Our Economy

Our Approach

As a global leader in the packaging industry, Amcor has the product development capability and technical know-how to drive sustainability throughout the supply chain and the packaging life cycle. We focus on:

• Offering responsible packaging and supporting our customers’ sustainability objectives;
• promoting the role and benefits of responsible packaging; and
• ensuring responsible and ethical sourcing/procurement.

Governance and business continuity

Corporate governance is integral to the way we do business. It shapes our relationships with all our stakeholders, including shareholders, co-workers, customers, suppliers and the communities in which we operate, It provides the framework and control systems that help us to adhere to the highest ethical standards. Our approach to governance is to foster an organisation that supports individual and professional integrity and responsible behaviour in all facets of our business.

Board structure and processes

We aspire to the highest standards of behaviour from all Amcor’s co-workers. This can only be achieved through responsible leadership, accountability and a governance structure that is well communicated throughout the organisation.

Amcor’s Board of Directors is responsible for the oversight of the corporate governance of the Company. The Board’s focus is to enhance the interests of shareholders and other key stakeholders by providing oversight of the economic, environmental and social performance of the Group.

As of 30 June 2012, the Board consisted of one Executive Director (Ken MacKenzie, Managing Director and Chief Executive Officer) and seven independent, Non-Executive Directors. Our Chairman, Mr Chris Roberts, is an independent, non-executive member of the Board. The Board is 12.5% female, with one female Non-Executive Director. We do not collect data on the minority group membership or age of our Directors.

Board members are selected due to their extensive knowledge of the Company’s industries or extensive experience in financial reporting and risk management at large companies. Well-established Executive, Audit and Compliance, Human Resources and Nomination Board Committees also ensure that Board responsibilities are upheld and executed to the highest level.

To ensure full disclosure and transparency, all Directors are required to report any potential conflicts of interest with those of the Company. An annual independence declaration from each independent Director helps facilitate this process.

As an Australian publicly-listed company, Amcor adheres to the ASX Listing Rules and the Corporations Act 2001 and operates under the guidance of the ASX Corporate Governance Principles and Recommendations (2nd Edition, with 2010 amendments).

Ethical standards and Code of Conduct

All Amcor’s Directors, managers and co-workers are expected to fulfil their functions with the utmost integrity, and with a focus on enhancing the reputation and performance of the Company. Amcor aims to abide by the national laws in each country in which it operates and conduct its business in accordance with internationally accepted practices and procedures.

Our Code of Conduct and Ethics Policy sets out the core principles that all workers producing or providing products or services for Amcor, whether or not they are co-workers of Amcor, are expected to observe. The Policy stipulates Amcor’s regard for the OECD Guidelines for Multinational Enterprises. The Code of Conduct and Ethics Policy was updated in January 2011 , in response to changes in legislation on bribery and facilitation payments in the United Kingdom and renewed global focus on these issues.

The Code is promoted throughout the organisation and ongoing training is provided at all levels of the Company. It also forms a part of the induction program for new co-workers, where they are asked to sign a declaration confirming their commitment to the Code. Third parties, such as suppliers and contractors, are also expected to follow the principles of the Code when working with Amcor.

The Board reviews the Code of Conduct and Ethics Policy regularly and processes are in place to communicate these policies throughout the business. Our Code of Conduct and Ethics Policy can be viewed online at www.amcor.com/policies

Reward for performance

The remuneration of Amcor’s senior managers is aligned to our core values of: Safety, Integrity, Teamwork, Social Responsibility and Innovation. We believe that linking management remuneration to Company values reinforces the importance of the Code of Conduct and Ethics Policy and promotes the development of a sound ethical culture.

As described in the Renumeration Report, contained within Amcor’s Annual Report, Senior executives receive variable or ‘at risk’ remuneration that is dependent upon their performance as measured through Amcor’s performance management process. This process includes an assessment of the excecutive’s emphasis on Amcor’s core values as well as their achievement of performance objectives.

Fraud and misconduct

Amcor has a strict policy prohibiting fraud and corruption, as operating honestly is essential to the interests of all its stakeholders, whether they be shareholders, co-workers or customers.

Our Fraud Policy outlines our approach to assessing fraud risks and reporting, investigating and responding to suspected incidents of fraud and corruption.

The Policy is included in the employee induction program and is available on our Intranet and promoted through other internal communication channels.

Fraud risks are monitored by Amcor Management and Group Internal Audit, which conducts all fraud investigations. Any detected fraud is reported to senior Amcor management and to the Board Audit and Compliance Committee by Amcor’s Group Internal Audit function.

During FY 2011/12, the Group Internal Audit team conducted audits of 34 Amcor sites and another 77 reviews of Amcor processes, projects, systems and controls. These reviews impacted Business Groups and Amcor sites and many considered fraud and corruption-related risks and controls.

The control posture of senior management at each site, with regard to Amcor values, including integrity, was also frequently assessed and reported by Group Internal Audit to the Board Audit and Compliance Committee during the year.

We are not aware of any instances of reported or suspected fraud that are material to the Amcor Group or individual Business Groups during the financial year.

Reporting potential misconduct

Amcor co-workers have the opportunity to report any potential misconduct, such as illegal activity, a Code of Conduct breach, fraudulent or corrupt practices, harassment or discrimination, misleading or deceptive conduct, unethical behaviour, and health, safety or environmental hazards, through their nominated supervisor or via the Amcor Whistleblower Service.

The Amcor Whistleblower Service enables the reporting of any potential misconduct to an independent third party for investigation. Importantly, co-workers who report suspected inappropriate conduct under the Whistleblower Service are given immunity. The Board Audit and Compliance Committee and the HR Committee are briefed on the issues raised and the corresponding action taken. Sixty three Whistleblower reports were recorded during FY 2011/12, most of which were related to employee grievances.

External parties such as suppliers, consumers, contractors and customers can also report potential misconduct or make a complaint via a Third Party Complaints email and free post facility available on Amcor’s website. These communications are delivered to the same forensic team that operates the Whistleblower Service.

Disclosure and communication processes

Shareholders are a key stakeholder, and our Disclosure Policy ensures that they are provided with appropriate and timely information about the Company. This includes identifying matters that may have a material effect on the price of the Company’s securities, notifying the ASX, posting relevant information on the Company’s website and issuing media releases.

Details of other forms of shareholder communication are set out in the Shareholder Communication Policy, which is available on the Company’s website.

The Annual General Meeting is the key platform for shareholders to communicate directly with the Amcor Board and raise issues or questions to the meeting. These generally pertain to the Company’s financial and environmental performance and strategy direction. All members of the Board attend this meeting and shareholders are encouraged to play an active role as the owners of the Company.

Shareholders and employees may also communicate with the Board in writing, care of the Company Secretary, Amcor Ltd, 109 Burwood Road, Hawthorn, Victoria, Australia 3122. They can also raise concerns about misconduct via our Whistleblower service (refer above).

Business Continuity

Business Continuity Amcor's business groups Presidents are responsible for the development, maintenance and regular review of Business Continuity Plans for strategically important sites and services, as identified in our enterprise-wide Business Impact Analysis process. Our Group Internal Audit function audits the coverage and application of the Business Continuity policy as part of their annual audit program.

At the day-to-day operational level, all sites use a Deliveries ‘In Full On Time In’ Specification (DIFOTIS) as a key performance indicator and this is reported in monthly management reports produced by Presidents of each Amcor Business.

A description of our governance processes can be found   in our 2012 Annual Report.

How we are doing

During the 2011/12 year we strengthened our Business Continuity system, developing a consistent global approach as well as a global Business Continuity policy. The policy aims to minimise the impact and duration of disruption to strategically important sites and critical business functions and aligns our management practice with the IS022301 standard - Societal security, business continuity management systems.

Public policy development and lobbying

We participate in public policy development and lobbying on issues material to our business. This is conducted largely indirectly through our participation in industry organisations around the world. These organisations are listed in the Our Marketplace section of this report.

In Australia, we met three times during FY2011/12 with Martin Ferguson, Federal Minister for Resources, Energy and Tourism to raise our concern about the dramatic rises in electricity network charges that have impacted our business recently. We consider these increases to be unreasonable and not reflective of actual cost increases. These discussions will be ongoing.

Also in Australia, we made a submission to the Australian Government’s Productivity Commission in response to their Packaging Impacts Consultation Regulation Impact Statement. Industry organisations, of which we are members, including the Australian Beverage Council and the Australian Food and Grocery Council also made submissions. Our submission included support for option 2b, an enhanced industry product stewardship scheme, as presented in the impact statement. We consider this option is most likely to deliver the required results at less cost than the other options.

We successfully lobbied the Victorian State Government in Australia to remove the Victorian Energy Efficiency Target (VEET) scheme charges for large energy users like Amcor. The scheme is designed to make energy efficiency improvements more affordable, contribute to the reduction of greenhouse gases, and encourage investment, employment and innovation in industries that supply energy efficiency goods and services. While Amcor agrees with the intent of the scheme its design unfairly penalises large energy users like Amcor who have already implemented energy efficiency measures and are unable to take advantage of the benefits of the scheme, yet must pay a disproportionate amount of the scheme charges, which are based on consumption.

As discussed in last year’s sustainability report, we made submissions to the Australian Federal Department of Health and Ageing and the House of Representatives Standing Committee on Health and Ageing inquiry on the proposed Plain Tobacco Packaging Bill. Our submissions are available online on the Department of Health and Ageing and the Australian Government’s House of Representatives websites.  This legislation will be fully implemented by 1 December 2012.

Compliance: fines, sanctions, settlements and assistance

Amcor received no material fines or non-monetary sanctions for non-compliance with laws or regulations during FY2011/12. Some minor fines are described in the ‘Environment’ section. The Company benefits from tax concessions and grants in certain countries but these do not have a material impact on its tax payments.

Sustainable business growth

Our approach

The financial profits we derive are only part of the overall economic contribution we make to society. Our contribution includes the value that flows from the broader contributions of our operations, such as payments to our co-workers and suppliers, the value we offer our customers and disbursements to governments, including taxes and royalties.

How we are doing

Financial performance

We have continued to deliver excellent financial performance, with profit after tax and before significant items for the year ending 30 June 2012 being $634.9 million, up 11.3% over last year. The result for FY2011/12 represented a record underlying profit, record returns and a record dividend for the company.
Our results for FY2011/12 can be found in the 2012 Annual Report, available online at www.amcor.com/annualreport2012 or in printed form by request.

Direct economic impacts

Managing climate change risks and opportunities

Our approach

Climate change has the potential to have a substantial impact on economic systems and the industries they support. We recognise that climate change is a challenge for the packaging industry which will impact our suppliers, our customers and our own operations in many ways.
Amcor has been working for a number of years to reduce the greenhouse gas emissions associated with our supply chains, raw material inputs, manufacturing operations and products around the world. We identify and manage risks and opportunities arising from climate change and a low-carbon economy through our Enterprise Risk Management process.

Amcor holds different positions in a number of non-governmental and industry associations and groups that promote a science- and life-cycle based approach for addressing climate change and packaging sustainability. Our active and often leading participation in these organisations is raising awareness around the role of packaging and the opportunities for improvement across the value chain. Climate change is an integral and essential element of all these sustainability initiatives.

Amcor has assessed the likely climate change-related physical, market and regulatory risks and has introduced programs to mitigate or adapt to these changes, including: reporting on our global greenhouse gas (GHG) emissions, waste and water use to the executive team and Amcor’s stakeholders; development of global targets and action plans to reduce Amcor’s emissions, waste and water; a program to minimise the GHG emissions associated with our raw materials; inclusion of climate change-related risks and opportunities in Amcor’s enterprise risk management system; active engagement in policy debate on climate change; and incorporation of carbon due diligence into the environmental due diligence processes when major acquisitions are under consideration.

Amcor provides incentives for the management of climate change issues. Business group environmental target performance and the development and delivery of action plans to achieve targets are built in to Key Performance Indicators (KPIs) for Business Group Sustainability Leaders and other co-workers responsible for environmental performance. Satisfactory achievement of KPIs as reported through the Performance Management process triggers both the pay review and the Staff Incentive Plan (SIP) or Management Incentive Plan (MIP) processes, depending on the level of the individual person. Any co-worker or management member who has KPIs relating to environmental performance and fulfils those for the performance period is entitled to benefit from these incentives. Amcor Senior Leaders need to demonstrate that they “Actively promote environmental responsibility and sustainable business outcomes” to meet the gateway criteria for the MIP.

Achievements by individuals or teams in a variety of areas, including energy reduction projects and ideas, is recognised in internal newsletters and through various internal award programs.

How we are doing

Enterprise Risk Management

We have identified the following specific challenges and opportunities arising from climate change and are managing them within our Enterprise Risk Management system.

Risks due to climate change

Opportunities due to climate change

Global forums

Amcor is active in several workstreams of the Consumer Goods Forum – Global Packaging Project. We are also represented on the Steering Committee for the Greenhouse Gas Protocol of the World Resources Institute/World Business Council for Sustainable Development.
We indirectly participate in climate change public policy development through our membership in various industry associations around the world. These are listed in the Marketplace section of this report.

Carbon Taxes and Emission Trading Schemes

We are impacted by carbon tax and emissions trading schemes around the world, including the Australian Government’s Clean Energy Legislative package, the European Union’s Emissions Trading Scheme, the ‘Climate Change Agreements’ program in the UK, the ‘Covenants’ program in Belgium and the official environmental programs in Switzerland (addressing the reduction of both CO2 -e emissions and energy consumption). Amcor also pays carbon taxes in any countries where they are applicable.

Australia

In Australia, Amcor is subject to the reporting requirements of both the Energy Efficiency Opportunities (EEO) Act 2006 and the National Greenhouse and Energy Reporting (NGER) Act 2007. The EEO Act requires the Australian business to assess its energy usage, including energy-saving opportunities, and to report publicly on the results and actions taken. Amcor complied with its reporting obligations under the EEO Act during the reporting period.
The NGER Act requires our Australian business to report annual greenhouse gas emissions and energy use. Systems and processes for the collection and calculation of data required have been updated to comply with the Clean Energy Regulator’s audit requirements. Amcor submitted its 2010/11 report to the Greenhouse and Energy Data Officer in October 2011, who reported that there were no material errors or omissions. Amcor will submit its 2012 report by 31 October 2012.

The Australian Government’s Clean Energy Legislative Package came into effect on July 1st, 2012. It impacts our Australian operations, which contribute approximately 20% of our sales revenue. Amcor Australasia generates approximately one million tonnes of scope 1 and 2 emissions as classified under the carbon pricing scheme. The majority of these emissions arise from two paper mills, a cartonboard mill, and our glass container operations. While Amcor will receive some assistance from the Australian government on scope 1 and 2 emissions, the impact of scope 3 emissions is dependent on how we manage our exposure against rising input costs in the supply chain. We have modelled the scope 3 pass through from our supply chain,  including incorporating information on which of our suppliers will receive Government assistance and at what level. The model has been applied to an Amcor product level, providing information about the impact of carbon pricing on different packaging formats.

Our Australian business qualifies for Emissions Intensive Trade Exposed (EITE) assistance from the Australian Government under the Jobs and Competitiveness Program. Some of our business units have been also been granted EITE assistance for the increase in the Mandatory Renewable Energy Target (MRET), which has increased from 2% in 2010 to 20% by 2020 . Our Paper and Cartonboard businesses will receive 94.5% free permits under the EITE Assistance Scheme. Assistance for our Glass business will be 66%. During FY2011/12 we received $2.3  million in government assistance for renewable energy charges. 

Changes to assistance under the Jobs and Competitiveness Program mean that EITE businesses will receive carbon permits based on the industry average emissions, multiplied by the assistance factor. In this situation, Amcor is likely to be a net seller of permits.

We have already realised direct economic benefits as a result of our emission-reduction efforts. During FY2011/12, we sold energy saving certificates in Australia for a value of approximately $300,000 . This arose from energy efficiency projects implemented at our Botany paper mill. 
We also received two grants under the Australian Clean Energy Futures package, totalling $70,000.

Europe

Amcor currently participates in the European Union’s Emissions Trading Scheme. During the calendar year 2011, we were allocated 17531 allowances and had verified emissions of 7259 metric tonnes of CO2e from the facilities we own and operate in the EU.
We also participate in the ‘Climate Change Agreements’ program in the UK, the ‘Covenants’ program in Belgium and the official environmental programs in Switzerland. Amcor also pays carbon taxes in any countries where they are applicable. We co-chair the joint Sustainability Committee of Flexible Packaging Europe and the European Aluminium Foil Association.

North America

We belong to various industry groups that work with policymakers on recycling issues and the environmental and social effects of packaging. For example, we hold a position on the Executive Committee of the National Association for PET Container Resources (NAPCOR). We are also represented on the Executive Committee of the Sustainable Packaging Coalition and are active in several projects.

Our Dunkirk, New York site received a $67389 rebate from the US National Grid incentive when they invested $136,880 to upgrade the lighting on their site.

Selected information on this page pertaining to realised direct economic benefits as a result of our emission-reduction efforts, Amcor’s participation in the European Union’s Emissions Trading Scheme, and the Dunkirk, New York site’s rebate from the US National Grid incentive has been assured by Net Balance.