (the finishing step). End-users expect their leather to have more than the basic properties of the crust. For example, the leather may need to have a specific colour intensity, structure or print, or perhaps waterproofing or certain other properties to enhance usability.

The finishing process ensures that the leather has the properties required by the customer. The dry leather is washed, lacquered, pigmented, colored, and processed until the required effect is obtained. Leather finished with Smit & zoon products is used by leading brands in the shoe, bag, clothing and furniture sectors. (More info: www.smitfinishing.com)

Smit & zoon Functional Oils Smit & zoon Functional Oils is a leading supplier of processed omega-3 oils. Smit & zoon Functional Oils’ customers include leading brands in the food and pet food industries, as well as major ingredient suppliers, aqua feed and animal feed producers. We supply refined, bleached, deodorized, and cold-filtered oils based on a wide range of fish oils, including anchovy, sardines, cod liver, salmon, and tuna. As of January 1, 2018 Smit & zoon’s Functional Oils division was divested. The business was sold to IQI. (More info: www.iqi-petfood.com) 47

48

COMPANY PROFILE

SMIT & ZOON | CSR REPORT 2017

Organizational Development

Risk Management

Smit & zoon India

Smit & zoon’s Management Team has final accountability for risk management. It is advised on emerging risks by several experts within the organization, each with his or her own area of expertise, and kept informed through regular reporting.

April 2017, Smit & zoon opened a sales office in Chennai, India. In order to intensify our service to customers and to grow our sales in India and the surrounding countries, an important next step is to set up manufacturing and product development on a local-for-local basis for both Wet-end and Finishing. This manufacturing and product development facility will open in the first quarter of 2018.

We have Safety, Health and Environment (SHE) Officers at each of our plants, reporting to the Director of Operations and/or to the General Manager of the plant concerned. They monitor compliance with our SHE management systems (ISO 14001, HACCP, GMP+, VBS, BRZO, OSHAS 18001), define risk mitigation measures and take corrective or preventive measures where necessary.

Functional Oils As per January 1st, 2018, the largest part of Smit & zoon’s Functional Oils division was sold to IQI B.V., a supplier of pet food-ingredients situated in Ermelo. As a result, eight of Smit & zoon’s employees were transferred to I.Q.I. A project team investigated the consequences of the sale for the remaining organization. Part of this research also included an inventory of the nature and scope of the FO-related activities and the consequences of the expiry of these activities as pf January 1st for the lagging organization. Based on that, we created a plan for organizational adjustments. In total 9,5Fte of work will be cancelled due to the departure of our FO business. For the most part we can compensate for this by making use of natural turnover (retirement, voluntary departure of employees because of a new job at a different organization) and the expiry date of a number of temporary contracts. In the end, we regrettably didn’t find suitable replacement work for two of our permanent employees within our organization.

In the event of an operational emergency, we have a crisis management plan of which all new employees are informed when they start working at Smit & zoon. Our crisis management team also regularly checks the plan.

Supply chain

Raw material

Slaughterhouse

Beamhouse

(Re)Tanning/fatliquoring

bovine, sheep, goat, specialties (snake, crocodile etc.)

Hides are a by-product of slaughtered cattle.

If these hides were not used for leather, they would be wasted.

Hides are cleaned from dirt, blood, salt and hair, the collagen structure is opened, they are fleshed, split into grain skin and split side – at this stage mainly for upholstery and automotive products – and prepared for tanning.

Hides are converted into durable material that is protected against water, heat and micro-organisms: they are sammied to reduce water content, shaved to reduce thickness, split into grain skin and split side – at this stage mainly for shoes and leather goods – retanned, dyed, fatliquored, set out, dried, staked and milled to soften the leather.

Consumer

Manufacturing

Finishing

Purchasing a product.

The manufacturer of the consumer product.

Leather is upgraded, embossed and basecoat and topcoat are applied, giving the leather nice patterns, colors etc.

Codyeco In November 2017, Smit & zoon acquired Italian leather chemicals manufacturer Codyeco. The management of both companies has started working on a future strategic plan and integration with the goal to utilize synergies to the maximum, which includes optimizing the new, joined organization.

49

50

COMPANY PROFILE

SMIT & ZOON | CSR REPORT 2017

Smit & zoon supply chain

Customers (670 worldwide)

Wet-end (486)1: Top 10 markets 1 China 2 India 3 Italy 4 Germany 5 Bangladesh 1

6 7 8 9 10

Finishing (132): Top 10 markets 1 China 6 2 Italy 7 3 Vietnam 8 4 Turkey 9 5 Russia 10

Turkey Russia South Korea Taiwan Austria

Ukraine Pakistan Portugal India Egypt

Functional Oils (52)*: Top 10 markets 1 Switzerland 6 2 France 7 3 Belgium 8 4 The Netherlands 9 5 Poland 10

Austria Russia Canada Italy China

Based on sales volumes. * Based on sales volumes, delivery addresses.

Plants at Weesp and Amersfoort Smit Wet-end, syntans

Plants at Weesp and Amersfoort Smit Wet-end and Smit Functional Oils, fatliquors

Plant Montorso Italy Smit Finishing4

30 different raw materials from 38 different suppliers. Suppliers from 15 countries Country of origin of all raw materials used for the production of Syntans in The Netherlands:

64 different raw materials and 12 Functional Oils suppliers from 74 different suppliers. Suppliers are from 14 countries. Country of origin of all raw materials used for the production of fatliquors in The Netherlands:

389 different raw materials, from 87 different suppliers, coming from 6 different countries.

NOR 4.6%

OTHERS 8.6%

AUT 5.2%

POL 3.5% NLD 26.4%

FRA 8.5%

1

Production facilities (4)

Key suppliers2

A B C D E

A B C D

A Product related goods (50) a. Raw materials (44) b. Packaging (6)

Storage & outsourcing (2) Sea transport (3) Road transport (8) Air transport (1) Couriers (2)

Amersfoort (NL) Weesp (NL) Montorso (IT) Nanjing (CN)

Key suppliers and key logistics partners are the 20% that account for 80% of our procurement volume.

51

B Non-product related goods & services (89) a. Consultancy b. Energy c. Facilities d. ICT e. Laboratory f. MRO

Raw materials + origin

DEU 29.5%

BEL 8.3%

ESP 7.5% GBR 9.6%

NLD 22.1%

DEU 24%

ESP NLD OTHERS DEU 1.7% 0.7% 0.3% 1.8%

TUR 3.9%

FRA 4.7%

RUS 5.5%

Key Logistics partners (16)2

ESP 2.5%

OTHERS ITA 4.2% 2.4%

NOR 22.8%

ITA 91.7%

Country of Origin - Raw materials for Fatliquors Plant at Nanjing - Smit Wet-end, syntans 18 different raw materials, from 16 different suppliers, 1 different raw materials, from 16 different suppliers, coming from 2 different countries. coming from 4 different countries5 ENG 2% RUS 26%

Figures on next page…

NLD 13%

CHN 59%

CHN 29% NLD 71%

Trade products excluded. Instead, 12 different raw materials from 6 suppliers are used.

Smit & zoon Finishing is currently working on gathering information on the origin of its raw materials. At the present time, we can only provide the supplier’s location.

5 Smit Nanjing imports raw materials for the production of syntans and fatliquors from Smit & zoon in The Netherlands. Smit & zoon Netherlands is Smit & zoon Nanjing’s sole supplier in The Netherlands.

3 4

52

GOVERNANCE

SMIT & ZOON | CSR REPORT 2017

Stakeholder Engagement STAKEHOLDER

KEY TOPICS FOR THE STAKEHOLDER

Current and potential employees

• Attracting the right employees who fit into the organization • Training and development • Openness, effective internal communications • Prioritize CSR throughout the organization • Sustainable employability

• Annual appraisals and progress reviews for all employees • Competence Program • Regular employee meetings to inform everyone about what is happening in the business • Vitality program for staff • Lunch sessions in all our offices to share and discuss our CSR activities • Widen reach of CSR by founding CSR Board and CSR Focus Teams • Provide student training at the Institute for Creative Leather Technologies at the University of Northampton.

Agents & customers & brands

• Good products and service • A reliable, stable and responsive network • Product safety

• Regular face-to-face meetings during which our products and service level are evaluated • Presence at global trade fairs to give customers and agents the chance to meet and talk to sales staff and technicians • Workshops on ‘Safe Use of Chemicals’ • Agent webinars • Presence in sustainability initiatives in which we educate the leather value chain to work safe and reduce the footprint.

Suppliers (and outsourcing partners)

• Efficient and appropriate cooperation based on clear agreements

• Regular one-to-one meetings

Municipal and provincial authorities

• Good relationship with Smit & zoon • A safe environment for local residents

• Regular meetings, for example, Smit & zoon Amersfoort hosts meetings of a local business group

Trade associations (MVO Nederland, Leather Working Group, Leather Naturally, Tannery of the Future, ZDHC, Ecoleban)

• Constructive cooperation to help improve the value chain • Take leadership in driving improvement.

• Regular meetings and joint activities. For example, MVO Nederland industry meetings on corporate social responsibility.

• Tannery of the Future foundation which is an easy to understand sustainability checklist for leather production. Smit & zoon is a founding partner, financial contributor and takes a seat in the board.

• Zero Discharge of Hazardous Chemicals (ZDHC): supporting the development of a Chemical Management Module that is improving transparency, safety & health and reducing the footprint in using chemicals.

• Leather Working Group: takes an active role in implementing best practices in the value chain.

• Leather Naturally is a supporter of improving the image of leather with factual PR. Smit & zoon takes part in the Steering Committee and holds the chair.

• Ecoleban: an initiative focusing on improving the social and environmental circumstances in the Bangladesh leather industry.

Works Councils

Smit & zoon is an entirely family-owned business. Marc Smit, 7th generation owner of the company, is a member of the Smit & zoon Management Team together with CEO Hans van Haarst.

We have active works councils at our offices that represent the employees and serve as local representatives in national labour negotiations.

The works council and Management Team meet on a regular basis.

Smit & zoon’s Supervisory Board meets five times a year. The CEO is also present at these meetings. The Smit & zoon Supervisory Board consists of three members, of which one serves as the Smit family representative.

CSR Board Our CSR Board consists of the company’s owner, the CEO, the Director of Operations, the General Managers of our three divisions, the Leader of Innovation & Sustainability, the Strategy and New Business Developer, and the Manager Communications & Marketing. In line with the focus areas defined in our CSR objectives, we have also established three CSR Focus Teams (Footprint, Safety & Health, Catalysing), each of which is led by a member of the CSR Board. The CSR Board members meet regularly to review the progress of the projects.

Each year, in December, the Smit & zoon Management Team presents its business plans for the coming year to the Supervisory Board for its approval.

Management Team The Smit & zoon Management Team consists of the company’s owner, Marc Smit, CEO Hans van Haarst, along with our Director of Finance, our Director of Operations, the General Managers of our divisions, and our HR Manager. For further information about our Management Team, see: http://www.smitzoon.com/meet-the-management-team/31/70.htm

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2017 STAKEHOLDER ENGAGEMENT

54

GOVERNANCE

SMIT & ZOON | CSR REPORT 2017

Ethics & Integrity SMIT & ZOON PROTOCOLS Sustainability Declaration

Quality Declaration

E-mail code of conduct

Harassment code

Absenteeism regulations

Corporate information code

Our materiality matrix

The CSR Board focuses its sustainability policy on three areas: Footprint, Safety & Health and Catalysing. Three focus teams with the same names take care of implementing the policy. These three themes are also the three pillars on which this report rests.

Based on discussions with employees, customers, agents and other stakeholders, the members of the CSR Board drew up a matrix. Members of the CSR Board include representation from the Management Team which has thereby immediately approved the matrix. On the right is the definitive version of the materiality matrix.

The placement of a topic along an axis indicates that it has impact on us (horizontal axis) or that it is a topic our stakeholders have concerns about (vertical axis). The topics at the top right are particularly important, both to us and to our stakeholders.

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SIGNIFICANT

Human rights

Customers satisfaction Product consistency Innovation Supply Chain management

Sustainable sourcing Product stewardship Poverty & inequality

Environmental footprint Business ethics

Community involvement Animal welfare

MODERATE

Selection of topics for this report

Stakeholder concern

MAJOR

Safety & health

Employee engagement

Black = included in report

MODERATE

SIGNIFICANT Impact on Smit & zoon

MAJOR

GOVERNANCE

SMIT & ZOON | CSR REPORT 2017

Clarification of materiality matrix MATERIAL TOPIC

CLARIFICATION

Safety & Health

The goals of occupational safety and health programs are to foster a safe and healthy work environment. OSH may also protect co-workers, family members, employers, customers, and many others who might be affected by the workplace environment.

Satisfied Customers

Satisfied customers are of vital importance to a successful and healthy business.

Product Consistency

We believe in consistency of product quality, by which we mean a consistent outcome when working with the product and the predictability of the product’s impact. This is leading to fewer complaints about the product and less waste in the supply chain.

Innovation

Explore the new, in order to lead the industry into a new era. Our innovation ambition is: To upgrade leather quality through a simple wet-end process with zero added footprint. Innovation can also include new innovative ways to pleasantly surprise our customers in anything

Supply Chain Management

We manage/encourage efficiencies in the whole supply chain by optimizing the logistical flow of goods and services.

Environmental Footprint

The effect that a person, company, activity, etc. has on the environment, for example the amount of natural resources that they use and the amount of harmful gases that they produce. Smit & zoon focuses especially on the footprint in water, waste, and CO2.

Business Ethics

Business ethics are implemented with the purpose of ensuring that trust is promoted in the supply chain through: Code of Conduct, contracts, certificates etc.

Sustainable Sourcing

We source sustainably, maintaining respect for people, the planet, and profit. We use different indicators depending on the source, ranging from raw materials to packaging and transport.

Product Stewardship

Everyone involved in the lifespan of the product is called upon to assume responsibility for reducing its environmental, health, and safety impacts

Community Involvement

Our company and its co-workers make it a priority to contribute to charitable programs and events.

Employee Engagement

Employee engagement is a workplace approach resulting in the right conditions for all our employees to give their best each day, committed to our business goals and values, motivated to contribute to organizational success. An engaged employee is enthusiastic about his/her work and so takes positive action to further Smit & zoon’s reputation and interests.

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Measurement and data collection

• Germany: Smit & zoon GmbH in Münsing • India: Smit & Zoon India Private Limited in Chennai • Italy: Smit Finishing SpA in Montorso

We used a recently developed protocol and monitoring instrument to collect the data for this report. This instrument ensures that data from our different locations can be compared and the CSR Board and Management can easily be updated on the status of CSR related projects.

From next year onwards Codyeco offices and plants will also be included in the report.

Codyeco figures were not yet included in this report. Functional Oils figures are still included. In the 2018 report, Functional Oils will no longer be included and Codyeco figures will be included.

GRI 4.0 (Global Reporting Initiative) was used as a guideline in compiling this report.

About this report This is Smit & zoon’s fifth CSR report. It addresses the performance and approach taken throughout our business in terms of corporate social responsibility. This annual report is intended to inform our stakeholders about how we add value for our customers and for society. It covers all parts of Smit & zoon, including offices and plants in: • The Netherlands: Smit & zoon BV in Weesp and Amersfoort • China: SNLCC Smit in Nanjing 58

GRI INDEX

NO.

SMIT & ZOON | CSR REPORT 2017

GRI DESCRIPTION

ITEM

NOT ENCLOSED

NO.

c. Total workforce by employees and supervised workers and by gender

Foreword

G4-10

Our strategy

d. Total workforce by region and gender

Appendix: Facts & Figures

G4-3

Name of the organization

Smit & zoon

G4-4

Primary brands, products, and services.

Appendix: Company profile

G4-5

Location of the organization’s headquarters

Appendix: Company profile

G4-11

Percentage of total employees covered by collective bargaining agreements.

0%

G4-6

Number of countries where the organization operates and names on the one hand of countries where the organization has significant operations or, on the other hand, countries that are specifically relevant to the sustainability topics covered in this report.

Appendix: Company profile

G4-12

Description of the organization’s supply chain.

Appendix: Company profile, Supply Chain

G4-13

Significant changes during the reporting period regarding the organization’s size, structure, ownership, or its supply chain

Appendix: Company profile, Organizational Development

Nature of ownership and legal form

• Dutch legal entity and headquarters: Smit & zoon BV • China: Ltd. • Germany: GmbH • Italy: SpA • India: Private Limited

G4-14

Report whether and how the precautionary approach or principle is addressed by the organization

Appendix: Company profile, Risk Management

G4-15

Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or which it endorses

ISO 9001, ISO 14001, IFFO, GOED, GMP+ BRZO, OSHAS 18001

Memberships of associations (such as industry associations) and of national or international advocacy organizations

Leather Working Group (LWG), MVO Nederland netwerk leer (the leather network of a Dutch corporate social responsibility organization), LeatherNaturally, TEGEWA (organization of chemical producers)

G4-8

G4-9

Markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries).

Report the scale of the reporting organization

f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)

Appendix: Company profile

Appendix: Facts & Figures

59

Sections E and F.

e. Report whether a substantial portion of the organization’s work is performed by workers who are legally recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors

ORGANIZATIONAL PROFILE

G4-7

NOT ENCLOSED

b. Total number of permanent employees by employment type and gender

STRATEGY AND ANALYSIS

G4-1

ITEM

a. Total number of employees by employment contract and gender

GENERAL STANDARD DISCLOSURES

A statement from the most senior decision maker in the organization (such as the CEO, chair, or someone in an equivalent senior position) about the relevance of sustainability to the organization and the organization’s strategy for addressing sustainability.

GRI DESCRIPTION

This report does not include financial information, as the company is family-owned.

G4-16

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Information about the origin of raw materials used by Smit & zoon Finishing

GRI INDEX

NO.

SMIT & ZOON | CSR REPORT 2017

GRI DESCRIPTION

ITEM

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17

All entities included in the organization’s consolidated financial statements or equivalent documents.

G4-18 G4-19

List all the material Aspects identified in the process for defining report content.

Appendix: Selection of topics for this report

G4-20

Report the Aspect Boundary within the organization for each material Aspect

Appendix: Selection of topics for this report

G4-21

Report the Aspect Boundary outside the organization for each material Aspect

Appendix: Selection of topics for this report

Effect of any restatements of information provided in previous reports, and the reasons for such restatements.

Appendix: Selection of topics for this report

Significant changes from previous reporting periods in the Scope and Aspect Boundaries

N/A

G4-23

NO.

G4-27

• Dutch legal entity and headquarters: Smit & zoon BV • China: Ltd. • Germany: GmbH • India: Private Limited • Italy: SpA

Explain the process for defining the report content and the Aspect Boundaries.

G4-22

NOT ENCLOSED

GRI DESCRIPTION

ITEM

Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting

Appendix: Stakeholder Engagement

REPORT PROFILE G4-28

Reporting period (such as fiscal or calendar year) for information provided.

2016

G4-29

Date of most recent previous report (if any).

April 2016

G4-30

Reporting cycle (such as annual, biennial)

Annual

G4-31

Contact point for questions regarding the report or its contents

Egbert Dikkers, Leader of Innovation & Sustainability (Egbert.dikkers@smitzoon.com)

G4-32

Report the ‘in accordance’ option the organization has chosen

Core

G4-33

Report the organization’s policy and current practice with regard to seeking external assurance for the report

N/A

Appendix: Selection of topics for this report

GOVERNANCE

STAKEHOLDER ENGAGEMENT G4-24

List of stakeholder groups engaged by the organization.

Appendix: Stakeholder Engagement

G4-25

Basis for identification and selection of stakeholders with whom to engage

Appendix: Stakeholder Engagement

G4-26

Organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process.

Appendix: Stakeholder Engagement

61

G4-34

Governance structure of the organization, including committees of the highest governance body responsible for decision-making on economic, environmental, and social impacts.

Appendix: Company profile, Governance

ETHICS AND INTEGRITY

G4-56

Describe the organization’s values, principles, standards, and norms of behavior such as codes of conduct and codes of ethics.

Appendix: Company profile, Ethics and Integrity

62

NOT ENCLOSED

GRI INDEX

NO.

SMIT & ZOON | CSR REPORT 2017

GRI DESCRIPTION

ITEM

NOT ENCLOSED

NO.

GRI DESCRIPTION

ITEM

SPECIFIC STANDARD DISCLOSURES CATEGORY: ENVIRONMENTAL

DMA

a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach

Sections on the Wet-end, Finishing and Functional Oils divisions

EFFLUENTS AND WASTE G4-EN22

Total water discharge by quality and destination

Facts & Figures

G4-EN23

Total weight of waste by type and method of disposal

Facts & Figures

G4-EN24

Total number and volume of significant spills

Facts & Figures

CATEGORY SOCIAL

MATERIALS G4-EN1

Materials used by weight or volume

ENERGY G4-EN3

Energy consumption within the organization

SUBCATEGORY: LABOR PRACTICES AND DECENT WORK

Facts & Figures

DMA

Facts & Figures

Total water withdrawal

Facts & Figures

G4-LA6

EMISSIONS

G4-EN15

Direct Greenhouse Gas (GHG) emissions (scope 1)

Facts & Figures

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Section: Our People

OCCUPATIONAL SAFETY AND HEALTH

WATER G4-EN8

a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach

Type of injury and rates of injury, occupational diseases, lost days and absenteeism and total number of work-related fatalities, by region and by gender

Section: Our People

TRAINING AND EDUCATION G4-LA9

Average hours of training per year per employee by gender and by employee category

Section: Our People

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NOT ENCLOSED

SMIT & ZOON | CSR REPORT 2017

Colophon Published by Smit & zoon, March 2018 TRANSLATIONS Vertaalbureau Tramontane, Nigtevecht PHOTOGRAPHY Sven Signe den Hartogh DESIGN & PRINT Glasnost / R-DV

Smit & zoon

Nijverheidslaan 48 1382 LK, Weesp The Netherlands info@smitzoon.com 65

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