Croda International : Sustainability Report

Meeting global challenges Delivering greater impact

Sustainability Report 2022

Highlights

	Sales growth
Sales	(constant currency)
£2,089.3m	+5.2%
2021: £1,889.6m	2021: +43.2%
Adjusted profit before tax	IFRS profit before tax
(PBT)	(PBT)
£496.1m	£780.0m
2021: £445.2m	2021: £411.5m

Contents

Our approach		Our Commitment		Our performance
Meeting global challenges	1	Sustainability strategy	13	Climate Positive	36
Megatrends	2	Governance	16	Land Positive	37
Chief Executive's review	4	Fundamentals: living our Purpose	20	People Positive	38
At a glance	6	Climate Positive	22	Fundamentals	39
Business model	8	Land Positive	28	Glossary	41
Chief Sustainability Officer's letter	12	People Positive	32

How we report

This report forms part of a wider reporting suite and the table below details where to find particular disclosures within this suite.

Scope 1 & 2 emissions (TeCO2e)

121,093

2021: 133,899

Land area saved (hectares)

145,709

2021: 125,958

Total Recordable Injury Rate*

0.74

2021: 0.76 (restated)

Ordinary dividend (proposed full year)

+8.0%

2021: +9.9%

Scan this QR code to download our non-financial data pack

Information	Annual Report	Sustainability	Non-financial	Fundamentals
provided	(ARA2022)	Report	data pack	factsheets	croda.com
Our Commitment					
progress report
Case studies					

Non-financial

information statement

TCFD

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GRI

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SASB Review

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* TRIR based on full year performance excluding COVID-19 cases

Principal adverse

sustainability impacts statement

Our approach

Our Commitment

Our performance

Meeting global challenges

Delivering greater impact

Of the trends affecting our markets and supply chains, we have identified three key global challenges where delivery of our Commitment can maximise positive impacts on planet and society. Our response to each continues to develop as we work towards our Commitment to be Climate, Land and People Positive by 2030. Aligning our work with the United Nations Sustainable Development Goals (UN SDGs) ensures Croda is tackling the most important challenges to deliver positive impact.

The challenge

Living sustainably within our planetary boundaries

Population growth and increasing consumption, fuelled by the expansion of the middle class with increased disposable income in the developing world, are putting pressure on planetary systems, such as water, climate, biodiversity and scarce natural resources. Addressing

this challenge requires transformational new approaches to consumption and circularity. For example, one of the greatest challenges of the coming decades is not only the transition to a carbon net zero society but doing so by embracing the role nature plays in mitigating and adapting to climate change and addressing social inequalities. Consumers, primarily in developed markets but increasingly in China and around the world, are supporting businesses they believe act responsibly, understand these societal challenges, protect and restore

nature and provide solutions to mitigate the causes and adapt to the negative impacts of a changing climate.

Global demand for health and wellbeing

The pandemic has laid bare public health challenges around the world and accelerated the demand for health care, already growing due to higher global population, rising malnutrition and an ageing population in developed countries. Following two years of lockdowns, consumers are much more conscious of their physical and mental wellbeing and the dependencies on healthier communities more broadly. This has increased the focus on the efficacy of products with increased demand for ingredients that are underpinned by science, and that

support physical and mental health.

Feeding a growing population and restoring nature

World population passed eight billion in 2022 and is expected to reach nearly ten billion by 20501 with the majority of the increase coming in South and East Asia, and Africa. Feeding this growing population will require a 70%2 increase in agricultural output by 2050, and the challenge is achieving this in a sustainable, regenerative way. Agriculture has undergone yield-enhancing shifts in the past but yields of important crops such as rice and wheat have now stopped rising in some intensively farmed parts of the world. Agricultural soils have been overused and overexposed to chemical fertilisers, destroying their vitality and threatening the food security

of 3.2 billion people3, especially poor rural communities and smallholder farmers. Since most suitable land is already farmed, most of this growth will come from higher yields and more resilient crops in less suitable land, supported by restoring degraded ecosystems.

The opportunity to deliver greater impact

Climate Positive

Read more on our Commitment

See pages 22-27

Land Positive

Read more on our Commitment

See pages 28-31

People Positive

The enabler

Digitalisation facilitating faster, more connected supply chains

Digital is changing expectations about transparency, with consumers demanding businesses take responsibility for not just their own operations but also their supply chains and end of life of their products. Digital is also increasing the speed at which new trends are adopted and enabling businesses to deliver transformative solutions from wherever they are conceived. Successful products are those which are innovative, highly effective, low impact, sustainably sourced and clearly labelled.

Read more on our Commitment

See pages 32-35

1. United Nations, World Population Prospects 2022

2. Food and Agriculture Organization of the United Nations, Global agriculture towards 2050

3. The Global Environment Facility, Land Degradation

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Our approach

Our Commitment

Our performance

Megatrends

Megatrends in our markets

In response to these global challenges, the Consumer Care and Life Sciences markets have inspired two technological megatrends, where innovative ingredients from leading suppliers like Croda can support the delivery of significant positive impact on planet and society.

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Our approach

Our Commitment

Our performance

Megatrends continued

The two trends affecting our markets and how we're responding

1. Move to sustainable ingredients

Consumers want to live more sustainably and this is influencing their decisions when it comes to the products that they buy. Generational shifts are accelerating these trends with an increasing number of consumers willing to pay more for purpose-led brands that meet their specific values. Sustainability will be the biggest single driver of consumer markets over the next decade and beyond.

Consumer-facing companies need to enhance consumer trust in their brands, so are looking for ingredients that enable them to deliver products with proven, substantiated claims and transparent, assured information on their social and environmental footprints. Sustainable ingredients must have a low footprint in terms of the carbon, water and resources used in their manufacture, and should also contribute to enabling consumers to live more sustainably.

Growing consumer demand for sustainable ingredients is driving increased regulation by industry and national authorities. For example, there are now very few countries in the world without cosmetic legislation and an increasing number of countries also have chemical regulations in place, with many more set to adopt chemical legislation in the coming years. Increasingly widespread and thorough legislation is providing a higher threshold for approval for new ingredients while increasing consumer confidence about the footprint and sustainability benefits of the products they buy.

The move to sustainable ingredients is not confined to consumer markets. Not only do crop science companies want biodegradable ingredients with a low carbon footprint, they also need innovative ingredients that make a positive contribution to improving yields, soil health and biodiversity.

Alongside more sustainable chemistry, biotechnology can be a highly sustainable route for creating new and existing molecules that have applications in high growth markets of today and the future. Designed correctly, biotechnology will enable ongoing performance innovation, facilitate ingredient footprint reduction, and support the transformation to bio-based ingredients.

For more information see the Crop Care and Consumer Care:

Capturing new opportunities section

in our ARA2022 on pages 27-33

2. Move to biologics

In Life Sciences, the 20th century was the era of the small molecule: relatively simple compounds made

by chemical synthesis. The 21st century is the era of biologics: giant molecules manufactured inside animal cells or micro-organisms, that are already transforming medicine and will transform agriculture over the next decade.

Biologic drugs mimic closely our body's biology and are much better at treating disease in a targeted way with fewer side effects. But they are complex molecules that are hard to make, difficult to keep stable, and need sophisticated delivery systems. They are also difficult to administer and are normally injected because otherwise they would be destroyed by stomach acid when swallowed.

The nucleic acid revolution that we are now witnessing, best illustrated by the global roll out of messenger ribonucleic acid (mRNA) vaccines for COVID-19, is the next phase in the move to biologics. It is creating an incredible number of opportunities because nucleic acids teach the body to create its own medicine. This is a fundamental shift in the complexity of new drugs and in their value - both in terms of patient outcomes and commercial opportunities for pharmaceutical companies.

Although crop science is some years behind, it is also experiencing a transformation to biologically active ingredients. For example, naturally occurring microbes act as fertilisers for plants but have yet to be exploited systematically to raise crop yields. The nucleic acid revolution is also making new approaches possible in agriculture. For example, ribonucleic acid (RNA) interference could be used as a precisely targeted, environmentally friendly pesticide, by preventing the production of a critical molecule in the body of a specific pest.

The ability for these biologics to target specific elements in the host offers a significant opportunity to reduce negative impacts on the planet and society. Increased targeting means reduced overall dosage, less unintended side effects and fewer resources to produce the same benefits.

Novel performance means new approaches such as improved vaccination to both prevent and cure diseases, and regenerative agriculture that leverages the power of nature.

For more information see the Pharma: Capturing new opportunities section in our ARA2022 on pages 30-31

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