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Control environment

The control environment is the set of standards, processes, culture, and structures that provide the basis for carrying out internal control across the organization. The Executive Committee sets the tone at the top as to the importance of internal control including expected standards of conduct. An important principle of the control environment is the commitment of the Executive Committee to integrity and ethical values, which is demonstrated by the programs mentioned below.

Business conduct / compliance

Business Conduct Program

Corbion’s Business Conduct Program combines the legal requirements of the countries where we operate and international standards, resulting in a framework that regulates how all Corbion employees interact with colleagues, business partners, governments, and communities. We translate these legal requirements and standards into our Code of Business Conduct, internal policies, and procedures to make them accessible to everyone. Often, we go beyond what is required by local legislation to create a single global integrity approach within Corbion.

The Executive Committee has overall responsibility for the Business Conduct Program and oversees its execution. To this end, they establish effective global business conduct governance and ensure allocation of appropriate resources for the upkeep and further development of the Business Conduct Program.

Corbion’s Legal & Compliance Department supports the execution of the Business Conduct Program as a second line of defense and, as such, has a coordinating role. The Legal & Compliance Department works closely with other departments (e.g. Risk Management, Internal Audit, HR, Finance, Customer Service, Procurement, Communications) and external stakeholders (e.g. law firms,  consultants, compliance software providers) to enable the proper roll-out of the Business Conduct Program throughout the organization.

As a third line of defense, Internal Audit offers independent reviews. The business is in the front line and is responsible for the day-to-day execution of the risk management strategy and Business Conduct Program.

Each year, Corbion’s Compliance Officer reports to the Audit Committee of the Supervisory Board on the status of the Business Conduct Program. In the event of significant incidents, the Audit Committee is immediately informed by the Executive Committee.

Code of Business Conduct and policies

At the heart of our Business Conduct Program is the Corbion Code of Business Conduct. Our Code states the values and principles that guide our work at Corbion and sets out the expected standard of behavior for everyone working for Corbion. Our Code applies to all activities we perform on behalf of Corbion wherever they take place, and to everyone working for our company.

Guided by the principles of the UN Global Compact and the OECD Guidelines for Multinational Enterprises, our Code of Business Conduct describes principles with respect to personal and business conduct, asset protection, employment standards, and our commitment to sustainability.

Our Code is available in six languages and was comprehensively revised in 2019 to include how Corbion’s new values relate to our purpose, and to extend our commitment to sustainability.

Our Code serves as an umbrella for underlying policies which cover in more detail areas such as competition law, anti-bribery, anti-corruption, conflicts of interest, privacy, economic sanctions, and insider trading.

Corbion has a network of regional Business Conduct Coordinators who help embed the Code of Business Conduct and the underlying policies into local operations. Besides this, they are a local point of contact for management and employees.

Speak Up channels

Under the Corbion Speak Up Policy, Corbion employees can report misconduct and (potential) violations of the Code of Business Conduct and underlying policies to their manager, their local HR contact, or the regional Business Conduct Coordinator.

Next to that, the Corbion Speak Up channels are available 24/7 to enable employees to report issues directly to the Business Conduct Committee, which is composed of the Chief Human Resources Officer, the VP Legal & Compliance, and the Director Internal Audit. Corbion Speak Up channels include a toll-free phone number and a global webservice which are operated by an independent service provider to ensure the confidentiality of the report.

Any misconduct and (potential) violations can be reported anonymously. In 2019, Corbion launched its External Speak Up platform, a dedicated channel available to Corbion’s external stakeholders, including customers, suppliers, communities, distributors, and agents. The Corbion External Speak Up platform can be used to raise concerns about (suspected) violations of the Corbion Code of Business Conduct, Corbion’s Supplier Code, Corbion’s Cane Sugar Code, or any applicable laws. 

Breaches of the Code of Business Conduct may lead to disciplinary actions, including termination of employment. The outcome of the investigations as well as any disciplinary measures taken are documented accordingly and reported to the Executive Committee and Audit Committee twice a year.

Business Conduct training

Every year, all Corbion employees follow a mandatory training on our Code of Business Conduct. Employees receive training in their local language through an e-learning course or a classroom session. Course materials are updated yearly, based on the most relevant risks at the time of the release and on the topics which were brought up in Speak Up reports in the previous year. Corbion has a strict policy on attendance to the Code of Business Conduct training.

In addition, selected groups of employees need to follow every two years mandatory e-learning trainings with respect to anti-corruption and competition law.

Compliance statement

Every year, at the time of the annual Code of Business Conduct training, employees confirm their compliance with the Code and underlying policies by signing a compliance statement.

In January of each year, the members of the Supervisory Board and Executive Committee as well as the direct reports of the Executive Committee, confirm their compliance with the Conflicts of Interest Policy by signing a compliance statement. They also fill out a questionnaire disclosing their close relationships and memberships in other companies, as well as related-party transactions.

In terms of our onboarding program, our standard employment contracts contain a clause with respect to adherence to the Code of Business Conduct. New hires are introduced to our Code as soon as they join Corbion and are required to complete the Code of Business Conduct training in the first 6 weeks of employment.

Anti-bribery and anti-corruption

As a listed company operating worldwide, compliance with anti-bribery and anti-corruption laws is key. Given its importance, compliance with our policy is overseen by the Executive Committee. Our policy with respect to anti-bribery and anti-corruption is laid down in our Gifts, Entertainment, and Third-Party Payments Policy. This policy is available in 6 languages and covers the (i) prohibition of offering, authorizing, or accepting bribes, (ii) rules on how to deal with giving and receiving gifts and entertainment, and (iii) rules on how to deal with third-party payments (agents and distributors, facilitation payments, sponsorships, political contributions).

All Corbion colleagues as well as our agents, distributors, and other representatives are prohibited from offering, authorizing, or accepting bribes of any kind. Any gifts and entertainment must be for legitimate business purposes, of a reasonable value, appropriate to the business relationship, and be given or accepted at an appropriate time. If the nominal value of a gift exceeds a certain threshold, prior approval of the employee’s manager is required. Prior management approval is always required for entertainment (with the exception of business meals) and travel and overnight accommodation.

Corbion has an anti-bribery and anti-corruption procedure in place to screen prospective agents and distributors, who are required to complete due-diligence questionnaires to be assessed by the Legal & Compliance Department and, in some cases, by an external party. Furthermore, higher-management approval is required prior to engagement. The agent or distributor is required to sign an agency or distribution agreement and accept the Corbion anti-corruption and anti-bribery clauses contained therein.

Economic sanctions

Corbion is committed to complying with economic sanctions laws and regulations. According to the Corbion Economic Sanctions Policy, prior to onboarding, each prospective business partner is subject to screening against applicable restricted parties and sanctioned countries lists to ensure compliance with economic sanctions laws and regulations.

Alongside this pre-screening of business partners, Corbion has appropriate tools to ensure ongoing screening of all active business partners and to prevent shipment of our products to embargoed countries and regions.

Privacy and data protection

In light of the European regulation on data protection (GDPR), Corbion has created a robust privacy program in 2018. Following its initial implementation, Corbion has further developed and localized its privacy program to reflect newly enacted privacy regulations in the countries where we operate, such as the CCPA/CPRA in California, the LGPD in Brazil, the PDPA in Thailand, and the PIPL in China.

Enforcement actions

Corbion has not been the subject of any investigation into business conduct violations (e.g. competition, privacy, bribery) by competent governmental authorities to date.

Risk appetite

Part of the control environment is defining the risk appetite of the company by the Executive Committee. Our risk appetite is the level of risk we are willing to accept to achieve our strategic goals. This requires adequate understanding and awareness of potential risks and their magnitude within the company. The level of risk appetite is set by the Executive Committee. Our risk appetite can be summarized as follows.

A 1% change in net sales, costs, profit, and currency rates can have the following impact on EBITDA (in millions of euros).

Risk appetite

 

Change

Approx. EBITDA impact (millions of euros)

Net sales

+1% / -1%

+/- 4.8

   

Gross profit

+1% / -1%

+/- 3.1

Operating costs (= selling expenses + R&D costs + G&A expenses)

+1% / -1%

+/- 1.7

USD

+1% / -1%

+/- 1.3

JPY

+1% / -1%

+/- 0.2

THB

-1

+/- 0.3

BRL

-1

+/- 0.1

Risk assessment

As an integral part of the strategy review, the Executive Committee annually performs an entity-wide risk assessment to assess the strategic risks, with a mid-year update for significant changes. Furthermore, risk assessment is an integral part of the project stage-gate methodology applied at Corbion for strategic initiatives and related investments.

Based on the strategic risks, the Executive Committee selects a number of key management activities with an increased focus on further strengthening our control framework. This is discussed with the Audit Committee and the Supervisory Board.

Operations, reporting, and compliance risks are considered throughout the organization, with ownership lying with the line organization (first line of defense). Risk committees have been established to monitor specific risks to stay within Corbion’s risk appetite (Treasury Risk Committee, Commodity Pricing Risk Committee).

The financial reporting risks are assessed on a regular basis and the outcome of these assessments forms the input for the Corbion internal control framework over financial reporting (see section Internal control systems). For more information on financial risk management and financial instruments see Note 27 of the Financial Statements.

Key risk areas

The table below summarizes the top risks that have the focused attention of the Executive Committee to support the realization of the strategic targets. For each risk, the table lists the potential impact as well as a summary of mitigation measures taken to minimize the risk. There may be other risks currently unknown to Corbion, or currently believed not to be material, which could ultimately have a major impact on Corbion’s business, objectives, revenues, income, assets, liquidity, or capital resources.

Corbion top risks

Risk event

Cause and potential impact

Mitigation actions

Strategic risks

  

Capacity

Due to favorable developments of PLA and the lactic acid market, our lactic acid production facilities run at maximum capacity. Significant interruptions would immediately result in lost sales impacting the realization of the strategic goals.

The construction of a new lactic acid plant in Thailand has been announced. The plant will be operational in 2023. Meanwhile, an extensive debottlenecking program is in place at existing lactic acid plants. In addition, we regularly expand our capacity incrementally in our derivatives plants.

With sophisticated demand forecasting and sales & operations planning, Corbion is optimizing the allocation of products to ensure we can meet our customer needs.

For measures to prevent business interruption, see the business interruption risk below.

Climate change

Climate change could affect Corbion in all areas of business through transition and physical risks. Transition risks include, amongst others carbon pricing, changing consumer behavior, and changing regulations, while physical risks manifest through increased intensity and frequency of extreme weather events and chronic climatic changes. Climate risk has an increasing impact on likelihood of several other risks, e.g. business continuity, raw material availability and price volatility, regulations, customer behavior.

Transitional risks are addressed through our strategy development process, with the use of scenario analysis, monitoring developments, and emerging risks and opportunities. Physical risks are addressed through mitigating actions as mentioned in this table at the relevant risk affected by climate change.

COVID-19

Supply-chain disruption (inbound and outbound)

We are continuously managing our in- and outbound supply chain and taking appropriate action to mitigate risk. We are adapting the inventory levels of strategic raw materials and have arranged for multi-sourced supply alternatives wherever possible.

Adverse cash flow impact

Our covenant net debt/covenant EBITDA ratio at the end of 2021 was 2.6, well below the limits of our loan covenants (3.75x). Adverse cash flow impacts may occur when multiple customers do not pay or pay late; or when business is declining due to an economic downturn, or due to production disruption issues within Corbion (see below). We continuously monitor our debtor payment behavior and actively manage any materializing overdue positions. We have credit facilities available (e.g. undrawn portion of the RCF facility) to cater for potential cash flow funding requirements.

Economic downturn
Delayed customer payments

Generally, the food and pharma businesses are relatively less sensitive to economic downturns, although the long-term consequences of the COVID-19 pandemic for future consumer behavior patterns are unknown. We stepped up our monitoring of business developments and payment behavior of customers to enable timely measures in case of worsening trends.

Production disruption

Because of our position as a key supplier in the food and pharma supply chains, our plants in most countries are qualified as “essential,” enabling our people and contractors to come to the plant and continue their activities, and enabling us to serve our customers in the best possible way. We have taken extensive preventive measures to reduce contamination risk on the shop floor and ensured redundancy in our shift planning.

Competition

With lactic acid demand exceeding supply, the possibility of new market entrants increases.

By investing in R&D Corbion intends to keep its competitive edge. The new circular lactic acid production technology is an example of the innovative strength of Corbion. In 2020 Corbion made the decision to build the first plant industrial scale with this new technology in Thailand, resulting in reduced production costs (operational in 2023).

Business development underperformance

Business development is one of the key drivers of Corbion's Advance 2025 strategy. Corbion is investing in new platforms of growth such as PLA, for which the pace of market adoption is inherently uncertain given the early development stage of these initiatives.

Corbion is following a disciplined investment approach to these major business development initiatives through actions like:
- strict project management approach supported by a well-established stage-gate development methodology;
- regular project status reviews with direct involvement at Executive Committee level;
- alignment of investment pace with market development;
- involvement of innovation / business partners to share business development risk and increase speed and likelihood of success.

Business interruption due to new ERP platform

Corbion embarked on a multi-year (2017 - 2023) project to replace the existing ERP systems by a new, global ERP platform (project CUBE, based on SAP S/4HANA). As this new system addresses nearly all of the core transactional processes, such transition if not prepared and/or managed well, could lead to major business interruptions.

Corbion considers project CUBE as one of the key initiatives for change management which will be implemented in the years to come. The project is staffed with dedicated experienced project management (resources from both internal and external system integrator), follows strict project governance procedures, and reports to an Executive Committee-led steering committee.
After a careful preparation phase and rigorous testing phase, the new system is currently being implemented using a multi-year phased approach (region by region). In 2021 implementation has been completed for Europe and Asia. COVID-19 caused a slight delay in the implementation schedule in 2020/2021 thus extending the project into 2023.

Inability to find, develop, and retain skilled talent

To execute the Advance 2025 strategy, Corbion requires a pool of skilled talent.
If Corbion in today's international labor market is not able to attract and retain skilled talent, the execution of the strategy may be delayed.

Corbion has robust compensation and performance management processes in place.
Succession planning is embedded in Corbion to ensure a strong pool of talent for the key positions.

Raw material, energy, and carbon price volatility and availability

Failure to manage the price volatility risk of raw materials, chemicals, energy, and carbon which cannot be directly passed on to customers due to market conditions or lack of contractual enforcement, may result in adversely impacted gross margins. Climate-change-related events may cause more volatility in respect of our key raw material components (sugar, corn) and carbon pricing.

Our global procurement organization, with dedicated finance support, has developed adequate measures to secure contract positions and obtain financial instruments to minimize or delay exposure to cost fluctuations due to changing raw material prices that might impact our margins negatively. These measures include early warnings of possible impact on our organization and our customers. Also, the trade in and availability of CO2-emission rights are actively managed.

To improve assurance on availability, we have implemented a multiple-supplier sourcing policy for our most critical raw materials.

Overall raw material risks are mitigated by actively taking longer-term contract positions where necessary, by sourcing from different locations/key raw materials, and in the longer run, by considering alternative or second-generation feedstocks and greenhouse gas emissions reduction.

Various measures are applied to actively manage our margins, e.g. through the inclusion of price formulas in sales contracts and timing alignment between sourcing price exposure and sales contract duration.

Changing customer behavior toward food and changing product regulations in all industries in which Corbion is active

Our industry is inherently subject to uncertainties including evolving diets, reflecting perceptions with respect to health and sustainability issues, and subsequent policy responses (regulations).

The wide range of industries Corbion is serving add to the complexity.

Furthermore, climate change potentially impacts customer behavior. For example through the promotion of plant-based diets, reduced demand for fossil-based plastics and a switch to deforestation-free consumption.

Corbion works closely with its customers to identify trends and develop the right portfolio of solutions to address evolving trends.

Corbion is well positioned having several biobased solutions for emerging trends and to address changing product regulations.

Corbion monitors the developments and includes changing consumer behavior explicitly in its scenario analysis as part of formulating the transition strategy.

Operations risks

  

Safety incidents

Inherent health and safety hazards in our operations and insufficient awareness of unsafe operational conditions can lead to injuries or casualties and, potentially, a temporary plant shutdown.

Safety is an integral part of new design and change in product formulations and production processes. We rolled out a new policy focused on safety core beliefs, followed by participative workshops, and a program focused on life-changing safety rules, supported by e-learning and awareness campaigns. In 2021, Corbion continued the awareness campaigns, in addition to the roll-out of the ISO 45001 safety standards. Next to that, a specialized consultancy firm assessed our safety culture and a roadmap was developed to further strengthen our safety performance.
Corbion fosters an open and transparent culture by encouraging all employees to report, amongst others, all near misses and events in order to continuously improve our safety and environmental performance.

Food safety

Food safety is of utmost importance to Corbion. Customers need to fully trust the safety of our products. Any issue can have significant impact on the reputation of the company and can result in significant costs of resolving the issue (for example, in case of a major recall).

Corbion has comprehensive quality assurance and control processes in place to ensure food safety and to track and trace our products in case of any issue. Every site is certified for food safety.

Where possible, liability caps are included in contracts. A product liability insurance is in place to cover part of the risk.

Business interruption

An external hazardous event (e.g. floods, riots, fires) or internal disruption (e.g. availability of critical spare parts, global supply chain complexity) may result in a significant period of plant shutdown or disruption and hence in delayed/non-delivery of our products to internal and/or external customers, ultimately leading to adverse financial and reputational consequences. Climate-change-related events may increase the risk of business or supply chain interruption.

Business continuity and crisis management plans including contingency sourcing are in place with ongoing evaluation, based amongst other things on highly credible incident identifications for each site. Climate change (e.g. extreme weather events) is considered using scenario analysis.

Furthermore, appropriate customer and supplier agreements are in place to limit exposure whilst leveraging supplies. Finally, residual risks are adequately insured including assets and business continuity risks.

In 2021, a business continuity incident occurred at our Blair facility. A thorough root cause analysis was performed. The lessons learned further improved the incident identification and resulting mitigation actions.

Cybersecurity breach

A breach of our IT security might lead to loss of information, business disruption, or unauthorized access to or corruption of our data and systems.

We have implemented an IT governance structure including a dedicated corporate information security officer and an information security governance board. The IT general control framework has been updated to include amended IT policies. On a frequent basis we perform penetration tests, helping us to identify and correct potential IT security weaknesses. The outcome of these tests helps us to further strengthen our IT security levels. In addition, we reduce our risk exposure by continuously raising IT security awareness with our people (e.g. through e-learning, communications). In 2021 we continued to have a strong IT control environment with our focus on timely application of patches, full implementation of multi-factor authentication, running a Security Operating Center, and segmentation of Corbion’s IT network. From time to time we experience cybersecurity attacks on our information technology systems, and the techniques used for such attacks are increasingly becoming more sophisticated. In 2021, we identified one cybersecurity attack on our information technology systems. However, this attack has not materially impacted our business or operations. Nevertheless, any system failure, accident or security breach could result in business disruption, theft of our intellectual property and trade secrets, or unauthorized access to or corruption of our data and systems.

Confidential information leakage

Failure to protect sensitive information adequately due to limited physical protective measures, inadequate user behavior, or potential cyberattacks may result in loss of valuable or sensitive information such as trade secrets or intellectual property.

All mitigation actions mentioned above under Cybersecurity breach are geared to keep our sensitive information confidential.
As an additional manual control, non-disclosure agreements with third parties are in place.

Compliance risks

  

Non-compliance with applicable tax laws

Failure to timely detect and anticipate changes in a wide variety of tax laws or in the application thereof could adversely affect our financial results.

An adequate quarterly reporting system is in place, we hold regular tax meetings, and review tax compliance of our operating companies. Our global tax control framework warrants compliance. Transfer pricing policy and documentation are in place as well. We seek the advice of external tax experts in compliance matters.

Non-compliance with legislative and regulatory environment

Failure to comply with (changing) laws and regulations in the markets we operate in and/or lack of insight into and/or awareness of relevant laws and regulations and their requirements may result in suspension of activities, reputational damage, and exposure to criminal and financial lawsuits.

Global legal and regulatory compliance programs are in place, including related awareness trainings, and we monitor, review, and report on changes in laws and regulations. We seek the advice of external experts in compliance matters.

Considering the increasing impact of regulatory affairs, Corbion decided in 2021 to make additional investments to further strengthen the Regulatory Affairs department and related processes.

Reporting risks

  

Sustainability reporting

There is an increasing number of new, existing and emerging regulations concerning climate change and other sustainability-related disclosures. These regulations or initiatives can be either voluntary or obligatory and can be aimed at investors or required by governing bodies. This includes, but is not limited to, the EU Taxonomy, CSRD, TCFD, TNFD, IFRS/ISSB prototype standards, science-based targets, and CDP. Failure to report sufficient information might potentially lead to a lack of trust, reputational damage, loss of customers, and legal claims.

Corbion aims to be a frontrunner in sustainable business practices. To communicate this effectively and reliably there is a need for adequate disclosures. We are therefore constantly monitoring development in this field and try to anticipate upcoming regulation. Through timely integration of standards and collection of data we are able to keep up with the required disclosures and provide investors and other stakeholders with the information they need.

Non-compliance with International Financial Reporting Standards (IFRS)

Not informing our shareholders and other stakeholders in conformity with IFRS might lead to a lack of trust, reputational damage, and legal claims.

Corporate accounting policies are maintained and made available via the Corbion intranet. Our global control framework includes financial reporting controls that warrant compliance with IFRS. For significant entities, the effectiveness is self-assessed every quarter.
External best-in-class expert advice is used if/where necessary.

Risk event

Cause and potential impact

Mitigation actions

Strategic risks

  

Capacity

Due to favorable developments of PLA and the lactic acid market, our lactic acid production facilities run at maximum capacity. Significant interruptions would immediately result in lost sales impacting the realization of the strategic goals.

The construction of a new lactic acid plant in Thailand has been announced. The plant will be operational in 2023. Meanwhile, an extensive debottlenecking program is in place at existing lactic acid plants. In addition, we regularly expand our capacity incrementally in our derivatives plants.

With sophisticated demand forecasting and sales & operations planning, Corbion is optimizing the allocation of products to ensure we can meet our customer needs.

For measures to prevent business interruption, see the business interruption risk below.

Climate change

Climate change could affect Corbion in all areas of business through transition and physical risks. Transition risks include, amongst others carbon pricing, changing consumer behavior, and changing regulations, while physical risks manifest through increased intensity and frequency of extreme weather events and chronic climatic changes. Climate risk has an increasing impact on likelihood of several other risks, e.g. business continuity, raw material availability and price volatility, regulations, customer behavior.

Transitional risks are addressed through our strategy development process, with the use of scenario analysis, monitoring developments, and emerging risks and opportunities. Physical risks are addressed through mitigating actions as mentioned in this table at the relevant risk affected by climate change.

COVID-19

Supply-chain disruption (inbound and outbound)

We are continuously managing our in- and outbound supply chain and taking appropriate action to mitigate risk. We are adapting the inventory levels of strategic raw materials and have arranged for multi-sourced supply alternatives wherever possible.

Adverse cash flow impact

Our covenant net debt/covenant EBITDA ratio at the end of 2021 was 2.5, well below the limits of our loan covenants (3.75x). Adverse cash flow impacts may occur when multiple customers do not pay or pay late; or when business is declining due to an economic downturn, or due to production disruption issues within Corbion (see below). We continuously monitor our debtor payment behavior and actively manage any materializing overdue positions. We have credit facilities available (e.g. undrawn portion of the RCF facility) to cater for potential cash flow funding requirements.

Economic downturn
Delayed customer payments

Generally, the food and pharma businesses are relatively less sensitive to economic downturns, although the long-term consequences of the COVID-19 pandemic for future consumer behavior patterns are unknown. We stepped up our monitoring of business developments and payment behavior of customers to enable timely measures in case of worsening trends.

Production disruption

Because of our position as a key supplier in the food and pharma supply chains, our plants in most countries are qualified as “essential,” enabling our people and contractors to come to the plant and continue their activities, and enabling us to serve our customers in the best possible way. We have taken extensive preventive measures to reduce contamination risk on the shop floor and ensured redundancy in our shift planning.

Competition

With lactic acid demand exceeding supply, the possibility of new market entrants increases.

By investing in R&D Corbion intends to keep its competitive edge. The new circular lactic acid production technology is an example of the innovative strength of Corbion. In 2020 Corbion made the decision to build the first plant industrial scale with this new technology in Thailand, resulting in reduced production costs (operational in 2023).

Business development underperformance

Business development is one of the key drivers of Corbion's Advance 2025 strategy. Corbion is investing in new platforms of growth such as PLA, for which the pace of market adoption is inherently uncertain given the early development stage of these initiatives.

Corbion is following a disciplined investment approach to these major business development initiatives through actions like:
- strict project management approach supported by a well-established stage-gate development methodology;
- regular project status reviews with direct involvement at Executive Committee level;
- alignment of investment pace with market development;
- involvement of innovation / business partners to share business development risk and increase speed and likelihood of success.

Business interruption due to new ERP platform

Corbion embarked on a multi-year (2017 - 2023) project to replace the existing ERP systems by a new, global ERP platform (project CUBE, based on SAP S/4HANA). As this new system addresses nearly all of the core transactional processes, such transition if not prepared and/or managed well, could lead to major business interruptions.

Corbion considers project CUBE as one of the key initiatives for change management which will be implemented in the years to come. The project is staffed with dedicated experienced project management (resources from both internal and external system integrator), follows strict project governance procedures, and reports to an Executive Committee-led steering committee.
After a careful preparation phase and rigorous testing phase, the new system is currently being implemented using a multi-year phased approach (region by region). In 2021 implementation has been completed for Europe and Asia. COVID-19 caused a slight delay in the implementation schedule in 2020/2021 thus extending the project into 2023.

Inability to find, develop, and retain skilled talent

To execute the Advance 2025 strategy, Corbion requires a pool of skilled talent.
If Corbion in today's international labor market is not able to attract and retain skilled talent, the execution of the strategy may be delayed.

Corbion has robust compensation and performance management processes in place.
Succession planning is embedded in Corbion to ensure a strong pool of talent for the key positions.

Raw material, energy, and carbon price volatility and availability

Failure to manage the price volatility risk of raw materials, chemicals, energy, and carbon which cannot be directly passed on to customers due to market conditions or lack of contractual enforcement, may result in adversely impacted gross margins. Climate-change-related events may cause more volatility in respect of our key raw material components (sugar, corn) and carbon pricing.

Our global procurement organization, with dedicated finance support, has developed adequate measures to secure contract positions and obtain financial instruments to minimize or delay exposure to cost fluctuations due to changing raw material prices that might impact our margins negatively. These measures include early warnings of possible impact on our organization and our customers. Also, the trade in and availability of CO2-emission rights are actively managed.

To improve assurance on availability, we have implemented a multiple-supplier sourcing policy for our most critical raw materials.

Overall raw material risks are mitigated by actively taking longer-term contract positions where necessary, by sourcing from different locations/key raw materials, and in the longer run, by considering alternative or second-generation feedstocks and greenhouse gas emissions reduction.

Various measures are applied to actively manage our margins, e.g. through the inclusion of price formulas in sales contracts and timing alignment between sourcing price exposure and sales contract duration.

Changing customer behavior toward food and changing product regulations in all industries in which Corbion is active

Our industry is inherently subject to uncertainties including evolving diets, reflecting perceptions with respect to health and sustainability issues, and subsequent policy responses (regulations).

The wide range of industries Corbion is serving add to the complexity.

Furthermore, climate change potentially impacts customer behavior. For example through the promotion of plant-based diets, reduced demand for fossil-based plastics and a switch to deforestation-free consumption.

Corbion works closely with its customers to identify trends and develop the right portfolio of solutions to address evolving trends.

Corbion is well positioned having several biobased solutions for emerging trends and to address changing product regulations.

Corbion monitors the developments and includes changing consumer behavior explicitly in its scenario analysis as part of formulating the transition strategy.

Operations risks

  

Safety incidents

Inherent health and safety hazards in our operations and insufficient awareness of unsafe operational conditions can lead to injuries or casualties and, potentially, a temporary plant shutdown.

Safety is an integral part of new design and change in product formulations and production processes. We rolled out a new policy focused on safety core beliefs, followed by participative workshops, and a program focused on life-changing safety rules, supported by e-learning and awareness campaigns. In 2021, Corbion continued the awareness campaigns, in addition to the roll-out of the ISO 45001 safety standards. Next to that, a specialized consultancy firm assessed our safety culture and a roadmap was developed to further strengthen our safety performance.
Corbion fosters an open and transparent culture by encouraging all employees to report, amongst others, all near misses and events in order to continuously improve our safety and environmental performance.

Food safety

Food safety is of utmost importance to Corbion. Customers need to fully trust the safety of our products. Any issue can have significant impact on the reputation of the company and can result in significant costs of resolving the issue (for example, in case of a major recall).

Corbion has comprehensive quality assurance and control processes in place to ensure food safety and to track and trace our products in case of any issue. Every site is certified for food safety.

Where possible, liability caps are included in contracts. A product liability insurance is in place to cover part of the risk.

Business interruption

An external hazardous event (e.g. floods, riots, fires) or internal disruption (e.g. availability of critical spare parts, global supply chain complexity) may result in a significant period of plant shutdown or disruption and hence in delayed/non-delivery of our products to internal and/or external customers, ultimately leading to adverse financial and reputational consequences. Climate-change-related events may increase the risk of business or supply chain interruption.

Business continuity and crisis management plans including contingency sourcing are in place with ongoing evaluation, based amongst other things on highly credible incident identifications for each site. Climate change (e.g. extreme weather events) is considered using scenario analysis.

Furthermore, appropriate customer and supplier agreements are in place to limit exposure whilst leveraging supplies. Finally, residual risks are adequately insured including assets and business continuity risks.

In 2021, a business continuity incident occurred at our Blair facility. A thorough root cause analysis was performed. The lessons learned further improved the incident identification and resulting mitigation actions.

Cybersecurity breach

A breach of our IT security might lead to loss of information, business disruption, or unauthorized access to or corruption of our data and systems.

We have implemented an IT governance structure including a dedicated corporate information security officer and an information security governance board. The IT general control framework has been updated to include amended IT policies. On a frequent basis we perform penetration tests, helping us to identify and correct potential IT security weaknesses. The outcome of these tests helps us to further strengthen our IT security levels. In addition, we reduce our risk exposure by continuously raising IT security awareness with our people (e.g. through e-learning, communications). In 2021 we continued to have a strong IT control environment with our focus on timely application of patches, full implementation of multi-factor authentication, running a Security Operating Center, and segmentation of Corbion’s IT network. From time to time we experience cybersecurity attacks on our information technology systems, and the techniques used for such attacks are increasingly becoming more sophisticated. In 2021, we identified one cybersecurity attack on our information technology systems. However, this attack has not materially impacted our business or operations. Nevertheless, any system failure, accident or security breach could result in business disruption, theft of our intellectual property and trade secrets, or unauthorized access to or corruption of our data and systems.

Confidential information leakage

Failure to protect sensitive information adequately due to limited physical protective measures, inadequate user behavior, or potential cyberattacks may result in loss of valuable or sensitive information such as trade secrets or intellectual property.

All mitigation actions mentioned above under Cybersecurity breach are geared to keep our sensitive information confidential.
As an additional manual control, non-disclosure agreements with third parties are in place.

Compliance risks

  

Non-compliance with applicable tax laws

Failure to timely detect and anticipate changes in a wide variety of tax laws or in the application thereof could adversely affect our financial results.

An adequate quarterly reporting system is in place, we hold regular tax meetings, and review tax compliance of our operating companies. Our global tax control framework warrants compliance. Transfer pricing policy and documentation are in place as well. We seek the advice of external tax experts in compliance matters.

Non-compliance with legislative and regulatory environment

Failure to comply with (changing) laws and regulations in the markets we operate in and/or lack of insight into and/or awareness of relevant laws and regulations and their requirements may result in suspension of activities, reputational damage, and exposure to criminal and financial lawsuits.

Global legal and regulatory compliance programs are in place, including related awareness trainings, and we monitor, review, and report on changes in laws and regulations. We seek the advice of external experts in compliance matters.

Considering the increasing impact of regulatory affairs, Corbion decided in 2021 to make additional investments to further strengthen the Regulatory Affairs department and related processes.

Reporting risks

  

Sustainability reporting

There is an increasing number of new, existing and emerging regulations concerning climate change and other sustainability-related disclosures. These regulations or initiatives can be either voluntary or obligatory and can be aimed at investors or required by governing bodies. This includes, but is not limited to, the EU Taxonomy, CSRD, TCFD, TNFD, IFRS/ISSB prototype standards, science-based targets, and CDP. Failure to report sufficient information might potentially lead to a lack of trust, reputational damage, loss of customers, and legal claims.

Corbion aims to be a frontrunner in sustainable business practices. To communicate this effectively and reliably there is a need for adequate disclosures. We are therefore constantly monitoring development in this field and try to anticipate upcoming regulation. Through timely integration of standards and collection of data we are able to keep up with the required disclosures and provide investors and other stakeholders with the information they need.

Non-compliance with International Financial Reporting Standards (IFRS)

Not informing our shareholders and other stakeholders in conformity with IFRS might lead to a lack of trust, reputational damage, and legal claims.

Corporate accounting policies are maintained and made available via the Corbion intranet. Our global control framework includes financial reporting controls that warrant compliance with IFRS. For significant entities, the effectiveness is self-assessed every quarter.
External best-in-class expert advice is used if/where necessary.