About This Report

From the CEO  

The purpose of this letter is not to cover all topics that are included in the comprehensive Environmental, Social, and Governance report that follows. I have taken the liberty of selecting a few highlights to discuss here.

AMG is deeply invested in the subject of Environmental, Social, and Governance (“ESG”), not by simply being compliant with regulations and best practices, but by what we do. AMG has been built to be a global leader in “critical” materials which are essential building blocks for containing and eventually reversing the growth of atmospheric CO₂ levels. Clean Energy Materials rely heavily on critical materials which AMG produces in a sustainable and responsible manner. Critical materials are vital to the transition to clean energy and energy saving strategies, which, due to the demand shift, makes them “critical.” The International Energy Agency estimates that the pathway to the net zero carbon target implies a growth of critical materials from less than 10 million tons today to over 40 million tons in 2050.

COVID-19

We made the important decision to maintain critical operations during this unprecedented crisis because of the vital role our company plays in sustaining global infrastructure. Keeping our operations running meant modifying how we work to keep our employees, contractors, and visitors safe during a pandemic.

AMG operations drew upon worldwide guidance to develop location-specific programs that included educating personnel to recognize signs and symptoms of COVID-19 infection, implementing self-quarantine protocols, establishing temperature checks at every entrance, elevating workplace hygiene and cleaning protocols, social distancing, and enacting global travel restrictions.

I am happy to report that AMG employees around the world successfully adapted to and overcame the threat and turmoil imposed by the COVID-19 pandemic, with no COVID-19 caused fatalities and limited required hospitalizations. However, one cannot ignore the impacts COVID-19 has had beyond the walls of our workplace and the devastation it has wrought around the world. AMG is committed to supporting the families of our employees and the communities where we do business as we all continue along the road to recovery.

Health and Safety

Delivering to the world critical materials which are manufactured responsibly and safely is our priority and a “conditio sine qua non” as regard to our values. We are proud to report that in 2020 we continued to strongly outperform industry standards, both in Lost Time and Total Incident Rates.

This clearly demonstrates improvement in the reduction of workplace injuries. Although a worthy accomplishment, our safety target is obvious: ZERO incidents. In 2020, we proved this an obtainable target with 23 of our 33 sites (70%) reporting zero lost time injuries. With over 3,000 employees working at 33 sites in 15 countries these are remarkable results. Nobody in AMG questions the priority of working safely.

Each site is supported by a dedicated business-specific safety executive responsible for the development and deployment of site-specific environmental, health, safety, and sustainability (EH&SS) policies, procedures, and training to ensure every AMG employee is equipped with the knowledge and tools required to perform their jobs safely. With a direct line to the Vice President of EH&SS, who reports to the CEO, safety executives are further supported with access to additional resources and subject matter experts.

Diversity and Inclusion

At the end of 2020, the Management Board’s composition was 100 percent male and the Supervisory Board’s composition was 67 percent male and 33 percent female. Also, in 2020, we added a new metric to track: the percentage of Women in Management. Women held 21% of our management positions in 2020, which as a percentage exceeds the 19% total female population at AMG.

We are particularly encouraged by the progress we have made at one of our largest industrial sites, the global leader in catalyst recycling at the Ohio Vanadium production facility. At that facility, 41% of the managers are female.

We look forward to growing the number of women in leadership throughout AMG.

CO₂ Emissions and AMG Enabled Reduction

Years ago, we started to measure the CO₂ emission reduction impact AMG products have on the CO₂ footprint of customers. In 2019, six products (Thermal Barrier Coatings, Titanium Alloys, Turbocharger wheel castings, natural graphite doped insulation materials, Ferrovanadium, and Aluminum alloys) went through a Life-Cycle Assessment (LCA) with the help of a qualified third party (ERM). We grouped these products in a virtual segment and named it Enabling CO₂ Reduction Portfolio, or ECO₂RP. In 2019, the six ECO₂RP product lines enabled a CO₂ reduction of 67.8 million tons.

The Enabling CO₂ Reduction Portfolio (“ECO₂RP”)

In 2020, two new products joined ECO₂RP through the LCA gate: glass coatings and certain heat treatment services. The total enabled CO₂ reduction in 2020 was 56.6 million, the decrease compared to 2019 primarily due to the aerospace downturn. In 2020 the ECO₂RP revenues added up to 23% of AMG’s total (compared to 8% in 2010); the ECO₂RP gross profit was 28% (up from 5% in 2010). Presently, seven ECO₂RP candidates are in the pipeline, which we call the ECO₂RP “Lobby,” undergoing LCA in various stages. Some of the candidates have substantial CO₂ reduction potential.

The International Energy Agency concludes that a very high percentage of the global CO₂ reduction targets will have to come from technologies not yet proven. The ECO₂RP Lobby is growing relentlessly, only held back by human and financial resources within a conservative risk management framework.

Changing Regulatory Universe

Over the years, the ability to enable our customers to reduce CO₂ emissions has become the strategic cornerstone of AMG. We constantly search for additional product innovations that are “carbon negative” and meet our profitability criteria. Carbon negative equals the direct carbon footprint of the product adjusted for enabled CO₂ reduction (verified by third-party LCAs).

The EU Taxonomy Regulation has embraced the concept of enabling activities. It states the following: “An economic activity shall qualify as contributing substantially to one or more of the environmental objectives set out in Article 9 by enabling other activities to make a substantial contribution.” In addition, the first environmental objective in Article 9 is climate change mitigation and the fourth objective is the transition to a circular economy, which aligns with our ongoing priorities to reduce CO₂ emissions.

The conclusion is that the EU taxonomy fully embraces the concept of counting enabled CO₂ reduction in the same way as the reduction of direct CO₂ emissions. We believe that will have profound consequences for CO₂ reduction (subject to, of course, impeccable third-party LCA verification).

Double Materiality

Let me close with a thought about double materiality - the idea that companies should identify and assess both financially material topics that influence enterprise value, as well as those that are material based on their outward impact on the economy, environment and people. For example, the figure above shows AMG’s position with respect to climate’s potential impact on enterprise value and its impact on climate. AMG’s impact on the climate measured by way of CO₂ reduction is significant, and we are creating enterprise value through our R&D investments and innovative CO₂-reducing products. We believe that if the double materiality approach is widely accepted, it will have profound consequences for both business and society.

Dr. Heinz C. Schimmelbusch
Chief Executive Officer

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