Governance framework

Organizational & operating model

Business groups are the main building-blocks of DSM's organization; they have integral long-term and short-term business responsibility, and have at their disposal all functions that are crucial to their business success. As the primary organizational and entrepreneurial building-blocks, they focus on four primary business functions: Innovation and R&D, Direct Sourcing, Manufacturing & Operations, and Marketing & Sales. Intra-company product supplies are contracted by the business groups on an arm's-length basis.

The business groups are organized into clusters, thus ensuring coherence of operations and the leveraging of resources within each cluster. The clusters are the main organizational entities for external strategic and financial reporting. This structure ensures flexibility, efficiency and speed of response to market changes. In order to ensure sufficient independence with regard to financial management, the Chief Financial Officer (CFO) has no business groups reporting to her.

DSM's business groups receive services from global support functions and functional excellence departments, and are supported by the regional organizations. This set-up enables DSM to create a global high-performing organization focused on meeting its targets and achieving its ambitions. The support functions and functional excellence departments are paid for the services they supply by the users, which are for the greater part the business groups and to a lesser extent other DSM units. Corporate departments are paid from a corporate budget.

Support functions provide those services that can be delivered more efficiently (in terms of total cost of ownership for DSM) by leveraging them across the company, thus capturing scale benefits and delivering higher quality at lower cost, rather than having them arranged in each business group separately. Within support functions, centers of expertise provide specialist support, while shared service centers provide standard transactional support. Business partnering is the concept that acts as the interface between the business groups and the support functions. Business partners consequently have a second reporting line in the business. In order to ensure that the functional policies sufficiently reflect regional requirements, the support functions work closely with the regional organizations and integrate their advice. Each support function reports to a Managing Board member. There are support functions in the areas of Finance, People & Organization, Legal, Indirect Sourcing, Communications, and ICT. Corporate functions (small, high-level groups) supporting the Managing Board and Executive Committee are also seen as support functions. Corporate departments are: Corporate Strategy & Acquisitions, Corporate Operational Audit, Corporate Risk Management, Corporate Sustainability, Corporate Investor Relations, and Corporate Affairs.

Functional excellence departments are mandated by the Managing Board to help the businesses to achieve excellence. They cover the areas of Operations & Responsible Care, Marketing & Sales, and Science & Technology. Functional excellence departments support businesses in improving their performance and provide guidance in setting aspiration levels and targets.

Governance framework

The following figure depicts DSM's overall governance framework and the most important governance elements and regulations at each level.

shareholders

For the sake of clarity, a short summary of the main aspects of the framework at Managing Board / corporate level and operational level is given here:

  • The Managing Board and Executive Committee adhere to the Regulations of the Managing Board.
  • The Managing Board and Executive Committee work according to the Management Framework for the corporate level. This implies, among other things, that they adhere to the DSM Code of Business Conduct and applicable corporate policies and requirements. The Management Framework for the corporate level further provides a description of the most important (decision-making) processes, responsibilities and 'rules of the game' at Managing Board, Executive Committee, functional and regional levels, and includes the governance relations with the immediately superior levels (Supervisory Board and shareholders) and the operational units.

The company's strategic direction and objectives are set by means of a Corporate Strategy Dialogue. In November 2015, DSM presented the outcome of the latest Corporate Strategy Dialogue: 'Strategy 2018: Driving Profitable Growth', which is described in detail in DSM's Integrated Annual Report 2015 and on the company website. As we delivered well ahead of this strategy for the second year in a row in 2017, we brought forward our regular strategy review process for the period beyond 2018.

The operational units conduct their business within the parameters of the Management Framework for operational units. This implies, among other things, that they:

  • comply with the DSM Code of Business Conduct, Corporate Requirements and Directives;
  • establish the strategy, objectives and operational targets of their business according to the Business Strategy Dialogue, aligned with the Corporate Strategy Dialogue, in which various scenarios and related risk profiles are investigated, and report on the achievement thereof;
  • implement risk management actions according to an Annual Risk Management Plan and in line with corporate policies;
  • execute DSM-wide standards for support functions (systems, processes, vendors, etc.); and
  • execute the annual functional improvement plans, monitor the effectiveness of the risk management and internal control system by process risk assessments and internal audits, and regularly discuss the findings with the responsible Executive Committee member.

Independent audits for all operational units are conducted by the Corporate Operational Audit (COA) department. The Director of COA reports to the CFO and has access to the Chairman of the Managing Board, the external auditor and the Audit Committee of the Supervisory Board. Furthermore, the Director of COA acts as the compliance officer with regard to inside information and is the secretary of the Disclosure Committee, as well as being chairman of the DSM Alert Committee, which is responsible for the DSM whistleblower policy, systems and processes. Chaired by the CFO, the Disclosure Committee ensures the timely and accurate disclosure of share-price-sensitive information related to the company and is responsible for the implementation of the DSM rules on the holding and execution of transactions in DSM financial instruments, among other things. A third committee at corporate level is the Fraud Committee, which was installed to ensure structural follow-up of fraud cases with the aim of reducing fraud exposure. Relevant corporate functions participate in the Fraud Committee under the chairmanship of the CFO.

Sustainability Governance Framework

Managing Board

Sustainability falls under the responsibility of the Managing Board. While CEO/Chairman of the Managing Board Feike Sijbesma is the primary point of contact, other members also chair sustainability topics and initiatives. In 2017:

  • Feike Sijbesma oversaw sustainability as a key responsibility and company value as well as a business growth driver. He also oversaw DSM's engagement with organizations including the United Nations and the World Bank, the strategic partnership with the World Economic Forum, nutrition related initiatives including the WFP partnership, and chaired the Inclusion & Diversity Council;
  • Geraldine Matchett integrated sustainability into financial decision making and represented DSM in the Accounting for Sustainability (A4S) CFO Leadership Network. She also oversaw our efforts and commitment towards the Taskforce for Climate-related Financial Disclosures recommendations; and
  • Dimitri de Vreeze was responsible for Safety, Health and Environment (SHE) and also oversaw DSM's Supplier Sustainability Program and the sourcing of electricity from renewable sources in his responsibility for the Sourcing function.

Supervisory Board

DSM's Supervisory Board has appointed its own Sustainability Committee to oversee progress against targets and report on the embedding of sustainability across the organization. For more details see 'Supervisory Board report' on Committees.

External Sustainability Advisory Board

Comprising a diverse international group of thought leaders, DSM's Sustainability Advisory Board acts as a sparring partner for the Managing Board and senior executives, to help sharpen their focus on strategic issues, deepen their understanding of external stakeholder needs, conduct advocacy and handle dilemmas. This board met twice in 2017 together with the Managing Board and a number of senior executives. Subjects discussed included DSM's corporate sustainability strategy, innovation project updates, climate strategy, circular and bio-based solutions, and a feedback session on the Bright Minds Challenge and possible next steps. They also had the opportunity to visit the new Rosalind Franklin Biotechnology Center in Delft (Netherlands). At the same time, Jessica Fanzo who joined in late 2016 and Robin Chase who joined in 2017 were welcomed to the Sustainability Advisory Board by Feike Sijbesma.

Sustainability Advisory Board

Member
Background
  
Robin Chase (f)
Co-founder and former CEO of Zipcar, co-founder of Veniam, board member of the World Resources Institute, and Tucows, and serves as an informal advisor to many cities, national governments, and transport agencies on the transition to shared automated vehicles. Nationality: American.
Jessica Fanzo (f)
Bloomberg Distinguished Associate Professor of Ethics and Global Food & Agriculture at the Johns Hopkins Berman Institute of Bioethics, the School of Advanced International Studies (SAIS), and the Bloomberg School of Public Health, Department of International Health, Director of the Global Food Ethics and Policy Program and co-chair of the Global Nutrition Report. She has previously held positions in nutrition advisory, advocacy and research organizations in the US, Rome (Italy) and Kenya. Nationality: American.
Paul Gilding (m)
Social entrepreneur, author and corporate strategy advisor. Fellow at the University of Cambridge Institute for Sustainability Leadership (UK). In 2011, he published his book 'The Great Disruption'. In the 1990s, he was executive director of Greenpeace International. Nationality: Australian.
David King (m)
Partner at SYSTEMIQ since 2017. Special representative for climate change of the UK government from 2013 to 2017. From 2008 to 2012, he served as the founding director of the Smith School of Enterprise and the Environment at the University of Oxford (UK). Chief Scientific Advisor to the UK government 2000-2007. Nationality: British.
Ndidi Nwuneli (f)
Social entrepreneur and Founder of LEAP Africa and co-founder of AACE Food Processing & Distribution Ltd. (AACE Foods), an indigenous agro-processing company in Lagos (Nigeria). She is also a partner at Sahel Capital, an advisory and private equity firm focused on the agribusiness and manufacturing sectors in West Africa. Nationality: Nigerian.
Ye Qi (m)
Cheung Kong professor of Environmental Policy and director of Brooking-Tsinghua Center for Public Policy at Tsinghua University in Beijing (China). Before he joined Tsinghua, he taught at Beijing Normal University, and the University of California at Berkeley (California, USA). Nationality: American.

Global network

At a corporate level, sustainability is steered by the Sustainability Leadership Team, a group of senior executives representing the business groups and contributing corporate functions, which is chaired by the Vice President Sustainability. He leads the Corporate Sustainability department and reports directly to CEO Feike Sijbesma. The aim of the Corporate Sustainability staff is to be a business-oriented center of excellence and partner on sustainability, internally and externally.

The Sustainability Leadership Team meets quarterly to monitor the progress of sustainability across the company, with particular emphasis on steering the company's business and innovation portfolio on key drivers. Regional operational sustainability networks are in place in China, India, Latin America and North America.

The DSM Operations & Responsible Care department is responsible for all corporate issues related to SHE. The Senior Vice President DSM Operations & Responsible Care reports directly to the Managing Board. SHE managers provide support at business group level. The DSM SHE Council, which includes all business group SHE managers, is instrumental in sharing experiences and developing best practices and communications on SHE issues.