2017 Sustainability Report - Air Products & Chemicals Products | 2017 Sustainability Report Air...

2017 Sustainability Report

Forward-looking statements

This report contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s reasonable expectations and assumptions as of the date of this report. Actual performance may differ materially from projections and estimates expressed in the forward looking statements because of many factors not anticipated by management including the risk factors described in the Company’s Form 10-K for its fiscal year ended September 30, 2016. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this report to reflect any change in the Company’s assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

Message from Seifi Ghasemi . . . . . . . . . . . . . . . . . . 2

Our Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Operations at a Glance . . . . . . . . . . . . . . . . . . . . . . .5

Grow responsibly through sustainability-driven opportunities that benefit our customers . . . . . . . . . . 6

Conserve resources and reduce environmental footprints through cost-effective improvements . . . . . . 8

Care for our employees, customers and communities— protecting our license to operate and grow . . . . . . . . . 12

Performance Data . . . . . . . . . . . . . . . . . . . . . . . . .20

Appendix: Detailed Reporting . . . . . . . . . . . . . . . . . .22

1

Grow responsibly through sustainability-driven opportunities that benefit our customers and our world . We help customers improve their sustainability performance through higher productivity, better quality products, reduced energy use, and lower emissions .

Conserve resources and reduce environmental footprints through cost-effective improvements .We set aggressive environmental performance goals for greenhouse gases, energy, water, and our fleet, and we measure progress to continually improve our own operations .

Care for our employees, customers and communities—protecting our license to operate and grow .We are building a culture of safety, simplicity, speed, and self-confidence .

Our goal is zero accidents and zero incidents . We are committed to developing our people, supporting our communities, engaging suppliers and upholding our integrity .

G r o w • C o n s e r v e • C a r e

S U STA I N A B I L I T Y

2Air Products | 2017 Sustainability Report

Air Products has returned to its roots as a company with a focus on our core business: industrial gases. In this transition over the past year, I am very pleased to share with you that our core values, including our commitment to Sustainability and safety, remained unchanged as we set new Sustainability goals for 2020 and we began our pursuit to achieve them.

Safety is Paramount to Sustainability

The number one core value at Air Products is safety. It is our focus 24/7, and is the responsibility of everyone. I firmly believe the only acceptable goal is zero accidents. We have a moral responsibility to our employees and their families, and the communities around the world where we operate, to ensure that everyone goes home every day with no injuries or incidents. I am proud to say that in 2016 our global safety performance showed great improvement, including an 11 percent decrease in our employee injury rate, and that progress is the result of everyone taking a personal responsibility for safety.

Sustainability is Our Business

For Air Products, Sustainability is what we do as a business. We strive to operate our manufacturing operations in a sustainable manner, and the products we produce for our customers assist them in operating in a more efficient, sustainable and successful way. For example, in this report you will see several Air Products innovative technologies and products highlighted, which underpin our sustainable offerings for customers, including:

• Smart oxyfuel burners which increase production, lower fuel costs, reduce emissions, and improve operations for energy-intensive applications like metals and glass manufacturing;

• Water treatment technology, which improves fish health in aquaculture and reduces unwanted byproducts in drinking water and sludge and volatile organic compounds (VOC) emissions from wastewater treatment plants;

• Membrane gas separators which generate gas onsite for industrial applications, and biogas membrane separators which can produce methane from farm waste, manure, or municipal waste that can be used to generate heat and power;

• Cryogenic chilling and freezing solutions to help food producers increase product quality and reduce waste;

• Hydrogen used in refining to increase yields and reduce emissions for cleaner transportation fuels, as well as hydrogen fueling station technology for fuel cells for vehicles, which only emit a water mist from the tailpipe;

• World-leading liquefied natural gas (LNG) technology and equipment to meet the global growing demand for energy by making it possible to economically transport stranded energy sources around the globe; and

• Helium for magnetic resonance imaging and high-purity medical oxygen, nitrogen, and other medical gases which help to sustain life.

These technologies and product uses are impressive and impactful, but in order to remain competitive and sustainable as a company, we recognize the need to continue improving the way we do business to remain among the leaders in our industry sector.

Chairman, President and CEO Message

3

A Sustainability Strategy of Grow, Conserve and Care

These innovative technologies and the effective use of our products fit firmly with Air Products’ Sustainability strategy of Grow, Conserve and Care. Under this strategy Air Products aims to:

• Grow – lead the Industrial Gas industry in profitability and contribute greater than 50 percent of revenues from offerings that improve energy efficiency, lower emissions, and meet societal needs.

• Conserve – save energy, reduce greenhouse gas emissions, conserve water, and effectively manage hazardous waste.

• Care – lead the Industrial Gas industry in safety, build a diverse and inclusive workforce, ensure ethical behaviors and compliance, and measure the positive impacts of our employee and community engagement efforts.

Serving A Higher Purpose

We believe our company should not just be successful and be satisfied with achieving our goals of being the safest, most profitable and best performing industrial gas company in the world, providing excellent service to our customers. We also believe that we serve a higher purpose, and through the innovative technologies we develop, the way we produce our products, and the efficiencies we provide our customers, that Air Products is continually pursuing and successfully achieving that higher purpose, which is to provide a safe and sustainable environment for all people around the globe.

It is also the reason why I feel the need at this time to assure all of our stakeholders worldwide that Air Products shares society’s concerns about the impacts of climate change on our environment, and why I again stress my own and Air Products’ commitment to the sustainability goals we have set.

Dedicated Workforce is the Key

We believe the commitment and motivation of our employees is the key to Air Products maintaining and building on its dedication to Sustainability, meeting our 2020 goals, operating safely every day, and attaining our overall goal as a global company. It is because of our employees, every day working with safety, speed, simplicity and self-confidence, that we will be successful.

I invite you to learn more about Air Products’ approach to Sustainability throughout this report.

We very much appreciate your continued interest in our company.

Seifi Ghasemi

Chairman, President and Chief Executive Officer of Air Products


Business SegmentsAir Products operated across seven business segments in fiscal year 2016 (FY16):

Industrial Gases ‒ Americas

Industrial Gases ‒ EMEA (Europe, Middle East and Africa)

Industrial Gases ‒ Asia

The regional Industrial Gases (Americas, EMEA, Asia) segments include the results of our regional industrial gas businesses, which produce and sell atmospheric gases such as oxygen, nitrogen, and argon (primarily recovered by the cryogenic distillation of air) and process gases such as hydrogen, carbon monoxide, helium, syngas, and specialty gases. We supply gases to customers in many industries, including those in metals, glass, chemical processing, energy production and refining, food processing, metallurgical industries, medical, and general manufacturing. We distribute gases to our customers through a variety of supply modes including liquid or gaseous bulk supply delivered by tanker or tube trailer and, for smaller customers outside of the U.S., packaged gases delivered in cylinders and dewars or small on-sites (cryogenic or non-cryogenic generators). For large volume customers, we construct an on-site plant adjacent to or near the customer’s facility or deliver product from one of our pipelines. We are the world’s largest provider of hydrogen, which is used by refiners to facilitate the conversion of heavy crude feedstock and lower the sulfur content of gasoline and diesel fuels. The regional Industrial Gases segments also include our share of the results of several joint ventures accounted for by the equity method. The largest of these joint ventures operate in Mexico, Italy, South Africa, India, Saudi Arabia, and Thailand.

Industrial Gases ‒ Global

The Industrial Gases – Global segment includes cryogenic and gas processing equipment sales for air separation. The equipment is sold worldwide to customers in a variety of industries, including chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing. The Industrial Gases – Global segment also includes centralized global costs associated with management of all the Industrial Gases segments. These costs include Industrial Gases global administrative, product development, and research and development.

Corporate and other

Corporate administrative functions are based in the Company’s administrative offices. The Gardner Cryogenic business operates at facilities in Pennsylvania and Kansas in the United States and in France. The LNG business has owned manufacturing facilities in the United States with management, engineering, and sales support based in the Trexlertown offices referred to above and a nearby leased office.

Materials Technologies

This business segment was comprised of two divisions, Electronic Materials and Performance Materials, prior to the 1 October 2016 spin-off of Electronic Materials and the 3 January 2017 sale of Performance Materials. The Electronic Materials portion of this segment was separated into a separate legal entity, Versum Materials, Inc. All of the shares of Versum Materials, Inc. were distributed to Air Products shareholders on October 1, 2016. The headquarters for this new entity is based in Tempe, Arizona, with supporting administration and research and development activities at four locations in Taiwan and two locations in South Korea, and in Singapore, China, the Netherlands, and Pennsylvania in the United States. The Performance Materials portion of this segment maintained operations at 12 production sites globally.

Energy-from-Waste (EfW)

On 29 March 2016, the Board of Directors approved the Company’s exit of its Energy-from-Waste business. As a result, the Energy-from-Waste segment is classified as a discontinued operation.

5

On-site/Pipeline

Liquid Bulk

Packaged Gas

Equipment & Services

sales of

$7 .5 billion

~$30 billionmarket capitalization

16,000employees

725production facilities

30+industries served

operations in

50 countries

1,800miles of industrial

gas pipeline

75+ yearsin business

170,000 customers

Latin America

Europe

AsiaU.S./Canada

Global Presence**

2016 Sales: $7.5 billion

Consolidated sales by business segmentConsolidated sales by destination

n Industrial Gases–Americasn Industrial Gases–EMEAn Industrial Gases–Asian Industrial Gases–Globaln Corporate and other

Fiscal Year 2016 Operations at a Glance*

Supply Modes

46%

28 %

16%

10%

44%

7%

23%

23%

3%

n Americasn Asian Chinan Europen Latin America

40% 29% 25%

6%

** Revenue basis with headquarters in Trexlertown, Pennsylvania; Hersham, England; and Santiago, Chile

42%

10%14%

28%

6%

*From continuing operations .

6

responsibly through sustainability-driven opportunities that benefit our customers and the world

Grow

53% of revenues from

sustainable offerings

28 patent families

$72 million in R&D spending

$1 .5 billion in operating income

15% return on shareholder equity

9% increase in EBITDA

$9 million in cumulative energy

costs avoided

11 million metric tonnes of CO2e avoided

by customers*

$935 millionin capital expenditure

Delivering Business Value: FY ’16



See page 68 for more details.

Air Products’ oxy-fuel combustion technologies are used in energy-intensive applications like metals and glass manufacturing to increase production, lower fuel costs, reduce emissions and optimize efficiency .

Halia®, our advanced oxidation technology improves fish health in aquaculture and improves water-treatment, reduces unwanted byproducts in drinking water, sludge, and volatile organic compounds (VOC) emissions from wastewater treatment plants .

SmartFuel® hydrogen fueling station technology provides complete fueling infrastructure from supply to dispensing for fuel cell vehicles . Hydrogen fuel can be used in many different types of transportation, either with a fuel cell or in an internal combustion engine, to eliminate or significantly reduce emissions .

Hydrogen is used in refining heavier, sour crudes, increasing yields and reducing emissions for cleaner transportation fuels . Many industries such as electronics, foods, glass, chemicals, and more benefit from its unique properties to improve quality, optimize performance and reduce costs .

Biogas membrane separators are used to produce methane from farm waste, manure, or municipal waste . The proprietary hollow fiber membranes purify the biomethane by removing unwanted elements from the biogas stream, so it can be used to generate heat and power .

Gases for Modified Atmosphere Packaging (MAP) and Freshline® solutions provide high-purity gases and equipment to extend the shelf-life of food, improve the taste, reduce waste, and help to keep production cost down .

LNG Technology and Equipment enables economic transport of stranded energy sources around the globe . More LNG is produced using Air Products' mixed component refrigerant and liquefaction processes than any other processes in the world .

Helium enables magnetic resonance imaging (MRI), and our high-purity medical oxygen, nitrogen, and other medical gases help to sustain life . Helium is also valued as a gas for lifting, breathing, leak detection, and shielding, as its unique properties optimize performance and productivity, reduce labor cost, and improve safety .

7

Our gases, equipment and applications expertise enable our customers in dozens of industries to improve sustainability performance by improving productivity, producing better quality products, reducing energy use and lowering emissions. For additional examples, see our sustainable offerings website.

Our contribution to the industrial internet of things

http://www.airproducts.com/industries/GlassMinerals/Primary-Glass/product-list/~/link.aspx?_id=34797D1A2FED46A68397E06525BB58CF&_z=z

http://www.airproducts.com/industries/WaterWastewater.aspx

http://www.airproducts.com/microsite/material-handling/index.asp?utm_source=redirect&utm_medium=web&utm_campaign=magic

http://www.airproducts.com/products/Gases/Hydrogen.aspx

http://www.airproducts.com/Microsites/membranes.aspx

http://www.airproducts.com/industries/FoodBeverage.aspx

http://www.airproducts.com/industries/Energy/LNG

http://www.airproducts.com/products/Gases/Helium.aspx

http://www.airproducts.com/Company/Sustainability/sustainable-offerings.aspx

8

resources and reduce environmental footprints through cost-effective improvements

Conserve



90 thousand metric tonnes of

CO2e avoided

950 million gallons of water conserved

$9 million in energy and water

costs avoided

0 .65% improvement in ASU

energy efficiency

38% reduction in

hazardous waste

0 .55% reduction in GHG

emissions intensity

300 thousand MWh of energy conserved

4% improvement in water efficiency

9% improvement in

distribution efficiency

Reducing Environmental Impact

99

Improving our operations In 2016, we set numerous sustainability goals for 2020. We made good progress in 2016 against these goals.

Fuel MWh GJElectricity 19,690,052 70,884,187

NG/refinery off-gas 79,799,953 287,279,831

Distillate fuel oil #2 615,024 2,214,086

Motor gasoline 16,505 59,418

Jet kerosene 2,484 8,942

Steam 11,406,304 41,062,694

Energy Savings Energy is the largest variable cost of our production processes, and we carefully track and manage energy purchases. The majority of our energy consumption is from less than 80 very large natural gas and/or electricity consuming facilities. The energy we use is converted into products and services that enable customers to reduce their energy use and improve their environmental performance.

Total energy consumption (primarily natural gas and electric power) was equivalent to 110 million MWh in 2016 .

Our ASUs improved energy efficiency in 2016, attaining 0 .65% improvement .

Our HyCO facilities achieved a 0 .42% improvement in energy efficiency in 2016 .

Environmental Target Area Air Products’ 2020 Goal 2016 Status

Energy Savings

Save energy by reducing use intensity by 2 .5% for ASUs, and 1 .5% for HyCOs

ASUs: 0 .65% improvementHyCO: 0 .42% improvement

Distribution Efficiency

Improve distribution efficiency and reduce CO2 emissions by 10%

9% improvement

Greenhouse Gases Reductions

Reduce GHG emissions intensity by 2% 0 .55% improvement

Water Conservation

Conserve water and lower use intensity by 5%

4% improvement

Waste Management

Continue to effectively manage 38% reduction in hazardous waste


Water Withdrawals Billions of Gallons 1,000m3

Purchased water 14 .0 52,996

Surface water 0 .3 1,147

Ground water 1 .1 4,349

Total 15 .4 58,492

Water Consumption by Region (billions of gallons) CY 2016 1000m3

Americas 10 .2 38,611

Europe 1 .9 7,192

Asia 3 .1 11,735

Total 15 .2 57,538

15 .4Water Discharges Billions of Gallons 1,000m3

Discharged to a treatment facility 2 .4 9,085

Discharged directly to surface water 0 .9 3,231

Discharged directly to ground water 0 .003 11

Water Usage and Conservation

Total global water consumption for 2016: 15.2 billion gallons;

decreased 6%

15 .2

n Americasn Europe and Middle Eastn Asia

11%

56 .4%

32 .6%

GHG ReductionsThe majority of our GHG emissions result from energy consumption. Through improvements in energy efficiency, as well as specific projects aimed at reducing GHG emissions, we have reduced GHG emissions by 0.55% on an intensity basis. This has avoided emissions of 90,000 metric tonnes of CO2e.

In 2016, total water consumption decreased because of water savings initiatives at existing facilities, including water treatment optimization to reduce blow down, and identifying/repairing leaks.

Total global water withdrawal for 2016: 15.4 billion gallons;

decreased 0.5%

Direct emissions (Scope 1) for CY2016 were 6% higher than the previous year due to the startup of a new

facility and production increases.

Indirect emissions (Scope 2) for CY2016 were 4% higher than the previous year due to the start-up of new

facilities and production increases.

Scope 3 emissions were 11.5 million MTCO2e for CY2016.

2016 Indirect Emissions 14.9 million MTCO2e2016 Direct Emissions: 15.3 million MTCO2e

0 .8%

91 .2%

8%

11

TRI Releases* (millions of pounds)

CY 2015 CY 2014Air 0 .15 0 .27

HAPs* 0 .06 0 .11

Water 0 .00 0 .00

Land 0 .02 0 .01

Total 0 .17 0 .28* Hazardous Air Pollutants as defined by the EPA; subset of total releases to air

Hazardous Waste Disposal (millions of pounds)

CY 2016 CY 2015 CY 2014Total 1 .5 2 .5 1 .7

Hazardous Waste Hazardous waste generation from our ongoing operations decreased in 2016 due to decreased cylinder disposal activities in Europe. In addition, the reclassification of a large waste stream is reflected in the CY16 total.

Toxic Release Inventory (TRI) Toxic releases in the U.S. decreased in 2016 due to lower air emissions. Hazardous air pollutants (HAPs) contin-ued to decrease due to improved leak detection and repair systems.

Plant NOx/SOx NOx emissions were lower in 2016 because of plant outages and permit changes. Estimated emissions of SOx were down for the same reason plus the phase out of heating oil at our corporate headquarters.

Distribution/FleetIn 2016, Air Products set a goal to improve fleet efficiency and reduce CO2 emissions by 10% by 2020. Through our efficiency programs, which include replacement of equipment, increasing the amount of product loaded in each trailer, and optimizing delivery routes, we have realized a 9% improvement in distribution efficiency. We will continue to monitor our progress in this area.

CY 2016 CY 2015 CY 2014NOx Emissions (MT) 1501 1571 1555

SOx Emissions (MT) 71 74 99

VOC releases in the U.S. and Europe decreased in 2015.

CY 2015 CY 2014Total (million pounds) 0 .13 0 .17

12

for our employees, customers and communities— protecting our license to operate and grow

Care

women represent

23% of global workforce

7 employee resource groups

for diversity and inclusion

32hours of training on

average per employee

<12%turnover rate

960grants to charitable

organizations

$6 .1 millioncash contributions to

communities

>12,000 hours of employee volunteerism



$0 fines for product noncompliance

zerohuman rights violations

FY ’16

13

Air Products believes the only acceptable goal is

zero accidents and incidents. We take the approach that all

accidents are preventable.

for our employees, customers and communities— protecting our license to operate and grow

0 .46 employee recordable rate*

11%improvement in employee

recordable injury rate

zeroemployee fatalities

zerocontractor fatalities

0 .32contractor lost-time

incident rate*

0 .18employee lost-time

incident rate*

13%decrease in employee

lost-time incidents

17%reduction in process

safety incidents

* per 200,000 hours worked

Safety and Health

28%decrease in contractor

lost-time incidents

Air Products’ goal is to be the safest and the most profitable industrial gas company in the world, providing excellent service to our customers. Underlying our safety goal is our Total Safety Philosophy. We integrate safety into everything we do, striving for industry leadership in safety performance.

During 2016, Air Products emphasized safety improvement programs across the organization through three pillars—visible leadership, operational discipline and mastering the basics. Our injury rate for our employees improved by 11%, and our employee lost-time incidents improved 13% over the prior year.

FY ’16


FY 2016Americas 40%

EMEA 30%

Asia 30%

Total Employees 16,000

Men WomenAmericas 79% 21%

EMEA 75% 25%

Asia 78% 22%

Global 77% 23%

members of collective bargaining units*

32%

employee turnover rate

<12%

Talent—FY ’16

Education and Training

Globally in fiscal year 2016, Air Products’ workforce was 77% male and 23% female.

Global Career Development (CDP) Program and European Graduate Program hires, which consist largely of engineering graduates, were 77% male and 23% female, helping the company build an increasingly diverse talent pipeline.

*Includes data for Americas, Europe and Asia operations.

• Human Capital Return (Benefit to Cost Ratio): $20.43 returned for every dollar invested

• % of training applied to the job: 77.9%

• Job performance change due to learning and development: 19.2%

• Time to job impact: 85.7% used the skills within one month of training

At the end of fiscal year 2016, Air Products (including majority-owned subsidiaries) had approximately 16,000 employees, of which 98 percent were full-time and of whom approximately 60 percent were located outside the United States.

Air Products has a globally consistent learning and development strategy to enable the talent we need and provide career development for our people. This is deployed through a global learning management system and our Human Resources organization.

We provide a significant amount of web-based course offerings with development tracks to ensure our employees are trained to comply with safety and job requirements, innovate new customer solutions, and grow professionally.

On average, Air Products’ employees completed at least 32 hours of training in 2016.

15

Governance—FY ’16

Our Corporate Compliance Committee and the Audit Committee of Air Products’ Board of Directors provided oversight for compliance and risk activities. The Corporate Risk Office managed Ethics & Compliance, Information Risk Management, and Asset Protection and Investigations programs, assisted by specialists in Law, Human Resources, and other teams. Air Products’ leadership holds professional integrity and business ethics as a priceless asset, a message that is frequently and firmly communicated.

Our Code of Conduct for officers and employees is housed on our public internet site for ease of access by all stakeholders. The document is supported by policies, standards and guidelines on our intranet, education and communication, and additional processes and tools.

The “Commit to Integrity” ethics and compliance program includes mandatory Code of Conduct training for all employees and additional training and conflict of interest certification for select employees. Employees are automatically enrolled in role-based learning modules required for their employment positions as new courses are added to the program. Methods for both

>99% employees completed

Code of Conduct certification

312reported allegations of

Code of Conduct violations

Zerohuman rights violations

98%employees completed anti-bribery training

Zero fines for product noncompliance

30,000+suppliers

employees and external parties to report Code of Conduct violations or express concerns include a global contact list of key subject matter experts, toll-free phone lines for multiple countries, and web reporting in the languages most commonly spoken by our employees. The phone and web reporting tools are managed by a third-party vendor, and anonymous reporting is available as allowed by local law.

A strong non-retaliation policy is upheld for good faith reporting.

Human Rights and EqualityOur global Human Rights Policy is aligned with the United Nations Global Compact’s 10 universally accepted principles in the areas of human rights, labor, environment and anti-corruption.

As a core component of our Code of Conduct and available to employees in 21 languages, the Human Rights Policy clearly states our commitment to fostering an environment where human rights are respected and people are treated with decency and dignity in our operations and practices. It articulates our position

relative to diversity, equal opportunity, harassment, child labor, forced labor, freedom of engagement, employee relations, compensation, employee security, health and safety.

In addition to our Human Rights Policy, our commitment to the fair and equitable treatment of people is reflected in our global Equal Employment Policy and Diversity and Inclusion Policies. These state that all activities related to recruiting, hiring, training, compensation, benefits, promotions, transfers, layoffs, company-sponsored programs and all treatment at work shall be free of unlawful or unjust discriminatory practices. Each of our employees has a responsibility to understand company policies and standards, which are communicated through training, routine communications, and our web sites.

Code of Conduct

http://www.airproducts.com/Company/governance/board-of-directors/director-code-of-conduct.aspx

http://www.airproducts.com/company/governance/commitment-ethical-business/human-rights.aspx

https://www.unglobalcompact.org/

https://www.unglobalcompact.org/


Sheridan Elementary School Adopted an urban school in crisis and installed a new playground, sponsored after school education and fitness programs, donated sneakers and other much needed school supplies.

Building 21 Supported the development and implementation of a new high school in a distressed urban school district, by acting as leading corporate partner.

Liquid Nitrogen (LIN) Performed 130 LIN demonstration programs for schools and community groups, to increase interest in education and STEM (Science, Technology, Engineering and Math).

Support for Urban Revitalization Provided community leadership by supporting the revitalization of

Community Giving and Philanthropy

Contributions of $6.1 million n Charitable contributionsn Community investments n Commercial initiatives

62%

19%

19%

Charitable contributions priority is given to:• Strategic community and economic development

• Promoting education and technical workforce through improving educational outcomes

• Ensuring healthy, stable and safe communities

We work closely with community partners including not-for-profit organizations, emergency responders, elected officials, education, business and community leaders in our operating communities around the world to identify opportunities to make a positive impact. In 2016, we provided 960 charitable grants to these organizations, totaling $6.1 million.

In 2016, Air Products employees were engaged with over 165 charitable organizations, including the United Way which has recognized the Company as one of only 126 Global Corporate Leaders for the United Way. Air Products’ 2016 United Way campaign was over $1 million, and we matched each employee donation on a one-to-one basis. Air Products’ United Way contributions stay in the communities where our employees live and work, and those dollars are designated to agencies in need.

Also in 2016, Air Products increased our relationship with United Way Worldwide as we continue to advance giving and involvement with charities around the world.

Significant community projects in 2016 included:

the urban core of our headquarters community, enhancing arts and culture, and volunteers for community events.

Workforce Developement Partnered with economic development leaders to create a stronger and more competitive work force, which can ensure skills and training in local schools meet the needs of the workforce.

Lehigh Valley Health Network Established the 'Center of Connected Care and Innovation', a health center to launch innovative ways to improve and deliver health care throughout the United States.

Air Products’ Community Internships Donated close to $100,000 to colleges and universities to create stipends for students who intern at a not-for profit organization in the community.

Lift-off for all future engineers! Air Products sponsored the Tim Peake Exhibition at the Novium Museum in Chichester, UK . Lynn Willacy (Community and STEM Ambassador UK & Ireland) pictured in the Air Products-sponsored elevator which was re-created as a Soyuz Rocket .

17

Suppliers

Air Products spends more than $6 billion in materials, equipment, power and services annually with over 30,000 suppliers and service providers worldwide. Suppliers are integral members of our team, and the Company wants to work with those who share in our commitment to ethical business practices and who can help Air Products deliver value to our customers.

Suppliers are required to abide by and conform to the global Code of Conduct in their business dealings with us and to support sustainability through the principles outlined in Air Products’ Expectations of Suppliers. To ensure that these standards are met, we:

• Prequalify suppliers using commercial and technical evaluations

• Evaluate supplier proposals considering energy efficiency

• Conduct reviews for critical suppliers

• Employ a rating system to encourage continuous improvement and recognize achievement

• Monitor ongoing performance and product quality via assessments

• Follow defined procedures for noncompliance and remediation

• Develop joint corrective action plans

• Organize joint continuous improvement events

Working here.Living here.Giving here.

Making a difference here!

Sheridan Elementary School

http://www.airproducts.com/Company/supplier-information.aspx


2016 Progress on our Sustainability GoalsIn 2016, Air Products identified new sustainability goals across all aspects of our Grow-Conserve-Care sustainability framework. This process was aligned with the identification of our sustainability priorities and engagement with key stakeholders. Within our first year, we are already making good progress against these goals, as shown below:

Grow Air Products’ 2020 Goal 2016 Status

Economic Performance Lead the industrial gas industry in profitability as measured by EBITDA margin, operating margin and ROCE

Led with adjusted EBITDA margin: 34 .9%Operating margin: 21 .6%ROCE: 12 .4%

Product Offerings withSustainability Benefits

Contribute more than 50% of revenues from offerings that improve energy efficiency, lower emissions and meet societal needs

53% of revenue

ConserveEnergy Savings Save energy by reducing use intensity by 2 .5% for ASUs,

and 1 .5% for HyCOs by 2020 from 2015 baseline year

ASUs: 0 .65% reductionHYCOs: 0 .42% reduction

Distribution Efficiency Improve distribution efficiency and reduce CO2 emissions intensity by 10% by 2020 from 2015 baseline year

9% improvement

GHG Reductions Reduce GHG emissions intensity by 2% by 2020 from 2015 baseline year

0 .55% reduction

Water Conservation Conserve water and lower use intensity by 5% by 2020 from 2015 baseline year

4% improvement

Waste Management Continue to effectively manage hazardous waste 38% reduction

CareSafety Lead the industrial gas industry in safety as measured by

recordable and lost-time incident ratesLed with employee recordable rate: 0 .46Led with employee LTI rate: 0 .18

Talent Management Build the most diverse and inclusive workforce in the industrial gas industry as measured by the representation of women and minorities in our workforce and leadership pipeline

Female share of workforce: 23%

Customer Sustainability Enable customers to avoid CO2 emissions through energy efficiency and innovative offerings


Ethics & Integrity Require 100% of employees to be trained in, and certified to, Air Products’ Employee Code of Conduct and ensure all allegations of misconduct are reviewed and closed

Code of Conduct certifications: >99%

Regulatory Compliance Continuously improve compliance systems and performance

Reduced fines for non-compliance

Community Relationsand Support

Enhance our ability to measure the positive impacts of our employee and community engagement

$6 .1 million in cash and product donations

Supplier Sustainability Ensure 100% of new supplier agreements include Human Rights and Conflict Minerals clauses

Conflict Minerals clauses added to global terms and conditions

19




2016(A)(B) 2015(A)(B) 2014 (A)(B)

GrowEconomic performance (millions of dollars, except per share)

Sales $7,504 $7,824 $8,384

Operating income $1,530 $1,233 $924

Operating margin 20 .4% 15 .8% 11%

Return on average Air Products shareholders’ equity(C) 15 .4% 12 .7% 9 .5%

Net income attributable to Air Products(G) $631 $1,278 $992

Adjusted EBITDA(D) $2,622 $2,399 $2,275

Adjusted EBITDA margin 34 .9% 30 .7% 27 .1%

Capital expenditures on a GAAP basis(E) $908 $1,201 $1,297

Capital expenditures on a non-GAAP basis(E) $935 $1,575 $1,498

Return on capital employed (ROCE) 12 .4% 10 .5%

Diluted earnings per common share attributable to Air Products:

Income from continuing operations $5 .04 $4 .29 $3 .24

Dividends declared per common share $3 .39 $3 .20 $3 .02

Book value $32 .57 $33 .66 $34 .49

Air Products shareholders’ equity(F) $7,080 $7,249 $7,366

Shares outstanding 218 217 215

Shareholders 6,000 6,400 6,600

R&D spending $72 $76 $79

Patent families granted 28 39 52

Conserve (C)

Energy consumption (MWh)

Total (MWh) 111,512,318 106,524,836 115,866,418

Other fuels (e .g ., natural gas, diesel) 80,415,962 77,346,884 90,406,416

Electricity 19,690,052 19,903,340 21,259,871

Steam 11,406,304 9,274,612 4,200,131

Energy intensity improvement

Air separation units 0 .65%

Hydrogen/carbon monoxide units 0 .42%

Greenhouse gas emissions

Scope 1 (MT CO2-e emitted) 15,326,296 14,511,249 14,645,261



GHG intensity improvement 0 .55%

Distribution efficiency CO2 intensity improvement 9%

Nitrogen oxides (NOx) (metric tonnes) 1,501 1,571 1,555

Sulfur oxides (SOx) (metric tonnes) 71 74 99

TRI releases (millions of pounds) 0 .17 0 .28

Hazardous waste disposal (millions of pounds) 1 .5 2 .5 1 .7

Gross water consumption (billions of gallons) 15 .2 15 .3 14 .7

Performance Data

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2016 2015 2014Water conservation intensity improvement 4%

Water withdrawal (billions of gallons) 15 .4 15 .5 14 .9

Environmental fines $7,300 $14,100 $150,510

CareTotal employees at year end 16,000

Female share of total workforce 23% 23% 23%

Global employee turnover rate 11 .75% 15 .90% 11 .10%

Average formal training hours per employee per year 32 30 30

Employees in collective bargaining units 32% 19% 19%

Cash and product donations (millions of dollars) 6 .1 6 .5 6 .4

United Way contributions (millions of dollars) 1 .0 1 .5 1 .5

Volunteer rate at corporate headquarters 47% 48% 49%

Safety performance(D)

Employee recordables 83 99 121

Employee recordable injury rate (per 200,000 hours worked) 0 .46 0 .51 0 .56

Employee lost-time incidents 32 40 53

Employee lost-time incident rate (per 200,000 hours worked) 0 .18 0 .21 0 .24

Employee fatalities 0 0 1

Contractor recordables 61 88 79

Contractor recordable injury rate (per 200,000 hours worked) 0 .48 0 .67 0 .60

Contractor lost-time incidents 41 47 58

Contractor lost-time incident rate (per 200,000 hours worked) 0 .32 0 .36 0 .44

Contractor fatalities 0 0 0

Vehicle accident frequency rate (preventable accidents per one million kilometers) 0 .87 0 .80 0 .87

Board of Directors

Executive directors 1 1 1

Independent directors 7 7 10

Total board size 8 8 11

Board diversity (percent women or minority) 37 .5% 37 .5% 27 .3%

Average board meeting attendance 97% 97% 96%

Allegations of Code of Conduct violations 312 333 344

Percent employees trained or certified in Code of Conduct >99% 96% 96%

(A) Unless otherwise stated, selected financial data is presented on a GAAP basis . Our operating results were impacted by certain items which manage-ment does not believe to be indicative of ongoing business trends and are excluded from the non-GAAP measure. Refer to Form 8-K the GAAP to non-GAAP measures for 2016, 2015, and 2014. Descriptions of the excluded items appear on pages 16-18. For 2013, these items include: (i) a charge to operating income of $98 ($71 after-tax, or $.33 per share) related to business restructuring and cost reduction actions, and (ii) expenses of $10 ($6 after-tax, or $.03 per share) related to advisory costs. For 2012, these items include: (i) a charge to operating income of $159 ($112 after-tax, or $.52 per share) related to business restructuring and cost reduction actions, (ii) a charge of $10 ($6 after-tax, or $.03 per share) related to a customer bankruptcy, (iii) a tax expense of $44 ($.20 per share) for a Spanish tax settlement, and (iv) a tax benefit of $58 ($.27 per share) for a favorable Spanish tax ruling.

(B) Metrics restated to reflect sale of Performance Materials and spin-off of Electronic Materials. Excludes approximately $1 billion of debt that was maintained by Versum upon spin-off.

(C) Calculated using income from continuing operations attributable to Air Products and five-quarter average Air Products shareholders’ equity.(D) A reconciliation of reported GAAP results to Adjusted EBITDA is presented on pages Form 8-K, 25-27.(E) Capital expenditures on a GAAP basis include additions to plant and equipment, investment in and advances to unconsolidated affiliates, and

acquisitions. The Company utilizes a non-GAAP measure in the computation of capital expenditures and includes spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. Refer to Form 8-K, page 30 for a reconciliation of the GAAP to non-GAAP measures for 2016, 2015, and 2014. For 2013, the GAAP measure was adjusted by $228 and $14 for spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests, respectively. For 2012, the GAAP measure was adjusted by $195 and $59 for spending associated with facilities accounted for as capital leases and purchases noncontrolling interests, respectively.

(F) Information presented on a total company basis, which includes both continuing and discontinued operations.

http://services.corporate-ir.net/SEC.Enhanced/SecCapsule.aspx?c=92444&fid=15057419

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About Air ProductsG4-3-4, 6, 8-9Air Products is a world-leading industrial gases company operating for more than 75 years. Our core Industrial Gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petro-chemical, metals, electronics, and food and beverage. Air Products is also the world’s leading supplier of liquefied natural gas process technology and equipment.

The Company had fiscal 2016 sales of $7.5 billion. Over 16,000 employees in 50 countries are focused on making Air Products the world’s safest and best performing industrial gases company, providing excellent service to its customers.

Air Products operated across seven business segments in fiscal year 2016 (FY16):

Industrial Gases ‒ Americas

Industrial Gases ‒ EMEA (Europe, Middle East and Africa)

Industrial Gases ‒ Asia

The regional Industrial Gases (Americas, EMEA, Asia) segments include the results of our regional industrial gas businesses, which produce and sell atmospheric gases such as oxygen, nitrogen, and argon (primarily recovered by the cryogenic distillation of air) and process gases such as hydrogen, carbon monoxide, helium, syngas, and specialty gases . We supply gases to customers in many industries, including those in metals, glass, chemical processing, energy production and refining, food processing, metallurgical industries, medical, and general manufacturing . We distribute gases to our customers through a variety of supply modes including liquid or gaseous bulk supply delivered by tanker or tube trailer and, for smaller customers outside of the U .S ., packaged gases delivered in cylinders and dewars or small on-sites (cryogenic or non-cryogenic generators) . For large volume customers, we construct an on-site plant adjacent to or near the customer’s facility or deliver product from one of our pipelines . We are the world’s largest provider of hydrogen, which is used by refiners to facilitate the conversion of heavy crude feedstock and lower the sulfur content of gasoline and diesel fuels . The regional Industrial Gases segments also include our share of the results of several joint ventures accounted for by the equity method . The largest of these joint ventures operate in Mexico, Italy, South Africa, India, Saudi Arabia, and Thailand .

Industrial Gases ‒ Global The Industrial Gases – Global segment includes cryogenic and gas processing equipment sales for air separation . The equipment is sold worldwide to customers in a variety of industries, including chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing . The Industrial Gases – Global segment also includes centralized global costs associated with management of all the Industrial Gases segments . These costs include Industrial Gases global administrative, product development, and research and development .

Corporate and other Corporate administrative functions are based in the Company’s administrative offices referred to above . The Gardner Cryogenic business operates at facilities in Pennsylvania and Kansas in the United States and in France . The LNG business has owned manufacturing facilities in the United States with management, engineering, and sales support based in the Trexlertown offices referred to above and a nearby leased office .

Materials Technologies This business segment was comprised of two divisions, Electronic Materials and Performance Materials, prior to the 1 October 2016 spin-off of Electronic Materials and the 3 January 2017 sale of Performance Materials . The Electronic Materials portion of this segment was separated into a separate legal entity, Versum Materials, Inc . All of the shares of Versum Materials, Inc . were distributed to Air Products shareholders on October 1, 2016 . The headquarters for this new entity is based in Tempe, Arizona, with supporting administration and research and development activities at four locations in Taiwan and two locations in South Korea, and in Singapore, China, the Netherlands, and Pennsylvania in the United States . The Performance Materials portion of this segment maintained operations at 12 production sites globally .

Energy-from-Waste (EfW) On 29 March 2016, the Board of Directors approved the Company’s exit of its Energy-from-Waste business . As a result, the Energy-from-Waste segment is classified as a discontinued operation .

Appendix: Detailed Reporting

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Global Operations

G4-5, 17Air Products, through subsidiaries, affiliates, and less-than-controlling interests, conducts business in 50 countries outside the United States. The Company owns its principal administrative offices, which include headquarters located in Trexlertown, Pennsylvania, as well as Hersham, England and Santiago, Chile. With over 725 production facilities, approximately 58 percent of Air Products’ consolidated sales in fiscal year 2016 (FY16) were outside of the U.S.

We have majority or wholly-owned foreign subsidiaries that operate in Canada, 17 European countries (including the United Kingdom, the Netherlands, and Spain), 11 Asian countries (including China, Korea, and Taiwan), seven Latin American countries (including Chile and Brazil), two African countries, and one Middle Eastern country. The Company also owns less-than-control-ling interests in entities operating in Europe, Asia, Africa, the Middle East, and Latin America (including Italy, Germany, China, India, Saudi Arabia, Singapore, Thailand, United Arab Emirates, South Africa, and Mexico).

OwnershipG4-7Founded in 1940 by Leonard Parker Pool who pioneered the “on-site” concept of producing and selling industrial gases, Air Products is a Delaware corporation and is traded publicly on the New York Stock Exchange (NYSE:APD). Over 90% of Air Products’ common shares are held by institutional investors. At the close of business on December 31, 2016, there were 217 million shares of Air Products common stock outstanding.

Supply ChainsG4-12Operating in over 50 countries, Air Products has a diverse supply chain that ranges from small, local suppliers to large multinational providers of products and ser-vices. The supply chains vary by business and depend on the product or equipment being manufactured. We also employ many contractors to help build our plants and deliver our products.

In our Industrial Gases businesses, the primary raw materials used to manufac-ture oxygen, nitrogen and argon are air and electricity. In fact, electric power is the largest cost component in the production of atmospheric gases, and Air Products purchased over 19 million MWh of electricity during 2016. Another energy source, natural gas, is used to produce energy at a number of our facilities and is a principal raw material for hydrogen production.

For sales of equipment, steel, aluminum and capital equipment subcomponents are the primary materials.

Significant Changes in 2016G4-13During 2016, Air Products continued with its reorganization to focus on its core industrial gases business with the announced sale and spin-off of entities within Materials Technologies. In March 2016, the company announced the intention to exit the Energy-from-Waste business.

In September 2015, Air Products announced plans to separate Materials Technologies. In May 2016, Air Products announced a definitive agreement to sell the Performance Materials business to Evonik Industries AG for $3.8 billion in cash. The sale closed at the beginning of 2017.

Air Products also announced a spin-off of the Electronic Materials business to shareholders as a separate public company, called Versum Materials. The separation was completed at the end of September 2016. All the shares of Versum Materials, Inc. were distributed to Air Products shareholders on October 1, 2016. For additional details, please refer to the 2016 Annual Report.

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About Our ReportG4-22, 28-33We have reported our sustainability performance each year for the past 13 years, building on a previous decade of environmen-tal, health and safety disclosures and reporting. As with our most recent reports, we have followed formal Global Reporting Initiative (GRI) guidelines to provide stakeholders with the data and perspective to understand and evaluate our performance, impacts and opportunities.

Our 2017 report is in accordance with GRI G4 guidelines and the “core” option. The report also contains supplemental informa-tion that is not specified by GRI and shows additional aspects of our sustainability efforts.

The report covers the period of January 1, 2016 to December 31, 2016, except where noted that fiscal year (October 1, 2015 to Sep-tember 30, 2016) data is provided. Our prior report for 2015 was issued in the fall of 2016. Please see the end of the report for the complete GRI index.

The scope of this 2016 report for continuing operations is global, including assets over which financial control is exercised, as reported in our consolidated audited financial statements. We exclude less-than-controlling interests in joint ventures or equity affiliates.

We have guided readers to additional information, including our Sustainability site on airproducts.com as well as other reports,such as our annual financial reports on Form 10-K and Report of unscheduled material events or corporate event on Form 8-K.

We are committed to transparency in our reporting and continuous improvement in our sustainability management and per-formance. The Corporate Sustainability Director was accountable for overseeing the preparation of this report, with significant data contributions provided by our Greenhouse Gases Center of Excellence, Environmental Measures and other sustainability-related teams, as well as other business and functional groups throughout the company. No GRI sector standard exists for our industry (industrial gases/materials); however, we have attempted to provide best possible disclosures based on the nature of our global business and the related risks and opportunities.

Restatements for 2016 include updates to historical performance data due to changes in our business, specifically the spin-off of the Electronic Materials business and sale of the Performance Materials business.

Select financial and greenhouse gas data has been externally assured by KPMG and WSP, respectively. Additional details are provided in the Grow and Conserve sections of this report.

Questions about this report can be directed to Julie O’Brien, Air Products’ Corporate Sustainability Director, at [email protected].

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mailto:obrienjk%40airproducts.com?subject=Sustainability%20Report%20Question

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Strategy and AnalysisG4-1Air Products’ strategy and analysis is described in our Chairman and CEO letter in the front of this report. In summary, we ap-proach sustainability across three areas: Grow, Conserve and Care.

We aim to:

• Grow responsibly through sustainability-driven opportunities that benefit customers and the world

• Conserve resources and reduce environmental footprints through cost-effective improvements

• Care for employees, customers and our communities, protecting our license to operate and grow

Business Impacts, Risks and OpportunitiesG4-2Sustainability is one of our core values at Air Products and is directly tied to our business strategy and our growth in serving energy and environmental market applications.

We use an issue assessment process to gauge sustainability risks and opportunities and prioritize our efforts and initiatives. See the “Sustainability Priorities and Stakeholder Engagement” section for details. This assessment is updated annually based on feedback from stakeholders and subject matter experts.

Sustainability priorities in 2016 included:

Grow Economic Performance Product Offerings with Sustainability Benefits

ConserveEnergy SavingsDistribution EfficiencyGHG Reductions

Water ConservationWaste Management

CareSafety FirstTalent ManagementCustomer Sustainability Ethics & Integrity

Regulatory ComplianceCommunity Relations and SupportSupplier Sustainability

In response to the top priorities:

• More than half of our research and development dollars are directed at environmental and energy offerings.

• Energy is a significant end market for our products and technologies, and we continue to develop clean energy solutions, including hydrogen for refining and petro-chemical processes, and as a fuel; LNG technology for natural gas as an alternative fuel; bioenergy processes; and gases and materials for alternative power, among others.

• We established new goals in 2016 for 2020 to drive our performance.


Grow: Air Products is making the world more productive, energy efficient and sustainable through the offerings we provide. Sustainability impacts our top and bottom lines through these offerings and the cost savings associated with our environmental sustainability goals. Specifically, over 50% of our revenues are derived from products or applications that help customers and others down the value chain improve energy efficiency, reduce environmental impact and address social needs. Meanwhile, we made good progress towards reaching our environmental sustainability targets—particularly our goals to improve energy efficiency.

From a grow perspective, we are making good progress on our goals.

Grow Target Area Air Products’ 2020 Goal 2016 Status

Economic performance Lead the industrial gas industry in profitability as measured by EBITDA margin, operating margin, and ROCE .

Led with adjusted EBITDA margin: 34 .9%Operating margin: 21 .6%ROCE: 12 .4%

Product offerings with sustainability benefits

Contribute >50% of revenues from offerings that improve energy efficiency, lower emissions, and meet societal needs .

53% of revenue

Conserve: We generate an environmental footprint and consume energy and water. In addition to enabling customers to operate more efficiently and sustainably through the use of our gases materials and technologies, we work to responsibly manage and improve our own environmental performance. We design our plants and manage our operations against environ-mental sustainability goals set to reduce greenhouse gases, energy and water use. Progress against these goals is tracked and reported annually.

We made solid progress against our 2020 goals in 2016.


Energy Savings

Save energy by reducing use intensity by 2 .5% for ASUs, and 1 .5% for Hycos




9% improvement



Water Conservation


4% improvement

Waste Management


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Our most significant challenges and opportunities for conservation going forward include:

• Continued reduction of the impact of our operations, particularly as customers demand more product.

• Driving improvements in greenhouse gas emissions intensity as production increases.

• Continuing to drive improvements in our operating energy efficiency, which is core to our business and profitability.

• With a 40% shortfall on water predicted by 2030, we continue to conserve and take steps to mitigate risk to our operations, which rely heavily on water for cooling processes. We are evaluating alternative methods like air cooling, which must be balanced with increased energy use, and continue to use more gray water in our operations.

Care: Good employment practices and a strong commitment to our communities and to sustainable operations remain important elements in our sustainability approach. We pay employees competitive wages, and offer competitive benefits, and provide training and developmental opportunities to improve their capabilities and advance their careers. All employees are required to abide by and certify their understanding of employment continuation responsibilities via training on Commit to Integrity: Code of Conduct for Air Products and Its Companies. Likewise the Board of Directors has adopted Governance Guide-lines Director Code of Conduct to focus on areas of potential ethical risk and conflicts of interest; provide guidance to directors to help them recognize and deal with ethical issues; and establish reporting mechanisms. Outreach is a critical element of our role as a neighbor in the communities where we operate and in our drive to be a responsible global corporate citizen. We regu-larly seek feedback from not-for-profits, emergency responders and community leaders in areas where we have major facilities. This ongoing interaction helps us identify, learn about and address needs. We also engage with our suppliers using our Supplier Expectations for Sustainability that include environmental and safety considerations beyond compliance. Likewise we have requested that our suppliers use conflict-free materials.

Care Target Area 2016 Status

Safety Lead the industrial gas industry in safety as measured by recordable and lost-time incident rates

Led with employee recordable rate: 0 .46Led with employee LTI rate: 0 .18

Talent Management Build the most diverse and inclusive workforce in the industrial gas industry as measured by the representation of women and minorities in our workforce and leadership pipeline

Female share of workforce: 23%

Customer Sustainability Enable customers to avoid CO2 emissions through energy efficiency and innovative offerings


Ethics and Integrity Require 100% of employees to be trained in, and certified to, Air Products’ Employee Code of Conduct and ensure all allegations of misconduct are reviewed and closed

Code of Conduct certifications: >99%

Regulatory compliance Continuously improve compliance systems and performance

Reduced fines for non-compliance

Community Relations and Support

Enhance our ability to measure the positive impacts of our employee and community engagement

$6 .1 million in cash and product donations

Supplier Sustainability Ensure 100% of new supplier agreements include Human Rights and Conflict Minerals clauses

Conflict Mineral clauses added to global terms and conditions


http://www.airproducts.com/Company/governance/board-of-directors/governance-guidelines.aspx


http://www.airproducts.com/Company/supplier-information/Air-Products-Expectations-of-its-Suppliers.aspx


http://www.airproducts.com/~/media/Files/PDF/company/governance-conflict-minerals-report.pdf


From a Care perspective, we view our most significant challenges and opportunities in these areas:

• In the competition for talent for our business, our commitment to and management of sustainability has become an increasingly important element of talent attraction and retention.

• The changing world of governance means new risks and ethical challenges that require employee understanding, training and certification. Our Commit to Integrity: Code of Conduct for Air Products and Its Companies reflects the most common business ethics challenges and risks that may be faced. We require every individual to certify their understanding and complete mandatory training as a condition of employment.

• We want to ensure that our investments of time, contributions and resources in the communities where we live and operate create value for our stakeholders.

• We see a significant opportunity to work with our suppliers to optimize our value chain. Collaborating to improve the overall sustainability of our offerings is a challenge due to the number and breadth of suppliers we use.

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Risk Management & Precautionary PrincipleG4-14, 45-46Risk management is an integral part of our operations—from design and construction, through start-up and production, to distribution and delivery of our products. The Corporate Risk Office leads the Enterprise Risk Management (ERM) pro-cess in identifying, analyzing, mitigating, communicating and updating risks. These risks are reviewed with the Board through the appropriate committees. All Board members have financial, engineering, operational, and reputational risk management experience and are competent to make judgments about the risks facing the company. Responsibility for risk oversight rests with the full Board, which formally reviews the Company’s risk management processes and policies periodically. Risk focus is on financial and accounting matters, compliance with legal and regulatory matters, financial reporting and controls, corporate governance, succession planning, training and retention of talent, EH&S and public policy and reputation.

We support the intent of the Precautionary Principle with respect to risk management and use a formal program to identify potential impacts and develop action plans to mitigate those impacts. For example, subject matter experts conduct risk reviews to identify and address potential safety, health and environmental impacts during new product, process and applications development. Research and Development projects must pass through risk assessment gates before projects may continue. We have conducted Life Cycle Assessments (LCAs) to quantify the environmental “footprint” of select products and technologies for comparison to new and competitive offerings. We provide extensive information on the safe use and handling of our products through targeted customer training and broad access to Safety Data Sheets (SDS), product stewardship summaries and other materials on our website.

GovernanceG4-34, 36, 38-42, 49, 51, LA12The Board of Directors – consisting of seven independent Directors (including an independent Lead Director) and Chair-man, President and Chief Executive Officer, Seifi Ghasemi – is responsible for, and regularly reviews, the organization’s corporate business plan, purpose, vision and values, strategies, policies, and approach and alignment with Sustainability issues including economic, environmental and social impacts.

The Board also holds the highest level of authority for corporate governance at Air Products. It has adopted Corporate Governance Guidelines to assure that it has the necessary practices in place to govern the Company in accordance with the best interests of its shareholders. The Guidelines include Board governance practices with respect to: director independence and qualifications, director responsibilities, access to management and independent advisors, director compensation, director orientation and education, chief executive officer performance assessment, management suc-cession, and assessment of Board and committee performance.

The Board has three standing committees that operate under written charters approved by the full Board: Audit; Corpo-rate Governance and Nominating; and Management Development and Compensation. The full board has accountability for oversight of the company’s environmental and safety performance, which it reviews every meeting. The Corporate Governance and Nominating Committee has responsibility for monitoring the company's response to important public policy issues, including sustainability.

http://www.airproducts.com/company/Sustainability/environment-health-and-safety/product-safety-safetygrams.aspx

http://www.airproducts.com/Company/about-us/leadership/seifi-ghasemi.aspx

http://www.airproducts.com/Company/governance/board-of-directors/executive-directory.aspx



http://www.airproducts.com/Company/governance/board-of-directors/committee-composition.aspx


Board Committee Summary of Responsibilities

Audit and Finance Committee Assists the Board of Directors in oversight responsibilities relating to the integrity of the Company’s financial statements, financial reporting process, and systems of internal accounting and financial controls .

Corporate Governance and Nominating Committee

Assists the Board of Directors in assuring the Board is operating effectively and the Company is governed in a manner consistent with the interests of its shareowners .

Management Development and Compensation Committee

Assists the Board of Directors in selection, evaluation, development and compensation of executive officers .

During fiscal 2016, the Board met 17 times, with committee attendance averaging 97% for the Board as a whole.

Seifi Ghasemi is Air Products’ Chairman, President and Chief Executive Officer. The Board does not have a policy on whether the roles of Chairman of the Board and Chief Executive Officer should be separate or whether the Chairman of the Board should be independent; the Board determines which structure is in the best interests of the Company at any given time. For more information, see “Board Leadership Structure” in Air Products’ Proxy Statement.

All of the Company’s non-executive directors, including the Lead Director, qualify as independent under the New York Stock Exchange (NYSE) corporate governance listing standards. In addition, the Board has adopted guidelines to assist in determining each director’s independence which meet or exceed the NYSE independence requirements. For more information, see “Director Independence” in Air Products’ Proxy Statement.

The Proxy Statement details the process for determining qualifications and expertise of Directors. The Corporate Gover-nance and Nominating Committee has primary responsibility for identifying, recommending, and recruiting nominees for election and recommending candidates for election as Lead Director. The Board follows practices outlined in the Corporate Governance Guidelines with respect to these matters. Women and minorities comprise 37.5% of the Board.

The Board has a formal process for reviewing related party transactions, which is articulated in the Proxy Statement. In addition, the Board has adopted its own Code of Conduct, which specifically focuses on areas of potential ethical risk and conflicts of interest, especially relevant to directors.

The majority of our Named Executive Officers’ direct compensation in 2016 was variable, based on company and stock perfor-mance. Executive incentive compensation (annual and long-term incentive awards) is structured to reward performance that will increase the value of our shareholders’ long-term investment through disciplined capital investment, sustainable growth and superior returns. The compensation program balances financial results with other company values such as sustainabil-ity, continuous improvement, safety, diversity and ethical conduct. Accordingly, some components of the program provide flexibility to recognize non-financial achievements or to reduce or recoup compensation where insufficient attention is paid to non-financial company objectives.

Detailed information about Director and Executive Officer compensation is available in our most recent Proxy Statement.

The Board has a written procedure for collecting, organizing, and forwarding direct communications from shareholders and other interested parties to the independent directors. This procedure is available through the Corporate Secretary’s Office.

Leading Sustainability EffortsG4-48Air Products’ Sustainability Leadership Council steers the Company’s sustainability strategy—working with the busi-nesses to operationalize it—and oversees the processes for measuring Air Products’ environmental footprints as well as setting and achieving reduction targets. These efforts are routinely reported to the Board of Directors.

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The Council was led by Joseph Pietrantonio, Vice President, Environment, Health, Safety & Quality and Corporate Chief Engineer, who also has direct operating responsibility for climate change policy and GHG inventory programs. Council members included: Corning Painter, Executive Vice President of Industrial Gases; Mary Afflerbach, Vice President, Corporate Secretary and Chief Governance Officer; Scott Crocco, Senior Vice President and Chief Financial Officer; Jennifer Grant, Vice President and Chief Human Resources Officer; Simon Moore, Vice President, Investor Relations and Corporate Relations; Julie O’Brien, Sustainability Director; Catherine McDonald, Communications Director; and Art George, External Communications Manager.

The Council was an integral part to the assessment of sustainability priorities described in the following section, and was the highest committee that reviewed the 2017 Sustainability Report.

Charters Subscribed ToG4-15Air Products has aligned a number of its policies and practices with charters and standards. For example, ISO14001 and OHSAS 18001 have been considered in the development of the Company’s Global Environmental, Health and Safety Management System.

Because improving product quality, service, and overall value to customers is at the heart of our strategy, we have ad-opted ISO 9001 as our model for quality assurance and obtained ISO 9001 certifications for 66% of our plants.

In a similar way, our Human Rights policy has been aligned with the fundamentals of the United Nations Global Com-pact (UNGC), covering all elements of the UNGC.

Organizations Subscribed ToG4-16

Driven to innovate, share knowledge and embrace good ideas, Air Products was active in a number of industry and advocacy associations in 2016:

• American Institute of Chemical Engineers (AIChE)

• AICHe Center for Chemical Process Safety (CCPS)

• Association of International Chemical Manufacturers (China)

• CDP (formerly Carbon Disclosure Project)

• The Chlorine Institute, Inc. (U.S.)

• Compressed Gas Association (CGA)

• European Industrial Gases Association (EIGA)

• Fuel Cell and Hydrogen Energy Association

• Manufacturers Alliance for Productivity and Innovation (MAPI) Sustainability Council

• European Association of Energy-Intensive Industries (IFIEC)

• UK Energy-Intensive Industries Group (EIUG)

• Spanish Energy-Intensive Industry Group (AEGE)

• Spanish Industrial Gases Association (AFGIM)

• German Industrial Gases Association (IGV)

• British Industrial Gases Association (BCGA)

• Dutch Chemical Manufacturers’ Association (VNCI)

Our management believes that our business, and thus our shareholders, benefit from our participation in organizations that represents our industry. Our GHG Center of Excellence identifies climate change risks and opportunities, policy developments, regulations, legislation, and regularly updates management. Our Government Relations staff works with government agencies and Non-Governmental Organizations (NGOs) in regions of the world where we have significant business interests to develop strategy, understand changing business environments, and protect and position our busi-nesses to respond to climate change risks and opportunities. These efforts are augmented through membership in these trade associations, and reduce the likelihood and magnitude of risks.

http://www.airproducts.com/Company/Sustainability/environment-health-and-safety/environment/additional-capabilities-and-certifications.aspx






Sustainability Priorities and Stakeholder EngagementG4-18-21, 23-27Stakeholder concerns are important to our company. For this reason, Air Products engaged with representatives of its key stakeholders to understand what is important to them, and what may have a significant impact on the company.

Our Key Stakeholder Groups

Customers Customers come to Air Products for innovative thinking and solutions to their most pressing operational challenges . It’s our commitment to quality, safety, fairness, mutual respect and integrity that keep them coming back . Key sustainability concerns of our customers vary by business, but typically focus on how our products can help them improve energy efficiency and reduce environmental impact . Several of these offerings are noted in this report under section G4-EC1 and on our website .

Employees Air Products is committed to providing a work environment where our employees can grow and thrive, bringing their greatest talents to bear on some of the world’s most pressing business and environmental challenges . We provide career development opportunities in which new employees have the opportunity to rotate through different assignments to gain on-the-job experience in various areas of our organization . We engage in regular, two-way communications with our employees through leadership dialogue sessions, executive town hall meetings, feedback surveys, “Ask Leadership” channels on our company intranet, and our CorpNEWS online newsletter .

Investors The only way to serve our customers with excellence, develop and reward our employees, and support our communities is to have a profitable company with satisfied shareholders .

We hold quarterly investor calls . We also participate in numerous sell-side conferences and one-on-one meetings to ensure the investment community’s perspectives are fully understood as an input to our strategy . Air Products is publicly traded as APD on the New York Stock Exchange, where over 90 percent of common shares are held by institutional investors . As of September 30, 2016, 217 million shares of Air Products common stock were outstanding .

Communities The stronger the local community, the stronger and more stable platform from which we can run our business . We continue to act as a good neighbor, demonstrating our commitment to the health and vitality of the local communities in which we work and live . Our plant management and other personnel communicate with stakeholders on a regular basis and solicit feedback on our processes and procedures, the safe use of our products, and the key issues in the community .

As an employer, we look to partner with local commerce boards to support economic development and jobs creation . Air Products also gives back to local communities through philanthropic endeavors totaling $6 .1 million in cash, volunteer, and in-kind donations in 2016, as well as through our ongoing involvement in workforce development through our investments in science, technology, engineering and mathematics (STEM) education .

Suppliers Every year, we purchase approximately $6 billion in materials, equipment, power and services from more than 30,000 suppliers worldwide . As an extension of our company, Air Products’ suppliers play a crucial role in delivering to our customers each and every day . We look for suppliers who share our values and commitment to sustainability, and hold them to the same high standards that you would expect from Air Products . Our “Expectations for Suppliers” is published on our company website and incorporates the elements of our sustainability program, including economic, environmental and social factors . We engage with suppliers on sustainability matters as part of our supplier relationship management program; for example, each step of an Engineering project is assessed and reviewed with input from key suppliers .

Governments and Regulators

Public policy decisions and regulations have a direct impact on our license to operate . Air Products supports fair, balanced and realistic policy decisions that will help us achieve our sustainability goals and serve the interests of the many stakeholders to whom we’re accountable . We maintain open channels of dialogue with the local, regional and national government entities where we operate . In many cases, our employees provide expertise and input to proposed legislation . We recognize that through cooperation and coordination with governments and regulators, we can more productively address global sustainability challenges .

http://www.airproducts.com/Company/Sustainability/sustainable-offerings.aspx


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Air Products has been conducting stakeholder assessments since it began reporting in accordance with Global Reporting Initiative guidelines in 2010. Stakeholder engagement has included:

• Evaluating sustainability issues identified in various frameworks, standards, questionnaires, customer reports and stakeholder questions.

• Interviewing key stakeholders on sustainability issues, including members of our Board of Directors, customers, investors and suppliers.

• Reaching out to community members in person and via surveys to identify and understand concerns.

• Engaging our Sustainability Leadership Council in discussions through which they identified specific concerns.

• Surveying sustainability subject matter experts who support company efforts.

For our 2017 report, we reaffirmed with select stakeholders the sustainability issues that were most important. All of our stakeholders expressed support for sustainability, and as expected, were concerned about varying issues depending on their relationship to sustainability and/or with us. For example, sustainability – and related areas – such as governance and safety–is an expectation of our investors, and they are less likely to invest in companies with poor performance in these areas.

The Sustainability Priorities included:

Issues across our businesses and our value chain that were considered:

ProductDevelopment Sourcing Production Sales &

Marketing Distribution Use/End of Life

high

med

ium

low

low medium high

Impact on Business Success

Stak

ehol

der C

once

rn Priorities

Grow Economic PerformanceProduct Offerings with Sustainability Benefits

Conserve Energy SavingsDistribution EfficiencyGHG ReductionsWater ConservationWaste Management

Care SafetyTalent ManagementCustomer SustainabilityEthics & IntegrityRegulatory ComplianceCommunity Relations and SupportSupplier Sustainability


These Sustainability Priorities, aspect boundaries, and their content within this report are provided below:

Sustainability Priority

GRI Reference Aspect within Air Products

Aspect outside Air Products

Report Pages

Economic Performance

Economic Performance; Economic Impacts

Production; Sales & Marketing

Communities Where We Operate

20, 40-41

Product Offerings with Sustainability Benefits

Products and Services Product Development Use/End of Life 46

Energy Savings Energy; Emissions Production Not Material 9, 20, 48-49


Energy; Transport Production; Distribution Not Material 11, 50, 58

GHG emissions Emissions Production Not Material 10, 20, 50-52

Water Conservation

Water Production Communities Where We Operate

10, 20-21, 54-55

Waste Management

Effluents and Waste Production Not Material 11, 20, 56

Safety Occupational Health and Safety Product Development; Production; Distribution; Use/End of Life

Communities Where We Operate

13, 21, 37-39

Talent Management

Employment; Labor/Management Relations; Training and Education; Diversity and Equal Opportunity

Product Development; Production; Sales & Marketing; Distribution

Not Material 14, 21, 61-67

Customer Sustainability

Economic Performance; Customer Health and Safety

Sales and Marketing Use/End of Life 42-43, 58-59

Ethics & Integrity Anti-corruption; Anti-competitive Behavior; Compliance (Society)

Product Development; Sourcing; Production; Distribution

Not Material 15, 21, 68-70

Regulatory Compliance

Compliance (Environmental, Society) Production; Distribution Communities Where We Operate

12, 15, 38, 47-48, 67, 70

Community Relations and Support

Local Communities; Indirect Economic Impacts

Production; Distribution Communities Where We Operate

21, 58, 70-71

Supplier Sustainability

Procurement Practices; Supplier Assessment for Labor Practices

Procurement Supply Chain 72-74

Air Products used GRI’s Principles for Defining Report Content to develop the 2017 Sustainability Report . These principles included: stakeholder inclusiveness, sustainability context, and coverage of aspects that reflect our significant economic, environmental and social impacts .

The scope of this report is for continuing operations and excludes the Electronics Materials business that was spun off in 2016, and the Performance Materials business that was sold in January 2017.

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Demonstrated Commitment to Sustainability

Air Products was named to the Dow Jones Sustainability North America Index (DJSI) 2016/2017, ranking among the top 20 percent of companies in its industry for corporate sustainability performance . For several years, the company has completed the DJSI Corporate Sustainability Assessment, which is used to evaluate our economic, environmental, social and governance practices . The ‘Grow − Conserve – Care’ approach to managing sustainability is rooted in our fundamental belief that good sustainability practices lead to long-term shareholder value and competitive advantage .

For the fifth consecutive year, Air Products was named to Corporate Responsibility Magazine’s (CR Magazine) 100 Best Corporate Citizens List (2016), which recognizes public companies with outstanding corporate responsibility performance .

Also during 2016, Air Products met the environmental, social and governance criteria to meet the inclusion requirements for the FTSE4Good index . This index is a tool used by a wide variety of market participants when creating or assessing responsible investment products, and is used in four main ways: Financial products, Research, Reference and Benchmarking .

Air Products was reconfirmed for inclusion in the Ethibel PIONEER and Ethibel EXCELLENCE Investment Registers in March 2016 . This selection by Forum ETHIBEL (www .forumethibel .org) indicates that Air Products qualified as a sector leader in Corporate Social Responsibility (CSR) .

For the fourth consecutive year, Air Products was named one of the Top 100 Most Attractive Employers in China . The company was selected by a group of university students majoring in natural sciences in Universum’s Chinese Student Survey 2016 .

Air Products earned a perfect score of 100 percent on the 2017 Corporate Equality Index (CEI), a national benchmarking survey and report on corporate policies and practices related to lesbian, gay, bisexual and transgender (LGBT) workplace equality, administered by the Human Rights Campaign Foundation .

Additional Issues Raised by StakeholdersA number of stakeholders raised concerns in addition to the Sustainability priorities stated above, including:

• Job growth and high quality jobs

• Education and skill development

• Affordable and accessible transportation

• Quality of life issues related to urban development, the environment, food and housing

• Noise control

These items are addressed through ongoing company programs, such as our Community Outreach priorities.

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Alignment with the United Nations Sustainable Development GoalsAs part of our assessment, we looked at our Sustainability Priorities and our new sustainability goals relative to the United Nations (U.N.) Sustainable Development Goals (SDGs), which were announced in September 2015. The 17 SDGs were developed by U.N. member states in collaboration with a number of organizations, including corporations, scien-tists, officials, business and labor representatives and NGOs. Air Products applauds the SDGs which are aimed at making the planet more sustainable. We have programs or products that align with nearly all of the SDGs, as shown below and shared within this report.

SDGs Related Air Products’ Efforts

1 No poverty Economic impact of goods/services, employment and support of education

2 Zero hunger Food technologies and products that enable preservation (food freezing and modified atmosphere packaging [MAP]) and food production (oxygen for aquaculture)

3 Good health and well-being Medical gases and helium for magnetic resonance imaging (MRI), philanthropy that supports local health initiatives, products that enable customers to avoid emissions

4 Quality education Support of education and STEM (Science, Technology, Engineering and Math)

5 Gender equality Diversity and Inclusion programs and goals

6 Clean water and sanitation Oxygen for water treatment and our goal to reduce water consumption on an intensity basis

7 Affordable and clean energy Hydrogen for cleaner burning fuels including ultra low sulfur diesel that reduces emissions, hydrogen for fuel cells, and our goal to reduce energy intensity

8 Decent work and economic growth Employment and our Human Rights Policy and programs

9 Industry, innovation and infrastructure

Development of new and sustainable offerings, products that improve customer productivity and efficiency, and offerings that enable the cleaner production of cement and steel for infrastructure

10 Reduced inequalities Employment and our Human Rights Policy and programs

11 Sustainable cities and communities Oxyfuel burners that enable the cleaner production of cement and steel for cities

12 Responsible consumption and production

Goals for reducing energy, water and fleet consumption, gases that enable the reduction of food losses

13 Climate action Products that improve customer productivity and efficiency, goals for reducing greenhouse gas emissions from operations and product distribution, and business continuity planning to prepare for potential disruptions due to climate change

16 Peace, justice and strong institutions Code of Conduct requirements for employees and other stakeholders, employee engagement in various organizations .

17 Partnering for the goals Philanthropy and engagement in trade associations

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Safety: Our Top Priority Disclosure on Management ApproachAt Air Products, safety is our top priority. It is a moral obligation, a condition of employment, and is fundamental to our goal of being the safest and most profitable industrial gas company.

Safety is part of our culture. We all care about safety and are driving towards our goal of zero accidents. Year-on-year, we strive to incrementally improve safety at all our sites to benefit our colleagues and the communities in which we operate. Our 2020 goal to lead the industrial gas industry in safety as measured by recordable and lost-time incident (LTI) rates will help us continue to drive our performance.

Our progress and performance in safety is built on years of experience and global policies and systems that require accountability and leadership. Our approach to environmental protection and sustainability has been built upon our strong safety foundation.

Global EH&S PolicyEvery employee is required to understand and adhere to our global EH&S policy as both a responsibility and a condition of employment. The highest level of accountability for environmental, health, safety and sustainability rests with our Board of Directors.

Environment, Health and Safety Policy We will be an industry leader in environmental, health, and safety performance and are committed to the following basic principles in managing our businesses worldwide:

• Compliance with all applicable environmental, health, and safety laws and regulations

• Continual improvement in health, safety, and security performance with the goal of zero injuries

• Continual reduction of the environmental impact of our operations

• Design and operation of our plants and facilities in a manner that protects the environment and the health, safety, and security of our employees, contractors, and the public

• Development and production of products that can be manufactured, distributed, used, and recycled or disposed of in a safe, secure, and sustainable manner

• Existing and new EH&S risks are understood and managed through our Risk Management Processes

• Transparent discussion of our environmental, health, and safety practices and performance

EH&S Management SystemApplying to 100% of our locations worldwide, our EH&S Management System includes controls driven by our own corporate policies and government regulations, and supports the principles promoted by international standards such as ISO 14001 and OHSAS 18001.

Elements of our EH&S Management System• Safe Systems of Work

• Occupational Health Protection

• Emergency Preparedness

• Process Safety Management

• Product Stewardship

• EH&S Assurance

• EH&S Training

• Incident Reporting and Investigation

• Product Distribution

• Procurement and Contractor Control

There are over 250 standards in the EH&S Management System, and nearly a third of these are specifically related to worker safety and health.




Managing Compliance and IncidentsAir Products uses Compliance Management, an SAP-compatible database, to help manage EH&S compliance with regu-lations, standards and permit requirements at facilities globally. The system enables Air Products to manage and track regulatory and permit-driven tasks, identify and track regulatory and permit exceptions, provides access to regulatory and permit requirements, and includes compliance tasks and limits. Tasks are automatically pushed through Compli-ance Management to employees with responsibility for the tasks.

If an incident occurs, it is reported in Event Management (EM), another SAP-compatible computer database which includes the ability to document, share, and learn from critical information regarding EH&S incidents and near misses. Sites must enter data into EM whenever an incident occurs, including injuries and lost-time incidents (LTIs), health and safety regulatory events, environmental events and regulatory key performance indicators (KPIs), motor vehicle ac-cidents, and process safety events. Also reported in EM are near-miss events related to worker safety, design, transporta-tion and product safety. EM is also used to document root cause analyses and track corrective actions.

In addition, our Corporate Assurance Group audits more than 30 plants annually for compliance with governmental requirements and internal standards, using our EH&S functional and operational expertise in production plants.

EH&S TrainingEmployees around the world are enrolled in our online Training Management and Delivery Tool, which enables us to manage EH&S training by assigning courses that are custom-tailored to the employee’s job assignment in addition to those required for regulatory compliance. Compliance is monitored within the system.

Our 2016 Worker Safety PerformanceG4-LA6Air Products’ goal is to be the safest and the most profitable industrial gas company in the world, providing excellent service to our customers. We are aiming for zero ac-cident and incidents, and measure our success against our peers as indicated by our 2020 goal to lead the Industrial Gas industry in safety. We also set internal, continu-ous improvement targets for safety that are monitored and communicated through the company on a monthly basis.

In 2016, our worker safety performance improved in all categories. Safety performance included:

• Zero employee fatalities • 11% decrease in employee recordable injuries • 13% decrease in employee LTIs

The decrease in our injury rates can be attributed to our systematic approach to safety, including our Basic Safety Process (BSP) that promotes one primary goal - incident prevention through continuous management of our safety effort. BSP has been designed to integrate our safety efforts into all levels of our organization and actively engage employees.

BSP Elements • Demonstrate safety leadership through highly

visible activities

• Clearly defined and measured safety responsibilities that promote accountability

• Planned activities designed to help us achieve, and then maintain safe work conditions and safe work behaviors

• Requirements for contractors to participate in BSP activities

• Emergency preparedness activities that help us practice and test responses

• Performance measures that focus on key process indicators so we know that we are applying the right amount of effort at the right place, before incidents occur

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BSP complements our EH&S Management system and standards that address the areas of worker and process safety and occupational health, as well as operational and regulatory compliance.

We continue to focus on more serious incidents by measuring and tracking Serious Injuries & Fatalities (SIFs) and Near Fatal Accidents (NFAs). These serious incidents help us quantify the severity of our work-related injury performance and can be a more meaningful measure of severity compared solely to the lost-time characterization. By actively monitoring SIFs and NFAs, we can engage the appropriate levels of expertise, target the most impactful improvement opportunities, and leverage the right resources to address issues.

SIFs and NFAs are tracked on a monthly or quarterly basis and reviewed throughout the organization. Employee SIFs are measured as a percentage of total recordable injuries. The current trend shows that 6-7% of our injuries are considered SIFs. Industry benchmarks indicate that this is a significantly better rate than typical industry, which performs at about 20% of recordable injuries being serious injuries. By reviewing SIFs monthly, we can use this data real time to respond to trends in accidents causing serious injuries and emphasize specific areas for focus and improvement.

The Company’s Serious Incident Review Board (SIRB) routinely reviews SIFs, NFAs and significant Process Safety Events that had, or could have had, a serious impact. Comprised of the Chief Executive Officer, Senior Vice Presidents, Directors and Managers from Operations and EH&S, the SIRB ensures that safety accountabilities are reinforced through line management, and safety events are reported and investigated in a consistent and thorough manner, with sustainable corrective actions identified and implemented.

Contractor safety has been an area of focus since 2011. Initial efforts included increased review of contractor safety performance and engagement in day-to-day activities using elements of BSP. This resulted in improved contractor safety performance through 2012 and 2013. In 2013 we acquired a large operation in South America that used a significant num-ber of contractors for product delivery, resulting in a large spike in contractor LTIs. In FY15 the South American operation was integrated with our Industrial Gases Americas business, and improvement initiatives were integrated, including full implementation of BSP. In 2016, our contractor recordable and LTI rates improved by 28% and 10%, respectively.

Fiscal Year Safety Performance 2016 2015 2014

Employee recordables 83 99 121

Employee recordable injury rate (per 200,000 hours worked) 0 .46 0 .51 0 .56

Employee lost-time incidents 32 40 53

Employee lost-time incident rate (per 200,000 hours worked) 0 .18 0 .21 0 .24

Employee fatalities 0 0 1

Contractor recordables 61 88 79

Contractor recordable injury rate (per 200,000 hours worked) 0 .48 0 .67 0 .60

Contractor lost-time incidents 41 47 58

Contractor lost-time incident rate (per 200,000 hours worked) 0 .32 0 .36 0 .44

Contractor fatalities 0 0 0

Information about other aspects of safety, including Process Safety, Transportation Safety and Product Safety, are provided in the Care section of this report.


GROW

Economic PerformanceDisclosure on Management ApproachOur goal at Air Products is to be the safest and most profitable industrial gases company in the world, providing excel-lent service to our customers. Our strategic Five-Point Plan is our roadmap to that goal.

The best way to serve our customers with excellence, develop and reward our people, and support our communities is by being a best-in-class, profitable enterprise.

The primary measures used to assess our performance and progress are:

• EBITDA margin as a percent of sales

• Return on capital employed

• Operating margin as a percent of sales

• Relative total shareholder return

Management Principles We believe cash generation drives long term value, and that what counts is the increase in per-share value of our stock, not the size of our company or growth rates. Air Products generates a significant amount of cash, and the effective deployment of that cash is critical. In fact, the CEO and CFO review every capital investment of more than $3 million. Cash we generate belongs to our shareholders, and we will only spend that cash if we have enough high return projects or good acquisitions.

Priorities for the use of cash are:

• First, to ensure our debt level supports and maintain an “A” credit rating;

• Second, to invest in good projects and accretive acquisitions;

• Third, to continue to increase our dividend; and

• Fourth, if and only if there is excess cash available, to return it to our shareholders in the form of share buybacks.

In 2016, we delivered strong results driven by cost improvement actions despite weakness in the worldwide economy and currency headwinds. We made signifi-cant progress on our strategy by focusing on our core industrial gases business and have significantly improved our profitability as measured by operating margin, adjusted operating margin, and adjusted EBITDA margin, which increased by 480 bp, 400 bp, and 420 bp respectively. During the year, we committed to exit our EfW business. Additionally, we completed the spin-off of our Electronic Materials business as a publicly traded company on 1 October 2016 and entered into a sales agreement to sell the Performance Materials division to Evonik, which closed on 3 January 2017. We improved our focus on safety, delivered on our cost reduction targets, and increased accountability by aligning pay with performance. These changes drove increased profitability as we delivered operating margins of 20.4%, adjusted operating margins of 21.6%, and adjusted EBITDA margins of 34.9%. Also, EPS of $5.04 increased 17% from the prior year. On a non-GAAP basis, EPS of $5.64 increased 16%.

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FY16 PerformanceG4-EC1Following is a summary of our performance in FY16. Additional details are available in our 2016 Form 10-K, and in our Form 8-K.

Millions of dollars, except per share 2016(A) (B) 2015(A) (B) Change

FOR THE YEAR

Sales $7,504.00 $7,824 .00 -4%

Operating income $1,530.00 $1,233 .00 24%

Operating margin 20.4% 15 .8% 29%

Income from continuing operations attributable to Air Products $1,100.00 $933 .00 18%

Net income attributable to Air Products(F) $631 $1,278 -51%

Capital expenditures on a GAAP basis(E) $908 $1,201 -24%

Return on capital employed (ROCE) 12.8% 10 .8% 10%

Return on average Air Products shareholders’ equity(C) 15.40% 12 .70% 21%

R&D Spending $72 $76 -5%

Patent families granted 28 39 -28%

NON-GAAP

Operating income $1,620 $1,389 17%

Operating margin 21.6% 17 .7% 22%

Adjusted EBITDA(D) $2,622 $2,399 9%

Adjusted EBITDA margin 34.9% 30 .7% 14%

Capital expenditures on a non-GAAP basis(E) $935 $1,575 -41%

Adjusted ROCE 12.40% 10 .40%

DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO AIR PRODUCTS

GAAP earnings per share (EPS) $5.04 $4 .29 17%

Non-GAAP earninngs per share 5.64 $4 .88 16%

Dividends declared per common share 3.39 $3 .20 6%

Book value 32.57 $33 .66 -3%

AT YEAR END

Air Products shareholders’ equity(F) 7080 7249

Shares outstanding (in millions) 218 217

Shareholders 6000 6400

Employees 16,000

(A) Unless otherwise stated, selected financial data is presented on a GAAP basis . Our operating results were impacted by certain items which manage-ment does not believe to be indicative of ongoing business trends and are excluded from the non-GAAP measure. Refer to Form 8-K the GAAP to non-GAAP measures for 2016, 2015, and 2014. Descriptions of the excluded items appear on pages 16-18. For 2013, these items include: (i) a charge to operating income of $98 ($71 after-tax, or $.33 per share) related to business restructuring and cost reduction actions, and (ii) expenses of $10 ($6 after-tax, or $.03 per share) related to advisory costs. For 2012, these items include: (i) a charge to operating income of $159 ($112 after-tax, or $.52 per share) related to business restructuring and cost reduction actions, (ii) a charge of $10 ($6 after-tax, or $.03 per share) related to a customer bankruptcy, (iii) a tax expense of $44 ($.20 per share) for a Spanish tax settlement, and (iv) a tax benefit of $58 ($.27 per share) for a favorable Spanish tax ruling.

(B) Metrics restated to reflect sale of Performance Materials and spin-off of Electronic Materials. Excludes approximately $1 billion of debt that was maintained by Versum upon spin-off.

(C) Calculated using income from continuing operations attributable to Air Products and five-quarter average Air Products shareholders’ equity.(D) A reconciliation of reported GAAP results to Adjusted EBITDA is presented on pages Form 8-K, 25-27.(E) Capital expenditures on a GAAP basis include additions to plant and equipment, investment in and advances to unconsolidated affiliates, and

acquisitions. The Company utilizes a non-GAAP measure in the computation of capital expenditures and includes spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. Refer to Form 8-K, page 30 for a reconciliation of the GAAP to non-GAAP measures for 2016, 2015, and 2014. For 2013, the GAAP measure was adjusted by $228 and $14 for spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests, respectively. For 2012, the GAAP measure was adjusted by $195 and $59 for spending associated with facilities accounted for as capital leases and purchases noncontrolling interests, respectively.

(F) Information presented on a total company basis, which includes both continuing and discontinued operations.

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The Value We GenerateAir Products generates direct and indirect economic value throughout its value chain. Fiscal 2016 revenues totaled $7.5 billion and adjusted EBITDA increased 9%. Additional information is available in our 2016 Form 10-K and Report of un-scheduled material events or corporate event on Form 8-K.

The company spends $6 billion each year with over 30,000 suppliers globally, and has approximately 16,000 employees at 750+ locations in 50 countries. Through their individual spending, investments and volunteering, our employees are very supportive of the communities where they live.

Growth OpportunitiesOur gases, equipment and applications expertise enable customers in dozens of industries to improve sustainability performance by improving productivity, producing better quality products, reducing energy use and lowering emissions.

Liquid bulk and packaged gas business growth is driven by the underlying manufacturing economy, while larger onsite plant investments are being driven by secular trends: energy, environment and resource constraints (i.e., materials use, water use). Examples for Air Products’ industrial gases to serve these needs include petrochemical investments in the U.S. Gulf Coast, coal gasification in China, refinery hydrogen globally, and outsourced gases for the oil and chemical industry (driven by lower oil prices), among others.

Today, a majority of our revenues are from improving customers’ energy efficiency, emissions and societal needs. We will strive to maintain this high level of use of these sustainable offerings through our 2020 goal to derive more than 50% of revenues from offerings that improve energy efficiency, lower emissions and meet societal needs.

Smart Burner InnovationFor over 50 years, Air Products’ oxy-fuel combustion technology has been used in energy-intensive applications like metals and glass production . In keeping with Air Products’ vision of developing the Industrial Internet of Things (IIoT), our latest innovations in combustion technology for glass and metals operations deploy “smart” technology . Our burner platforms now include offerings with state-of-the-art on-burner diagnostic sensors and wireless communications technology . With our advanced combustion solutions, customers can optimize and maintain burner performance and improve efficiency and quality, while reducing environmental impact .

Several our offerings are aligned with the U.N. Sustainable Development Goals (SDG), particularly:

2 6 7 9 Zero hunger

Clean water and sanitation

Affordable and clean energy

Industry, innovation and infrastructure

Sustainable cities and communities

Responsible consumption and production

Climate action

11 12 13

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Cleaner Air through HydrogenHydrogen is critical to produce today's necessary cleaner transportation fuels . These clean fuels help eliminate smog so people can breathe easier .

Hydrogen is used in refineries to remove sulfur from crude oil and reduce the amount of aromatic compounds in fuels, thus enabling refiners and engine manufacturers to meet government standards for emissions . The ultra-low-sulfur-diesel (ULSD) produced in these refineries greatly reduces the amount of sulfur oxides (SOx) emitted from engines, which reduces acid rain . ULSD also enables the use of Diesel Particulate Filters (DPFs) that remove particulate matter (PM), including Black Carbon . Likewise, ULSD enables the use of catalytic converters that remove nitrous oxides (NOx) and volatile organic compounds (VOCs) . Lowering these emissions has health benefits, including reducing respiratory problems and cancer risk . A 2015 study released by the California Air Resources Board noted that the use of ULSD fuels had decreased the risk of cancer from diesel PM emissions by 47% (2006-2012) .

In addition to being used for cleaner fuels, hydrogen helps conserve precious resources by enabling refiners to increase the amount of fuel that can be produced from every barrel of crude oil, and to process more sour crudes .

As the world’s need for fuel grows, so will the need for hydrogen . The trend for crude oil to be heavier in its consistency and contain more sulfur will continue . At the same time, the world demands cleaner air, and with it comes the increased need for cleaner burning fuels, meaning hydrogen's role will remain critically important .

Air Products is the world’s largest supplier of hydrogen . Our facilities feature the latest technology advancements to maximize energy efficiency, and our efficiencies are typically higher than can be achieved by refiners making their own hydrogen . We also have pipelines that provide a safe, robust and reliable supply of hydrogen to the refinery and petrochemical industry around the world .

We have the experience, technology and resources to meet the hydrogen and clean fuel demands of today and tomorrow .

Efficient Design of New PlantsAir Products is continually looking for ways to improve the efficiency of facilities it designs for its own use, as well as for sale to customers.

In designing any facility, there are tradeoffs between initial capital investment and efficiency. Air Products works closely with its customers to promote the most energy efficient and cost effective facility design.

Some of the areas where we focus include:

• Matching the design of equipment, such as compressors and distillation columns, for each ASU to manage energy usage and costs

• Optimizing heat exchanger energy efficiency and integration with process cycles

• Developing process control systems that enable plants to operate at optimal efficiencies

We have built over 2,000 air separation plants and currently own and operate over 300. We learn from the retrofits of our own facilities how to optimize efficiencies and costs and apply what we learn to designing and troubleshooting our customers’ facilities.


ConserveEnvironmental StewardshipDisclosure on Management ApproachEnvironmental stewardship at Air Products means reducing our environmental impacts while helping our customers do the same. As noted in our EH&S policy, we are committed to comply with all applicable environmental laws and regulations to continually reduce the environmental impact of our operations and to develop and make products that can be managed in a sustainable manner. Implementing this policy, as well as managing the systems and tracking per-formance enables Air Products to drive environmental stewardship in the organization.

Our environmental values support Air Products’ EH&S Policy. We recognize that conducting our business in an environ-mentally responsible manner is critical to our success.

Our Environmental Values

We believe that:

• Environmental policies, programs and practices must be integrated into each business function and made a priority in the design of new processes and facilities and in the evaluation of new business opportunities.

• Pollution of air, water and land can be prevented, and waste can be eliminated.

• Where our past practices have created environmental conditions that require correction, we should responsibly correct them.

• We can supply products, or those of predecessor facility operators where we now have responsibility, and processes that can be manufactured, distributed, used, and recycled or disposed of in an environmentally

responsible manner, helping our customers to protect the environment.

• We must be an environmentally responsible neighbor for the benefit of our host communities and to retain our license to operate.

• We have a responsibility to protect the environment and conserve resources for future generations through sustainable development.

• Each employee must be given the training and tools needed to understand and support these environmental principles in his or her daily responsibilities.

We also believe that protecting the environment is a key element of sustainability. To that end, we work to minimize the environmental impacts of our operations and products and enable customers to do the same. As described in the following sections of this report, we set and track environmental sustainability goals aimed at reducing resource con-sumption and emissions. The Vice President, Environment, Health, Safety & Quality has responsibility for these goals and performance. Progress against these goals is routinely reviewed by our Sustainability Leadership Council and Board of Directors.

For commercial products, potential environmental impacts have been assessed through a product risk review process, which establishes risk management measures for products based on their intrinsic environmental hazards. Depending on the potential environmental impact, we can also conduct life cycle assessments of products and processes to identify areas for improvement.

We also evaluate environmental protection during plant design and operation. Capital expenditure authorizations, which are required to finance new projects, include environmental considerations. From an operations perspective, we have set specific goals to reduce emissions, water consumption, and energy use. We also established GHG reduction targets based on our verified GHG inventory.

Importantly, the majority of our products and services enable our customers to reduce their environmental impacts. Some examples include use of hydrogen by refiners to remove sulfur dioxide from crude oil, thus producing cleaner fuels that enable vehicles to operate more efficiently and reduce emissions of SOx, NOx and particulates; and water treatment technologies that improve water quality and reduce wastewater sludge.

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Environmental Sustainability GoalsWith a commitment to design and operate our facilities in a manner that reduces impact on the environment, we set a series of environmental sustainability targets to assure continued focus and progress in reducing greenhouse gas emis-sions, energy use, water consumption, other emissions and transportation impacts. We made good progress in all areas in 2016.


Energy Savings

Save energy by reducing use intensity by 2 .5% for ASUs, and 1 .5% for Hycos




9% improvement



Water Conservation


4% improvement

Waste Management


Water ChallengeAs part of our global commitment to conservation, we set a 10% water conservation goal for 2010 – 2015 . When we measured our progress in 2016, we found that we’d beat our own goal by 230%, having saved more than 22 billion gallons of water globally . To continue the momentum, all employees were invited to participate in a Global Water Challenge to identify ways we can improve water efficiency and increase the use of recycled water . One of our ASU plants in Malaysia identified a simple approach to improve water efficiency in our operations by shutting down the cooling water system during certain periods of operation .The team estimated the volume of water that could be conserved is about 175,000 cubic meters per month, or 2 .1 million cubic meters per year . With the cost of water set to rise by 30% in Singapore, the Malaysia facility is thinking ahead with innovative water conservation ideas .


Environmental Product and Process Innovations

G4-EN7We work to minimize the environmental impacts of our operations and products and enable our customers to do the same. Many of these offerings are described in the “Growth Opportunities” section of this report and on our website.

In 2016 we undertook many projects that will help Air Products and our customers reduce their environmental impact, including:

• Bringing on stream four air separation unit (ASU) trains in Yulin, China with state-of-the-art air compressors, as well as design and technology enhancements, to enhance energy efficiency and minimize operational costs for the customer.

• Reinvesting in our Carrington, UK facility and upgrading our coldbox technology that will improve environmental performance and enable increased production levels.

• Developing a new Freshline® Inline ingredient chilling solution to help food producers improve temperature control for dry foodstuffs leading to an increase in quality and reduction in waste.

• Launching our Hydrogen Services Business to help customers improve the reliability and productivity of their own hydrogen plants.

• Commercializing the first retail hydrogen fueling station in Japan with Nippon Steel and Sumikin Pipeline and Engineering Co. Ltd. The station will enable filling of vehicles that run on hydrogen and emit only water.

• Supporting a three-month trial of the world’s first refrigerated delivery truck for a UK supermarket that could cut CO2 emissions by 1.6 tonnes.

• Converting glass furnaces in Korea to oxy-fuel using new Cleanfire® HRe burner technology that enables reduced emissions, improved energy efficiency, productivity and glass quality.

• Rolling out the first LNG heat exchanger from our Port Manatee, FL facility to enable the use of stranded natural gas for energy.

We are also continuing to look for methods to produce hydrogen from renewable and low carbon sources, such as biomass. This builds on the many energy benefits of hydrogen, from removing sulfur from sour crude oil that enables refiners to meet fuel emissions standards, to increasing the amount of fuel that can be produced from every barrel of crude, to hydrogen’s use as an emission-free transportation fuel.

For our customers we provide a number of products and applications that help improve productivity and efficiency, thereby reducing costs and waste. Examples of these offerings include:

• Oxygen for oxyfuel combustion that reduces fuel consumption and GHG emissions; for de-bottlenecking catalytic cracking units and sulfur recovery units; for facilitating CO2 capture and sequestration; and for use in biomass combustion/gasification for renewable power and biofuels.

• Hydrogen for use as an emission-free transportation fuel; in the production of biofuels from renewable feedstocks; and to enable refiners to meet fuels emissions standards while increasing the amount of fuel that can be produced from oil.

• Nitrogen for unconventional natural gas production and increased demand for energy-integrated liquefied natural gas (LNG).

• High purity process gases and cleaning agents and services that support the drive for renewable energy sources.

• Gases for high efficiency lighting and insulation of windows to reduce energy losses from buildings.

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Maximizing Asset Value with Digital PlatformAir Products’ Industrial Gas Plant Support monitors and maintains more than 400 industrial gas facilities globally with each site having thousands of I/O points . Air Products has developed proprietary algorithms to monitor key performance indicators allowing us to run each site at the most cost effective level . In this way, Air Products assists our customers to enhance asset reliability and profitability on a frequency that works for them . The three levels of support consist of:

Plant Performance Advisor (PPA)

A regular analysis report is generated from information pulled from a secure digital cloud offering with key process points analyzed for preemptive analysis of abnormal operations and cost efficiency . This one-way system access ensures digital and physical systems are secure . The promise of PPA is to “know it before it happens .” Use of predictive analytics minimizes unplanned shutdowns and maintenance which results in savings on an ongoing basis .

Mentored Operations

Includes all the benefits of PPA, with near real time data process monitoring and reporting, training for the company’s operators, and “real time” operating support via a 1-800 number . This provides access to Air Products engineering expertise trouble shooting . Having direct access to Air Products Operations capabilities during a plant upset can improve outcomes and speed of resolution .

Operate and Maintain (O&M)

Air Products operates a customer’s industrial gas plant as it were part of our own fleet . With our knowledge and experience at the site, we seamlessly integrate the gas production into the process plan . This includes continuous monitoring, and oversight of all planned and preventative maintenance activities, while providing the latest in industrial gas plant expertise .

Compliance MattersG4-EN29, G4-EN31Air Products strives to comply with all applicable regulatory requirements. However, issues can arise at our plants, such as emergency shutdowns due to loss of power, which can cause compliance issues.

We track and internally report environmental compliance on a monthly basis. Incident reports, which are tracked in Event Management, are required on anything that can cause harm to the environment or anything that does not main-tain compliance with government regulations.

Environmental measures reported include:

• Notices of Violation (NOVs) – a deviation from a regulation or permit requirement that is formally cited by a government agency

• Key Performance Indicators (KPIs) – any emission or discharge that exceeds a regulatory or permit limit, the discovery of missing or expired permits, and NOVs


NOVs increased slightly in fiscal 2016 due to increased enforcement activities, particularly in Asia.

Fiscal Year NOVs KPIs

2016 10 27

2015 8 29

2014 17 55

In 2016, Air Products had one reportable spill that was due to fuel leakage. The spill was promptly addressed and reported to governmental authorities.

Environmental fines declined in 2016, with fines in fiscal 2016 totaling $7,300.

Fiscal Year Environmental Fines

2016 $7,300

2015 $14,100

2014 $150,510

During fiscal 2016, Air Products spent $12.2 million for operating expenses directly attributable to environmental protec-tion activities. We spent another $3 million in 2016 for capital improvements in our facilities to control emissions and reduce waste.

Remediation We accrue environmental investigatory and remediation costs for identified sites when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The potential exposure for such costs is estimated to range from $81 million to a reasonable possible upper exposure of $95 million as of September 30, 2016. The consolidat-ed balance sheets at September 30, 2016 and 2015 included an accrual of $81.4 and $80.6 million, respectively. The accrual for the environmental obligations includes amounts for Pace, Florida; Piedmont, South Carolina; and Pasadena, Texas locations which were a part of previously divested chemicals businesses.

Energy and Climate ChangeWe share society’s concerns about the impacts of climate change on our environment. And we’re focusing our develop-ment efforts on real solutions, bringing the breadth of our innovation, problem solving abilities, and proven gases and technology capabilities to bear.

After all, air and gases is “what we do.” We have a unique history and depth of experience as a leading gases and tech-nology solutions company, developing environmental and energy solutions for customers that have contributed to cleaner air and energy efficiency improvements for decades.

We believe the global challenge of greenhouse gases (GHG) should be addressed through a diverse mix of solutions. With the increasing use of fossil fuels and the world’s continuing need for competitively-priced power, we believe that the gases and technologies we supply will continue to improve efficiency and reduce GHG emissions in a variety of our end-use markets. Our most significant contributions to address the global challenge of climate change will be in developing clean energy technologies with the potential to reduce emissions across the energy supply chain through a variety of emission reduction options.

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From our leading position supplying hydrogen to refineries to make low-sulfur, cleaner burning fuels; to large-scale oxygen systems for solid fuel combustion and oil or clean coal gasification; to delivery systems to support a future hydrogen economy, we continue to invest in research and development (R&D) to develop products and processes that contribute to cleaner air and GHG mitigation. In 2016, half of our total R&D budget of $72 million was spent on products and processes that reduce GHGs and address other sustainability issues.

Meanwhile, as we grow our operations and help our customers do the same, we are committed to continually improving our own efficiency, acting on emission reduction opportunities, and improving our overall environmental performance.

Powering our PlantsG4-EN3, EN5-6Due to the nature of our operations, Air Products uses a significant amount of energy. Ultimately our energy consump-tion is driven by fulfilling our customers’ demands for our products.

In our ASUs, energy is used to compress air before it can be separated into nitrogen, oxygen and argon. Historically, electricity has been used for this purpose, however since 2014 we have seen an increase in the use of steam to drive the air compressors.

Another energy source, natural gas, is the primary raw material for hydrogen production via steam methane reforming (SMR). Natural gas is reacted with water in two “shift” reactions to form hydrogen, with carbon dioxide as a significant by-product. Hydrogen production via SMR is the most economic and efficient method for hydrogen production, and the main driver for Air Products’ Scope 1 GHG emissions.

Our direct energy consumption for 2016 was as follows:

Fuels MWh

Natural Gas and Refinery Off-gas combined 79,799,953

Electricity 19,960,052

Steam 11,406,304

Distillate fuel oil No 2 615,024

Motor gasoline 16,505

Jet kerosene 2,484

Against a calendar 2015 baseline, our 2020 intensity-based energy efficiency goals represented approximately 80 percent of our total global energy requirements. They include a 2.5 percent reduction in energy consumption at our large ASUs per quantity of gas produced, and a 1.5 percent reduction in fuel and feedstock consumption per quantity of hydrogen produced.

In 2016, ASUs realized a 0.65% reduction in energy intensity since 2015. Our HyCO units improved energy efficiency by 0.42%.

This success was realized through hundreds of projects aimed at improving energy efficiency and reducing emissions. These projects included the redesign, replacement and/or upgrade of equipment, changes to manufacturing processes, and facility improvements.


Driving ReductionsG4-EN30Air Products is focused on delivering productivity, energy efficiency, and helping our customers be more sustainable. Through our efficiency programs, which include replacement of pre-emission engines, increas-ing the amount of product loaded in each trailer, and improving miles per gallon through driver behavioral programs such as reduced idling, we have improved our distribution efficiency by 9%, and reduced CO2 emis-sions by the same amount.

Managing our GHG RisksG4-EC2Our Greenhouse Gas strategy is focused on managing the potential commercial risks of climate change and pursu-ing business growth opportunities. To that end, we are identifying opportunities to use our core technology and product strengths to bring cost-effective solutions to our customers to reduce their environmental impact while improving our ef-ficiencies to reduce emissions and other potential costs. This approach is reflected in our Climate Change Policy Statement.

New Trailer GenerationA recent purchase of 32 new liquid bulk (LB) trailers for the Northern Continent Industrial Gases (NCIG) business underlines our commitment to reducing our carbon footprint . For the first time when buying new LB trailers, we set out to optimize the equipment with aerodynamic packages and energy saving class “A” tires, which impact fuel consumption during our distribution activity . The new state-of-the-art trailers also include improved safety features, such as a Tailguard System for reversing, full LED lighting and maximized rear vision protection . To ensure increased productivity, the vessel size and tare weight of each trailer are fully optimized for the product and efficiency for each country . These cost-effective improvements demonstrate how sustainability finds its way into our daily business and decision-making, and help us get closer to our new goal to improve fleet efficiency and reduce CO2 emissions by 10% by 2020 .

http://www.airproducts.com/Company/Sustainability/environment-health-and-safety/environment/greenhouse-gases/where-we-stand.aspx

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Climate Change Policy Statement Climate change, energy consumption and water use are inextricably linked . Looking ahead, the world’s population is expected to grow to over nine billion people by 2050, while their needs for energy, water and food will increase even faster . For these reasons, maximizing the efficient use of the earth’s resources while minimizing environmental impacts is vital . Air Products’ long-standing strategy for responding to these challenges is straight forward . We enable our customers to reduce their environmental impact by providing cost-effective technologies and products that improve their energy and water efficiency and reduce emissions to the environment . At the same time, we strive to reduce energy and water consumption, as well as emissions, in our own operations through efficiency improvements and technological innovations . We are making real progress in these areas, as demonstrated by our environmental sustainability targets and related cost savings .

Evaluating Risks and OpportunitiesAir Products has evaluated the potential risks and opportunities of climate change and GHG legislation.

Our GHG Center of Excellence (COE) identifies and prioritizes climate change risks and opportunities based on potential financial and operating impacts, supports internal policy development, tracks regulations and legislation, and regularly updates management.

We also conduct detailed country risk assessments that consider GHG/Climate Change (among other) risks for new ge-ographies for expansion. Once risks are identified, the business unit or function must create plans to mitigate the risks.

Through Business Continuity Plans (BCPs), we assess and plan for the risk of business interruption due to natural disas-ter, supply chain disruptions, pandemics, etc.

GHG risks identified generally include those driven by changes in regulation, such as carbon taxes and Cap & Trade pro-grams, changes in physical climate parameters, such as increased weather events, and changes in other climate related developments. Any binding agreement that limits or taxes GHG emissions from Air Products’ facilities could impact our value chain and growth by increasing operating costs, both directly and through suppliers. We believe we will be able to mitigate some of these potential costs through contractual terms. Additional details can be found in our annual CDP Climate Change submission.


GHG Emissions MethodologyWe use the WRI/WBCSD Greenhouse Gas Protocol standard to define organizational boundaries, operational bound-aries, emission calculation methodologies (general and specific), sector-specific calculation protocols, and inventory quality aspects to ensure an accurate and representative inventory. Scope 2 emissions are calculated using the location-based method. An Inventory Management Plan, developed under the U.S. EPA Climate Leaders program, defines the work processes employed in managing our data, documents refinements to the emission estimation methodology, and guides any restatements of historical values based on objective criteria. The Inventory Management Plan and support-ing work process reference documents cover our Scope 1, Scope 2 and Scope 3 reporting activities.

The calculations and data are subjected to several levels of quality assurance to ensure completeness and accuracy of the resulting emissions inventory. The entire inventory process is documented and subsequently summarized in the “Annual GHG Inventory Summary and Goal Tracking Form,” originally developed by the U.S. EPA Climate Leaders Pro-gram. The Inventory Management Plan, the Annual GHG Inventory Summary and Goal Tracking Form emissions report, and all the underlying calculations and data compilations are then reviewed by an independent, third-party assurance firm, providing a further level of quality assurance.

WSP Environment & Energy (WSP) conducted a limited assurance review of our 2016 Scope 1, Scope 2 and Scope 3 green-house gas inventory in accordance with ISO 14064-3. WSP issued an Assurance Statement, attesting to Air Products’ adher-ence to the Greenhouse Gas Protocol and the absence of any material inaccuracy in the representation of the inventory data.

Understanding Our GHG Footprint G4-EN15-19For calendar 2016:Direct emissions (Scope 1) of 15.3 million metric tonnes were up 6% vs. prior year. This was due in large part to the com-missioning of a large facility and production increases.

Indirect emissions (Scope 2) of 14.9 million metric tonnes were up 4% vs. prior year. The increase was due to the start-up of new facilities as well as production increases. Several of these new facilities use customer-supplied steam in lieu of electricity for air compression prior to cryogenic distillation. In addition, the facilities are primarily located in Asia, where coal is the predominant source of energy for making steam. As a result, indirect greenhouse gas emissions for these plants are a significant portion of the company's indirect emissions. Air Products has limited ability to control these emissions as the energy source is selected and provided by our customers.

In 2016, we set a goal to reduce GHG emissions intensity by 2020 from a 2015 baseline. We achieved a reduction of 0.55% for GHG emissions intensity and are ahead of schedule on the goal.

In 2016 we continued reporting Scope 3 emissions, covering nine of the 15 Scope 3 categories. Total Scope 3 emissions for 2016 were estimated at 11.5 million metric tonnes. Most emissions were based on analyses completed with the life cycle assessment tool, SimaPro. Details about our Scope 3 emissions are available in our CDP Climate Change response.

Game Changing InnovationCampylobacter bacteria, often found on the surface of raw poultry, causes nine million cases of food poisoning annually in the European Union . It is the EU's most reported food-borne disease . A few years ago, the UK decided to tackle this public health issue with very stringent public health guidelines . Our new patented Freshline® SafeChill™ system uses super-chilled air to cool down the chicken surface resulting in a substantial reduction of harmful bacteria, while the quality of the product remains the same . This game changing innovation helps tackle a serious public health issue .

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Ozone Depleting SubstancesG4-EN20Air Products does not manufacture or sell pure chlorofluorocarbons (CFCs) or methyl bromide. We also do not manufac-ture hydrochlorofluorocarbons (HCFCs). We do sell different gas mixtures that contain small quantities of HCFCs and CFCs in cylinders for calibration of detection instruments, as allowed under the Montreal Protocol. In eight European countries, we are a refrigerant distributor but also recover, recycle and reclaim for destruction. We have phased out the use of CFCs in plant refrigeration systems at our facilities, while eliminating the use of HCFCs completely in Europe and at other plants when refrigerant systems are replaced.

NOx and SOxG4-EN21NOx emissions were lower in 2016 because of plant outages and permit changes.

Estimated SOx emissions were down slightly for the same reason plus the phase out of heating oil at the company's headquarters.

2016 2015 2014

NOx Emissions (MT) 1,501 1,571 1,555

SOx Emissions (MT) 71 74 99

Toxic Release Inventory (TRI) and VOCs1

G4-EN21Toxic releases in the U.S. decreased in 2016 due to lower air emissions. Hazardous air pollutants (HAPs) continued to decrease due to improved leak detection and repair systems.

TRI Releases* (millions of pounds)

2015 2014Air 0 .15 0 .27

HAPs* 0 .06 0 .11

Water 0 .00 0 .00

Land 0 .02 0 .01

Total 0 .17 0 .28*Hazardous Air Pollutants as defined by the EPA; subset of total releases to air

VOC releases in the U.S. and Europe decreased due to lower emissions to air and improved calculations.

2015 2014Total (millions of pounds) 0 .13 0 .17(1) TRI data for 2016 will be available in August 2017 .


Water StewardshipG4-EN8For our Industrial Gases businesses, the majority of our water consumption results from two uses – cooling the air com-pressors that are used in ASUs and completing the water shift reactions for production of hydrogen via SMRs.

For 2016, our global water withdrawal was 17 billion gallons, which was slightly lower than the amount withdrawn in 2015.

Water Withdrawal by Source Million Gallons 1,000 m3

Surface 0 .3 1,147

Groundwater 1 .1 4,349

Purchased water 14 .0 52,996

Over the same period, water consumption—including water pumped, piped or otherwise brought on-site for use in manufacturing and related activities but not including the netting-out of water discharges returned to their sources—was 15.2 billion gallons.

Gross Water Consumption (billions of gallons)

CY2016 1000m3

Americas 10 .2 38,611

Europe 1 .9 7,192

Asia 3 .1 11,735

Global 15 .2 57,538

In 2016, water consumption decreased 6% because of water savings initiatives at existing facilities, including water treatment optimization to reduce blow-down, and identifying and repairing leaks.

With respect to our 2020 goal to reduce water intensity by 5% (2015 baseline), we are ahead of schedule, realizing a 4% improvement in 2016.

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Recycled/Reclaimed WaterG4-EN10One of the ways we strive to reduce potable water consumption is through the use of “gray” water. This is water that has been used for another purpose and treated by Air Products prior to reuse in our facilities.

During calendar 2016, Air Products used over 150 million gallons of gray water at facilities in the U.S., helping make more potable water available to cities in drought-stricken California.

Conserving Water in California Large quantities of purified water are a critical component of the hydrogen manufacturing process . Following a similar project at the Wilmington HyCO facility last year, the Carson team identified new ways to conserve water by installing a more efficient reverse osmosis (RO) water purification system . The new system includes a higher efficiency two pass RO configuration and a recovery RO system, which purifies the reject water from the main system . This purified water is used to replace the cooling tower make up water, which previously came from the city . The new system also eliminates the need for water softeners, which created large volumes of wastewater during regeneration steps . The entire project resulted in a system efficiency improvement of 22% and saves approximately 40 .4 million gallons of water per year .

Water DischargeG4-EN22Globally, Air Products discharged approximately 2.4 billion gallons of water in 2016, primarily to treatment facilities and the original water sources. As in prior years, the direct water discharges from the majority of our industrial gases opera-tions were predominantly cooling tower blowdown streams with low chemical oxygen demand (COD) impact.

Water Discharges Billion gallons 1000m3

Discharged to treatment facilities 2 .4 9,085

Discharged directly to surface water 0 .9 3,231

Discharged directly to groundwater 0 .003 11

COD releases totaled seven tons for 2016. Our chemical facilities and HyCO operations typically generate higher COD wastewater streams; however, these are transferred to nearby regulated facilities where COD is effectively treated prior to the water being discharged to the environment.

Water Sources Significantly AffectedG4-EN9Water we use at our operating sites does not significantly affect any ecosystems, habitats or water sources. We continue to evaluate our water sources using the World Business Council on Sustainable Development’s Global Water Tool and as part of our participation in CDP’s annual water survey. Air Products has no known water discharges from operations with significant impacts on water bodies.


Managing WasteG4-EN23-24Based on internal record keeping, external reporting to agencies, and verification documents from approved waste disposal vendors, the weight of hazardous waste from operations globally, excluding recycling, was 1.5 million pounds during calendar 2016. The significant decrease in 2016 was due to decreased cylinder disposal in Europe and the reclas-sification of a large waste stream.

Hazardous Waste Disposal (million pounds) CY 2016 CY 2015 CY 2014

Landfill 0 .5 0 .2 0 .1

Incineration 0 .6 0 .2 0 .3

Recycling 3 .6 3 .4 3 .5

Treatment/Disposal 0 .3 2 .1 1 .3

Total 5.1 5.9 5.2

With respect to non-hazardous waste, Air Products has a relatively complete dataset for North America that is sup-ported by our national waste vendors. Air Products is continuing to analyze and assess information that is available for non-hazardous waste on a global scale.

North America Non-Hazardous Waste Disposal (million pounds)

2016 2015 2014

Total 8 .5 9 .0 8 .8

At our corporate headquarters, we reached a recycling rate of 59% during 2016 that included:

• 200 tons of metal

• 26 tons of cans, bottles, and glass

• 25 tons of cardboard

• 137 tons of paper

• 200 yd3 of leaf waste, and 47 tons of wood

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Care

Our Management Approach to SocietySafely and responsibly caring for each other, our communities and the global environment is a core value at Air Prod-ucts. We have a strong history of serving in the hundreds of communities where we operate throughout the world.

We believe healthy and vibrant communities are key to building a successful and growing business, and to our ability to attract, retain and develop talented employees. This belief shapes our community engagement and development efforts. The most senior position with responsibility for Society aspects is the Senior Vice President, and Chief Human Resources Officer.

We are committed to:

• Operate by the highest standards of integrity and ethi-cal behavior as the environment in which we do busi-ness continues to change.

• Be a leader in the areas of the environment, health and safety and comply with or exceed laws and regulations.

• Design and operate our plants and facilities to protect the environment and the health and safety of our work-force and the public.

• Develop and produce products that can be manufactured, distributed, used, and recycled or disposed of in a safe, secure and sustainable manner.

• Be an employer of choice, known as much for the way we value our employees, as for the quality of our prod-ucts, or our earnings.

• Be a part of our communities through time, talent, resource and financial contributions.

SafetyOf the Sustainability priorities identified under “Care,” safety rises to the top. We take a comprehensive approach to safety as described in “Safety: Our Top Priority,” which includes a detailed review of worker safety policies, pro-grams, goals and performance. Additional focus areas for safety include Process Safety, Transportation Safety and Product Safety.

Process SafetyProcess safety has been a key component of our Environmental, Health & Safety (EH&S) Program since the 1970s, and we have evolved into an industry leader in this area.

We believe we have a commitment to ensure:

• Our processes and products are designed to minimize risks from potential process safety incidents.

• Our operating facilities and delivery of our products to customers are conducted in a safe and responsible manner.


Transportation SafetyWith a global fleet that travels millions of miles each year, we’re focused on making sure our drivers get to their destina-tions – and back home – safely. A key measure of our transportation safety is preventable Vehicle Accident Frequency Rate (VAFR). Accidents are reported and tracked in Event Management, and communicated across the organization.

VAFR for the past three years are provided below:

Fiscal Year VAFR

2016 0 .87

2015 0 .80

2014 0 .87

When it’s time for some of our higher-hazard materials to leave a manufacturing facility, we use our Transportation Risk Assessment (TRA) process to evaluate potential transit risks. This analysis includes a Process Safety review, evaluating package specifications and sizes, shipment frequency, route, carriers, emergency response capability, and elements of safety in the supply chain.

Product SafetyDisclosure on Management Approach, G4-PR1, 3, 4, 9We are committed to the safe use of our products and ensuring they can be appropriately handled by our customers. The key to product safety is identifying and managing potential risks, which we do through our Product Risk Review process. We then communicate through Safety Data Sheets, labels, Safetygrams and other means. In addition, we have established a list of chemicals of concern that enable our product security commitments, which include customer verification and transportation tracking.

We aim for a cradle-to-grave life cycle management approach, incorporating EH&S protection into every step of the life cycle of our products. We have conducted life cycle assessments of our products and processes to identify the environmen-tal benefits of our offerings, as well as areas for possible improvement. And before a product can go to market, we put it through an Offering Development and Introduction (ODI) process, which looks at EH&S considerations at each stage of product development, from concept through commercialization.

We provide clear and easy to understand directions on the safe use and handling of our products, all of which comply with our own requirements and governmental regulations for hazard communication information, specifically data sheets and labels. We have completed the implementation of the Globally Harmonized System (GHS) to define, classify and consistent-ly communicate chemical hazards and safety information.

Labels are not enough; education is key to product safety performance. For many years, we have offered product and equip-ment training to our customers and published Safetygrams on the safe use and handling of our products, related equip-ment and services.

In 2016, we paid 15 fines totaling $3,900 related to the transportation of our products. We are not aware of any fines in fiscal 2016 resulting from the use of our products.

REACH (Registration, Evaluation and Authorization of Chemicals), the EU chemicals legislation in force since 2007, requires the registration of substances manufactured or imported in the EU above a certain volume. Since 2010, Air Products has registered eight substances related to Industrial Gas products under REACH.

We worked with a number of external stakeholders – regulatory authorities, customers, suppliers and co-registrants – to complete these registrations. Led by Product Safety, compliance required the assistance of employees from many internal functions, including Supply Chain, Operations, Controllership, Accounts Payable, Purchasing, Customer Service, Commu-nications, and Legal. Work is in progress to meet the next and final registration deadline (May 2018). We also put measure-ments and processes in place to maintain compliance beyond the 2018 deadline.

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Customer ‘Toasts’ Air Products’ Safety Expertise Air Products employees supported a winery customer in their goal to improve safety culture by training employees on oxygen properties and helping with an emergency response drill . We started with understanding the customer’s product needs and helping them take a leap forward on their safety journey . The site supervisor at our generated gas plant in Modesto, California, immersed himself in the customer’s company culture while remaining committed to our safety values . So it was natural that when the site supervisor suspected that their knowledge of oxygen — and its potential hazards — was incomplete, he suggested ways to improve safety in their process . The customer’s oxygen plant was located in the middle of the production facility, so response time in the event of an emergency is especially important . The site supervisor and other Air Products employees organized a training and drill exercise to raise product awareness .

Starting with basic content and format for customer training that our glass team uses with oxygen customers, our employees crafted a customized training package . Over the course of five days, 109 customer employees from all areas of the facility were trained on the properties of oxygen, its potential hazards, safety precautions and appropriate response if an incident were to occur . Now it was time to test with some “hands-on” activities . The drill scenario simulated a rupture in a liquid oxygen tank during trailer offloading . The Air Products team provided a hypothetical emergency, complete with LIN (liquid nitrogen) venting by professional driver, and another employee for realism . To make the drill extra challenging and truly test retention of learning, the event was staged on a Saturday morning, and neither Air Products or the customer’s managers were immediately available . The exercise was not only a success, it produced a new level of “safety energy” and resulted in a debrief that lasted longer than the drill itself . Employees made many suggestions for ideas to improve safety in other ways . As a reward, everyone enjoyed refreshments including some ice cream made using liquid nitrogen after the drill .

Security and PrivacyDisclosure on Management Approach, G4-PR8The security and safety of our employees and the communities in which we operate have always been a priority. In support of these efforts, and as part of Air Products’ Security Plan, we regularly communicate about the importance of security and expectations for employees when it comes to security matters.

Our formal security policies and standards address employee and facility security, product security, pipeline and land transportation security, Security Vulnerability Assessments (SVAs), workplace violence, and security services for which we contract, among other areas.

Our Security Approach includes: Security Personnel: Air Products employs security personnel globally, including a cyber investigation team, with much of our security staff having prior security, audit and law enforcement backgrounds . All third-party contracted security personnel are properly vetted to ensure professional services are provided around the globe .

Security Vulnerability Assessments (SVAs): Air Products has a regimented, global SVA program in place supported by trained personnel and global policies and standards . The SVA process systematically assesses the risks at each facility and determines security measures needed to ensure risks are properly mitigated .

Chemical Facility Anti-terrorism Standard (CFATS): Our security and process safety teams are actively engaged in the CFATS effort . We have completed the “Top Screens,” SVAs and Site Security Plans (SSPs) per the regulation and have implemented changes as necessary .

U.S. Customs Trade Partnership Against Terrorism (C-TPAT) Programs: Air Products is a certified and validated C-TPAT member, and we remain committed to the program . We consistently look to maintain the highest level of security and integrity across our supply chains .

Global Security Incident Reporting System: We have implemented a global incident reporting system to respond to suspicious behavior and other security-related activity . All incidents are recorded and investigated by appropriate internal resources, and when appropriate, are reported and investigated by external law enforcement agencies, including the regional Joint Terrorism Task Forces in the U .S .

Employee Travel Security Program: We use a web-based tracking tool to identify, locate and communicate with employees traveling anywhere in the world .

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Global Data PolicyAt Air Products we believe it is our responsibility to safeguard the personal information of our employees and all other individuals with whom we deal, including customers. We have established a Global Data Privacy policy to ensure that personal information is handled and stored in a secure manner. We also adhere to any additional data protection re-quirements in the countries in which we operate.

We have had no substantiated complaints regarding breaches of customer privacy and losses of customer data.

Global Health and WellnessWe provide a variety of educational, training, counseling and prevention resources to maintain and improve the mental and physical health of our global workforce.

Global Health and Wellness:

• Works closely with our EH&S organization to ensure global standards comply with governmental regulations on topics including handling of blood-borne pathogens, medical records management, emergency response, fire brigade and confined space entry rescue, among others.

• Provides wellness assessments and health coaching for employees in the U.S. and Canada, including a program for more than 800 professional Air Products drivers.

• Provides a program of travel medicine—including formal standards and policies for medical evaluations, training, administration of medications and/or immu-nizations, country-specific information and educational materials and more—to help employees and family members traveling internationally or working abroad.

• Collaborates with our Global Security and Corporate Travel organizations to ensure employees have the most current information they need to travel safely, including a dedicated Intranet portal for relevant information.

• Conducts global Influenza Awareness campaigns, pro-viding flu vaccines at employee work sites to promote seasonal influenza vaccinations. This has resulted in vaccination rates higher than national averages at many Air Products’ locations for the past several years.

• Collaborates with the Crisis Management Team in dealing with a health crisis event, such as a pandemic. Provides the Health Crisis Event Procedure at inception of a health crisis event, and engages in the decision to activate the Crisis Management System.

• Works collaboratively with employees, Human Resourc-es and management to determine reasonable accom-modations for employees living with a disability so that they can work safely and productively.

Reaching New Heights TogetherIn 2016, Air Products introduced a new employee wellness program called the ‘Global Corporate Challenge’ (GCC) . For 100 days, employees around the globe participated in a virtual 100 Day Journey around the world . The program was designed to increase awareness and promote the importance of physical activity, good nutrition and sleep, which can be challenging in our busy lives . The exercises and advice offered through the GCC program encouraged employees to establish good work-life balance . At the end of the 100-day challenge, it was determined that 4,599 employees in 657 teams walked a daily average of 13,000 steps daily .

Air Products CEO Seifi Ghasemi (second from left) walking with employees at the program's kick-off event.

This adds up to 5 billion steps, which covers the distance of nearly 3 .2 million kilometers, which is equivalent to walking around the globe 79 times!

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Labor Practices and Talent Management Disclosure on Management ApproachBeyond Policies: Programs to Turn our Commitments into Actions

Career and personal development of employees is a vital part of our business strategy. Air Products has a glob-ally consistent learning and development strategy to de-velop the talent we need and provide long-term career development for our people. This is deployed through a global learning management system and our Human Resources organization. We go beyond traditional train-ing to capture informal learning, best practices and the exchange of knowledge and experience with a variety of programs.

The Foundation: Supporting Respectful, Fair and Equitable TreatmentOur commitment to a respectful workplace is embodied in our Employee Code of Conduct, Human Rights, Equal Employment, and Diversity and Inclusion Policies.

• Our Code of Conduct for Air Products and its compa-nies reflects the most common business ethics chal-lenges and risks employees may face. Every individual is required to certify their understanding and complete mandatory training as a condition of employment.

• Our global Human Rights Policy, which was developed in alignment with the United Nations Global Compact, clearly states our commitment to fostering an environ-ment where human rights are respected and people are treated with decency and dignity in our operations and practices worldwide. The policy articulates our position relative to diversity, equal opportunity, harassment,

child labor, forced labor, freedom of engagement, em-ployee relations, compensation, employee security, and health and safety. We abide by all local laws, and often our internal standards are more stringent than govern-mental requirement.

• Our commitment to the fair and equitable treatment of people is reflected in our global Equal Employment Policy, and Diversity and Inclusion Policies. These state that all activities related to recruiting, hiring, training, compensation, benefits, promotions, transfers, layoffs, company-sponsored programs and all treatment at work shall be free of unlawful or unjust discriminatory practices.

Workforce Demographics

G4-10-11, 13, LA1, LA4In 2015, Air Products undertook the largest organizational restructuring in company history, creating more than 40 profit centers with individual incentive plans, and the empowered, decentralized structure that we have today. While these changes were necessary to create the financial strength required for future growth, it resulted in the elimination of a significant number of jobs, particularly as layers of management and the global structure on top of the local structure were eliminated to increase speed and simplicity.

As part of the restructuring, the Company consulted with Works Councils, Unions, employee groups and where necessary, employees directly in compliance with local labor laws. Separated employees were provided with severance and benefits in accordance with company policies and applicable laws. Many employees received outplacement support.

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At the end of fiscal year 2016, Air Products (including majority-owned subsidiaries) had approximately 16,000 employees, of which approximately 98 percent were full-time and of whom approximately 64 percent were located outside the United States.

Fiscal 2016

Americas 40%

Europe/ROW 30%

Asia 30%

Total Employees 16,000

Approximately 32% of Air Products’ workforce is represented by officially designated third-parties or designated/elected employee representatives. Underscored in our Code of Conduct and Human Rights Policy, Air Products respects employ-ees' voluntary freedom of association and right to collective bargaining.

Globally in 2016, Air Products’ total workforce was 77% male and 23% female. To better understand the impact of our focus on enhancing our gender diversity, it is important to break this number down further. Our emphasis on closing gaps in female representation in leadership has resulted in greater female diversity in our professional and leadership pipelines:

Diversity of our Career Development Program (new college hires)

• Air Products’ new hires into its Global Career Development Program, which consists largely of engineering graduates, were 78% male and 22% female.

Diversity of our Professional Talent Pipeline (excl. roles such as production, maintenance & drivers)

• 30% of our professional talent pipeline is female.

Diversity of our Management and Mid-Level Professional Pipeline

• 20% of our management and mid-level professional pipeline is female.

Diversity of our Senior Leadership

• 18% of our senior leadership pipeline is female.

Providing Employee Benefits G4-LA2We want to attract talented employees. And once they’re here, we want to keep them motivated and engaged.

Our total rewards approach includes:

• Market-based pay and merit-based incentives

• Equality-based long-term incentives

• Savings plan match and profit sharing plans

• Medical and dental insurance

• Flexible spending accounts for healthcare and childcare

• Healthcare insurance for same-sex domestic partners

• Paid vacation, holidays and sick days

• Life, accident, short-term and long-term disability insurance for eligible employees

• Retirement healthcare benefits and plans

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Education and Training G4-LA9, LA10Air Products has a global learning and development strategy to develop the talent we need and providelong-term career growth for our people. This is deployed through a global learning management system and our Hu-man Resources organization. We provide a significant amount of web-based course offerings with development tracks to ensure our employees are trained to comply with safety, specific job requirements, and professional development. Employee roles and responsibilities, as well as current and future business needs, determine training and learning requirements and opportunities. In addition to formal training and education, we also measure the time invested in learning through other events, such as hands-on training, teaching communities, action teams and knowledge transfer processes, which are available to all employees. On average, Air Products’ employees completed 32 hours of training in 2016.

When it’s time for our colleagues to retire, we honor their knowledge and contributions, and provide services that may help them transition through our Knowledge Retention and Transfer process, which uses a variety of tools to help retir-ees impart their knowledge. As colleagues approach retirement, we offer services and planning seminars on topics such as “financial readiness” and “the transition to non-working life.” Our Credit Union, in the U.S., also provides contracted services for retirement financial planning. Some of our retirees return to work on a part-time basis through our Supple-mental Employment Program (SEP), enabling them to work up to 1,000 hours within a fiscal year and collect a salary comparable to what they earned prior to retirement (assuming the work is comparable).

Air Products’ network of more than 1,500 retirees across the U.S. is an active part of our extended community. Members of Air Products’ Retirees Association, AIRPro, stay connected through a variety of means and have the opportunity to continue supporting our local communities through the Air Products (Retiree) Volunteers (APV) organization, which matches retiree volunteers with specific needs in their communities.

Everyone. Everyday.G4-LA11, LA12In 2016, Air Products introduced a new Talent Management framework designed to enable every employee to do their best work everyday. The new framework is aligned with our 4S strategy, and includes a commitment to diversity and inclusion.

Talent is our Competitive Advantage

What differentiates Air Products in the industrial gases industry is the commitment and motivation of our people. Their passion to be the best, and a positive attitude help to deliver outstanding customer service, while enabling us to sustain our industry leadership.

Our Talent Management Essentials

Our “Everyone. Everyday.” approach originates from our belief that every job is critical to our company, and it is essential that we provide the framework which allows long-term career development. The framework consists of three elements:

• Performance Development

– Performance Development is a contemporary approach to performance management. Our emphasis is on provid-ing employees with regular, on-going and in-the-moment feedback, recognition and coaching. We’ve stripped out the bureaucracy associated with more traditional approaches to refocus and reinvest time and energy into pro-viding every employee with the feedback they need to continue to develop and grow on-the-job. We are foster-ing a growth mindset across our company to fuel the empowerment critical to winning in our local and regional markets.


• Individual Career Planning

– Through Individual Career Planning, we provide employees and their managers with highly effective resources to ensure they are focused on the skills they need to excel in their current roles, and the capabilities needed for the future. Using these resources, employees can effectively own their development, while working closely with their managers for the support and coaching needed for longer-term career opportunities.

• Talent Reviews & Succession Planning

– We believe current leaders have a responsibility and obligation to develop future leaders. Through our new process, we’ve introduced measures to ensure we are investing in high potential people while creating a diverse leadership pipeline for critical roles across the organization.

Competencies: Fully Aligned to our 4S Culture

In addition, we’ve introduced a set of competencies to enable our employees to bring our 4S culture of Safety, Speed, Sim-plicity and Self-Confidence to life. The 4S culture is foundational to our Five-Point Strategy Plan, and therefore, helping our workforce master our competencies is a critical focus. There are nine competencies everyone must master and three additional competencies for those in leadership positions. The competencies are now fully woven into all three elements of “Everyone. Everyday.” and are also being integrated into our talent acquisition processes.

Investing in Excellence for our People Leaders

People leaders are key to developing our people and fostering our culture. They create the positive, engaging work envi-ronment for our colleagues. That’s why in 2016 we intentionally focused on investing in their skills to develop through lead and inspire by:

• Feedback & Coaching Workshops: People leaders across the company and at all experience levels participated in hands-on workshops to enhance their ability to provide high-impact feedback and coaching. Co-facilitated by Hu-man Resources (HR) and business leaders, these have been highly impactful at accelerating our shift to Performance Development.

• Refreshed Leadership Development Training: Both of Air Products’ flagship leadership development programs – one designed for first time managers, and one for experienced managers shifting into organizational leadership roles – were completely revamped to focus on mastering our leadership competencies and enhancing skills related to unleashing high performance, with an emphasis on inclusive leadership.

• 360 Feedback & Coaching: To further enable leaders to master our new competencies, we also introduced a new multi-rater feedback instrument, and certified HR professionals across the globe as development coaches to work one-one-one with our managerial talent to accelerate their personal and professional growth.

Recognition Moments

We recognize the power of recognition to reinforce great performance. Therefore, in 2016, we introduced our new global recognition program, Recognition Moments. This program allows for free flowing recognition that is tightly aligned to our 4S culture. Using a contemporary social media platform, employees and managers can recognize outstanding work in one of five categories: Safety, Speed, Simplicity, Self-Confidence and Inclusion. There are multiple benefits associated with the new platform, including the opportunity for managers to provide impactful feedback, create visible examples of role modeling behavior, and for peers and colleagues to build teamwork and inclusion by showing appreciation for a job well done.

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Diversity and Inclusion Vision & Goals

Diversity and Inclusion has always been highly valued at Air Products. In 2016, we raised the bar by setting a goal to be the most diverse and inclusive industrial gas company in the world. This goal is incorporated into our Sustainability 2020 goals and aligns naturally with our belief that talent is truly our competitive advantage. Given the solid evidence that diversity and inclusion drive top and bottom-line performance, we believe being the leader in Diversity and Inclusion is a key to being the leader in safety, profitability and customer service.

In addition to our vision, we have set two complementary goals:

• Diversity: Reflect the places we do business and fully utilize the diversity of the available talent pool. This includes working globally to increase the representation of women in leadership roles, and increasing the representation of U.S. minorities in our pipeline. Outside of the U.S., leadership is encouraged to set a meaningful goal related to minor-ity talent that is regionally relevant.

• Inclusion: Embed inclusive leadership practices to foster a respectful workplace where we routinely seek out diverse thinking and where people are empowered to confidently express their viewpoints. Our Inclusion goal reflects and aligns with both our 4S culture and our competencies.

Inclusion NetworkFostering an inclusive workplace for everyone’s success

Intentional Actions

By fully integrating Diversity and Inclusion into our Talent Management framework, our goal is to make Diversity and Inclusion the way we work. That, however, doesn’t limit us from taking intentional Diversity and Inclusion actions. We have four areas of focus:

• Innovative Recruiting:

– In the U.S., we have a diverse slate policy that requires every open job, internally and externally sourced, to have a diverse candidate slate.

– As a science and engineering based company, finding outstanding technical talent is essential to us. We have forged partnerships with organizations that are dedicated to developing a diverse engineering workforce, includ-ing the Society of Women Engineers, National Society of Black Engineers, Society of Hispanic Engineers and the National Action Council for Minorities in Engineering. We provide funding for scholarships to support the diversifi-cation of the overall pipeline, and actively source talent from each of these organizations.

• Investing in the Unique Development Needs of Diverse Talent:

– In 2016 and well into the future, our most significant opportunity to make an impact is in developing our existing talent base.

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– We are committed to ensuring diverse representation in our flagship leadership programs noted above. Additionally, we recognize it is imperative to address the unique development needs of women and minorities within our organi-zation. As such, every other year, we offer an eight-month long Leadership Development Program for Diverse Talent. The program consists of small learning circles of high performing and high potential talent nominated by their management. The circles are facilitated by a male and female senior leader, using Lean In educational materials.

– We also utilize our external diversity partnerships to provide unique development opportunities for colleagues who are nominated to attend as ambassadors to present workshops, recruit talent and attend several professional development seminars.

– We encourage and support mentoring through events such as Speed Networking.

• Leadership Engagement and Accountability:

– Every Business and Functional leader is asked to have a Diversity Action Plan. The development of these plans is embedded into the annual Talent Review process, and is tracked quarterly during talent drills.

– Each quarter, Business and Functional leaders, along with their senior HR partners meet with the head of Diversity and Inclusion/Talent Management to review their diversity data and discuss their Diversity Action Plans and op-portunities.

– Air Products has developed a REACH Inclusive Leadership Model, based on external best practice research. Manag-ers are provided with the opportunity to develop their skills through workshops and training on unconscious bias and inclusive leadership. They also have access to toolkits that allow them to facilitate conversations with their teams on inclusion topics ranging from respect, to enhancing teamwork, by addressing assumptions about others to interrupting biases in decision-making.

• Fostering Inclusion:

– As noted above, it is essential that we foster a 4S culture, and inclusion is critical to that. Having an environment where everyone can contribute fully is essential to our locally empowered business model. We need everyone to make their voices heard when they know there is a better way to increase safety, reliability, productivity and cus-tomer service.

– Air Products has seven Employee Resource Groups (ERGs) that came together in 2016 to form the Inclusion Net-work. The Inclusion Network is committed to fostering an inclusive workplace for everyone’s success. The Network kicked off with a global webcast that included four Ted Talk-like development workshops on topic ranging from “Recognizing Privilege” to “Strategic Mentoring.” Further examples of fostering inclusion include:

• Spectrum, our LGBTQ ERG, developed and hosted a series of Ally Workshops to go beyond building awareness by teaching inclusion skills. Participants in Allentown and Hersham worked through real life scenarios and built new ways to engage with colleagues to be more fully inclusive. Additionally, they produced a video series featuring leaders discussing why they are allies, and followed with an employee engagement campaign that encouraged employees to write personal stories on why they are inclusion champions. The ERG’s work helped Air Products earn 100% on the Human Rights Campaign’s Corporate Equality Index.

• The Women’s Success Network (WSN), worked with the Diversity and Inclusion team, to host a successful Man-ager’s as Diversity and Inclusion Champions Workshop, highlighting the power of managers to make a difference by committing to one or two actions to intentionally develop diverse talent.

The new Talent Management framework and the Diversity and Inclusion vision and goals were introduced in 2016 to fully align our human capital activities around ensuring talent truly is our competitive advantage.

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Corporate Equality IndexIn 2016, Air Products earned a perfect score on the 2017 Corporate Equality Index (CEI), a national (U .S .) benchmarking survey and report on corporate policies and practices related to lesbian, gay, bisexual and transgender (LGBT) workplace equality, administered by the Human Rights Campaign Foundation . The efforts in satisfying all of the CEI's criteria resulted in a 100 percent ranking and earned the designation as a Best Place to Work for LGBT Equality, making Air Products one of 517 major businesses which earned 2017's top mark . In all, CEI rated 1,043 businesses in the report, which evaluates LGBT-related policies and practices including non-discrimination workplace protections, domestic partner benefits, transgender-inclusive health care benefits,

competency programs, and public engagement with the LGBT community . This recognition from the Human Rights Campaign affirms that Air Products is a company that attracts and retains the best talent, and one that strives to earn the respect of our customers and communities .

Customer Sustainability G4-PR5Customers come to Air Products for innovative thinking and solutions to their most pressing business challenges. It’s our commitment to quality, safety, fairness, mutual respect and integrity that keep them coming back.

Key sustainability concerns of our customers vary by business, but typically focus on how our products can help them improve energy efficiency and reduce environmental impact. Several of these offerings are noted in this report under section G4-EC1 and on our website.

In 2016, customers avoided 11 million metric tonnes of CO2e emissions due to the use of our Sustainable Offerings. And one of our 2020 sustainability goals is to continue enabling our customers to reduce their CO2 emissions.

The people closest to our customers manage the relationships. Each of our divisions solicits regular feedback (at least annually) and manages customer satisfaction independently.

These efforts and our products keep customers coming back, for example in 2016, over 97% of our sales revenue in Eu-rope was from was from recurring customers.

Our marketing organizations and regional marketing managers promote, protect and enhance the value of our brand. We regularly benchmark respected external organizations for best practices and follow consistent guidelines for global promotional materials to ensure clarity and consistency of our message and identity standards.

We had no instances of noncompliance, sanctions, warnings or fines regarding regulations for marketing communica-tions during 2016.


Estimating Avoided EmissionsFor several years, Air Products has quantified potential emissions avoided by its customers through its Sustainable Offerings, and reported many of these offsets through the CDP (formerly Carbon Disclosure Project) Climate Change questionnaires .

Most recently, Air Products has estimated the potential CO2 emissions avoided for 19 industrial gas products and applications . This process included:

• Identifying the Sustainable Offering

• Determining the base case against which the offering would be compared, for example, the energy leakage from windows using argon and krypton for insulation was compared to energy leakage of windows with air insulation

• Developing product- and application-specific calculations, based on standard protocols and emissions factors (where available), to estimate potential emissions avoided

• Applying sales data to these calculations to estimate the potential emissions avoided on a product/application basis

Air Products estimates that the potential emissions avoided by industrial gas customers for these products and applications, excluding hydrogen for cleaner burning fuels, totaled 11 million metric tonnes of CO2e in 2016 .

The largest contributor to these savings was the use of oxygen in combustion . With respect to hydrogen, the Company has thoroughly examined methods in the public domain for estimating CO2 avoided due to ultra-low sulfur fuels and diesel particulate filters and has concluded that further analysis is needed to estimate the avoided emissions .

Ethics and Integrity Disclosure on Management Approach, G4-56-57Air Products’ values – accountability, customer focus, innovation, integrity, respect and sustainability – underpin our policies and practices companywide.

Our Values Accountability - Being responsible for our actions and delivering results for the enterprise

Customer Focus - Creating value for our customers

Innovation - Cultivating ideas to deliver improvement and growth

Integrity - Behaving ethically and being true to our words

Respect - Treating all people with dignity and valuing the collective power of team work

Sustainability - Safely and responsibly caring for each other, our communities and the global environment

Our integrity is a priceless asset. It is something that has been held in the highest esteem, and we must continue to up-hold it. As stated in our Employee Code of Conduct, we will not sacrifice our integrity for any reason, not profit, and not ease of doing business. There are no exceptions.

Our “Commit to Integrity” program provides practical guidance for managing company risks and compliance. The pro-gram consists of our Code of Conduct document, related policies, standards, and guidelines and ongoing learning oppor-tunities and communications. It’s the responsibility of each employee to understand the Company’s expectations and take the training that applies to his or her work. It’s also the employee’s responsibility to uphold the ethical business standards on which individual and the company’s reputations depend. That means reporting wrongdoing or expressing concerns when someone becomes aware. Our IntegrityLine reporting numbers, IntegrityOnline web site, and our orga-nization contact list are tools to use to take such steps when approaching a leader is not comfortable or practical.

Air Products’ Employee Code of Conduct and related policies and training apply to employees of all entities that are controlled by the Company (>50% ownership). The Code is available in 23 different languages, which enables internal and external stakeholders to have access to the Code in their local language. We have also published additional support-

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ing documentation entitled "Reporting Instructions and Contacts" to help stakeholders who want to report a violation of our Code.

All employees must comply with the Code of Conduct; it is a condition of employment. Code of Conduct training is required of all employees and is delivered in local languages. In addition, local senior managers make periodic presenta-tions to reinforce the message as part of normal leadership and team communications.

Compliance with Code of Conduct training requirements is reviewed regularly with the Chief Compliance Officer and quarterly with senior business and functional leaders who are responsible for addressing delinquencies. Code of Conduct training and compliance certifications are done in alternating years biennially. Air Products' appraisal process includes consideration of integrity and ethical conduct, as well as compliance with training requirements. We have a standing committee dedicated to monitoring compliance with key legal and ethical training requirements.

Because of the importance of ethics and integrity, we established goal for 2020 that requires 100% of employees to be trained in, and certified to, Air Products’ Employee Code of Conduct and ensure all allegations of misconduct are re-viewed and closed.

Anti-Corruption ProgramsG4-SO3, SO4, SO7The company continued to expand its Anti-Bribery and Corruption initiatives in 2016. Due to the increasing attention of government authorities on bribery and corruption related to third-parties, the Company has updated its third-party intermediary risk assessment and revised the associated review process. The process determines the potential for brib-ery and corruption of third-parties who are acting on behalf of Air Products. Factors considered in the risk assessment include the service being provided, location of services and payment, how and how much the third-party will be paid and if the third-party is engaged with or needs to interact with a government official. Due diligence requirements are based on the risk assessment. All information on the third-party intermediaries is stored in a third-party database.

Employees are identified as candidates for Foreign Corrupt Practices Act (FCPA)/Anti-bribery training based upon the position they hold and where they are located. Of the required employees targeted globally for FCPA training, we have achieved a >99% completion rate. We have broadened this training to include global anti-bribery and anti- corrup-tion (ABAC) awareness, and 96% of employees with this requirement have completed the ABAC training. Both of these training sessions are available in 16 languages to facilitate understanding of these important topics. We also require all employees to complete multi-unit courses on our Code of Conduct and Competition Law.

In accordance with our Policy on Political Contributions and Expenditures for Lobbying, Gifts and Travel for Govern-ment Officials, we will not use corporate funds to make political disbursements to candidates in any country or region, even where allowed by law. However, we do use our resources to advance matters of public policy by educating public officials about our business. We also use our resources to facilitate employee contributions.

Air Products uses a Political Action Committee (PAC), whose membership comprises certain eligible employees who donate to it on a purely voluntary basis. The PAC makes contributions—reported to the Federal Election Commission and applicable state agencies—to U.S. candidates who support the Company’s business interests. In 2016, Air Products’ PAC disbursements totaled $164,900. The Corporate Governance and Nominating Committee of the Board of Directors monitors the Company’s political activities through periodic reports from members of management responsible for the activities.

We take a strong position on all violations of our Code of Conduct. We maintain telephone and web-based allegation systems designed to be compliant with local regulations and rulings. Stakeholders who wish to make allegations of vio-lations in accordance with the Sarbanes-Oxley Act or our Code of Conduct can report their allegations, consistent with local regulations, to their local management, functional specialist or to our allegation system. All reported incidents and the related investigations are reviewed quarterly with our Corporate Investigation Council and annually with the Compliance and Risk Committee, which is comprised of senior executives. Similarly the Audit Committee of our Board of Directors reviews all material incidents.


Legal actions for anti-competitive behavior, antitrust and monopoly practices which are deemed to be material are re-ported as required in our Form 10-K (page 16-17), Item 3, Legal Proceedings, for our fiscal year ending September 30, 2016.

Reporting MechanismsG4-58Air Products has multiple mechanisms for reporting potential violations of integrity and other corporate policies, thefts, workplace violence and regulatory inquiries. Reporting allegations of misconduct is completed primarily through our IntegrityLine via phone or online. Directions for reporting misconduct and the IntegrityOnline website are available in the languages most commonly spoken by our employees.

Effectiveness of our Code of Conduct is evaluated using allegations of code violations filed through the IntegrityLine and other direct reporting methods (HR, EH&S, Security incident management) and are reviewed by the executive level Corporate Risk and Compliance Committee and the Investigation Council.

All allegations are appropriately reviewed and closed.

Regulatory ComplianceAir Products strives to comply with all applicable regulations and laws. We have systems and personnel to identify what regulations apply to the company, and to ensure the systems and requirements are in place for compliance. We also have processes to audit our compliance systems and performance.

Occasionally an inspector will find an issue with an aspect of our business or operations. These findings are reviewed, addressed as required, and closed. Environmental, transporta-tion and other fines are noted elsewhere in this report.

Because the number and complexity of regulations and laws according to which we must operate are continually increas-ing, we have a goal for 2020 to continuously improve our compliance systems and performance, and will report on our progress in future reports.

Working here. Living here. Giving here. Disclosure on Management Approach, G4-SO1The theme for Air Products community outreach efforts, “Working here. Living here. Giving here.” embraces three impor-tant roles that the company and its employees have played in our communities worldwide for more than 75 years.

• Working here: We provide nearly 16,000 jobs to support families and communities worldwide while maintaining a commitment to be the world’s safest industrial gas company.

• Living here: We embrace our responsibility to be a good neighbor. We uphold the highest environmental and sus-tainability standards and provide resources to strengthen educational, environmental and welfare institutions.

• Giving here: Many not-for-profit institutions around the world receive grants from our foundation to support their important missions. And our employees donate significant hours toward making these organizations stronger and more vibrant.

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Working here.Living here.Giving here.

Making a difference here!

Working here.

With operations in more than 50 countries around the globe, Air Products is an integral part of local, regional, national and international economies. Our employees work and live close to our facilities, providing not only economic benefit to the community, but also a deep commitment to contribute to the health and vitality of that community.

For the well-being of our neighbors, our customers, our employees and the world around us, we are committed to being the world’s safest industrial gas company.

As colleagues, we are driven to succeed by collaborating on work that is challenging and makes a difference in the world. We are a corporation committed to developing people and where professional aspirations can be nurtured and realized.

Living here.

Air Products and its employees embrace the opportunity (and responsibility) to be an integral part of the communities and neighborhoods where we operate. After all, the stronger the local community, the stronger and more stable the platform from which we can run our business.

We care deeply about protecting the economic, environmental and social fabric of our communities as evidenced by our multiple awards for sustainability, including the Dow Jones Sustainability North America Index for 2016/2017, which ranked us among the top 20 percent of companies in our industry for corporate sustainability performance. And we were again named to Corporate Responsibility Magazine’s 100 Best Corporate Citizens List (2016), which recognizes pub-lic companies with outstanding corporate responsibility performance.

As part of the community, we are involved with a variety of educational efforts including inner city school districts, vocational and STEM education and advanced training and internships at colleges and universities.

Living here means acting with integrity, purpose, compassion and consideration for our neighbors.


Giving here.

Air Products and its employees have a long tradition of philanthropy and volunteerism.

Our people give deeply of their time and talents, too. Air Products employees served on over 150 nonprofit groups, includ-ing the United Way, which recognized us as one of only 126 Global Corporate Leaders for the United Way Worldwide.

We have also become a national leader in “Skills-based Volunteering,” whereby employees go out into the community to share their professional competencies (e.g., strategic planning, IT, human resources) and help nonprofits be more business-savvy and competitive.

“Working here, Living here, Giving here” is more than a simple set of words. It is a guiding principle that not only con-tributes to the success of Air Products, but also actively contributes to the fulfillment of our employees. And that’s a win-ning combination for our company and our communities.

We are active members in our communities, and are striving to have a real impact. To that end, we have established a 2020 sustainability goal to enhance our ability to measure the positive impacts of our employee and community en-gagement.

Supporting STEMAir Products has supported STEM - Science, Technology, Engineering and Math - programs for decades . We align our efforts in accordance with the people we're aiming to help, including SPARK Interest (K-12), BUILD Capabilities (college/university students) and SHARPEN skills (workforce programs) . In 2016 we supported over 130 programs globally, touching over 15,000 people .

Our liquid nitrogen (LIN) demonstrations shown at right are a favorite of elementary school children and communities throughout the globe .

Supplier Sustainability Disclosure on Management Approach, G4-12, LA14, LA15, HR1, SO9Air Products’ supply chain varies by business, and as a result, suppliers are managed independently by the business.

For our Industrial Gases businesses, energy – as electricity, natural gas or steam – is the primary raw material we use. In many cases these utilities are provided by our customers, and we include this supply as part of our energy and environ-mental reporting. We work closely with our energy suppliers to ensure that the energy we need is reliably available. We also use a significant amount of steel, aluminum and capital equipment to build the facilities we own and operate, or sell.

We purchase more than $6 billion in materials, equipment, power and services annually from over 30,000 suppliers and service providers worldwide. We use local suppliers where appropriate and economically fiesible. We want to work with vendors who share in our commitment to ethical business practices and who can help us deliver value to our customers.

Suppliers are required to abide by and conform to our global Code of Conduct in their business dealings with us and to support sustainability through the principles outlined in Air Products’ Expectations of Suppliers.


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To ensure that our standards are met, we:

• Prequalify suppliers using commercial and technical evaluations

• Evaluate supplier proposals considering energy efficiency and cost factors

• Conduct reviews for critical suppliers

• Employ a rating system to encourage continuous improvement and recognize achievement

• Monitor ongoing performance and product quality via assessments

• Follow defined procedures for noncompliance and remediation

• Develop joint corrective action plans

• Organize joint continuous improvement events

Our Supplier Relationship Management (SRM) program focuses on identifying and managing critical suppliers within our supply chain. Our sourcing specialists use a Segmentation Model Tool to identify key suppliers, taking into consider-ation factors such as supplier annual spend, financial strength, potential for innovation, ease of finding substitutes and switching, and overall business impact on Air Products.

Various processes are in place to identify supplier sustainability risks, including safety requirements for all contractors, review of environmental risks, business continuity planning, a conflict minerals program, and supplier risk assessments. Supplier qualification includes the use of a scorecard system, which includes metrics by category and key performance indicators. Sustainability is included under the supplier risk category, and specifically references supplier environmental and social programs and measures. Numeric data with respect to screening of suppliers and contractors is not tracked. All suppliers and contractors are expected to comply with the Human Rights principles of our Global Code of Conduct.

Air Products has completed initial human rights assessments for its Industrial Gases operations and supply chains. From a supply chain perspective, we have examined human rights risks relative to procurement spend and supplier location using country-specific risk information from third-parties. For the highest risk countries, the specific human rights risks have been reviewed for potential impact, and are not considered significant. However we are reviewing our supplier due diligence process as a result of this assessment to determine if and what improvements are needed.

We are not aware of any significant actual and potential negative impacts or fines for labor practices in our supply chains in 2016.

That being said, we have a 2020 sustainability goal to ensure that 100% of new supplier agreements include Human Rights and Conflict Minerals clauses.

Supporting Diverse Suppliers Our Supplier Diversity Program in the U .S . is tied to our commercial activities that support U .S . Federal Government purchase requirements . Annually, we develop a Commercial Subcontracting Plan with specific performance targets and other actions—including attendance at trade fairs and involvement in local business groups and councils—which our procurement organization undertakes to encourage small and small disadvantaged businesses . Our Supplier Diversity Program provides us with a competitive advantage as a result of gaining different perspectives on new ideas and the introduction of innovative products and processes . More information about our procurement policies and practices is available on our website .


http://www.airproducts.com/~/media/Files/PDF/company/conduct-brochure-en-ie-oct2015.pdf?la=en

http://www.airproducts.com/~/media/Files/PDF/company/supplier/supplier-diversity-brochure.PDF


Conflict Minerals

G4-LA15Air Products has invested significant effort to understand the potential for Conflict Minerals in our supply chain. These four minerals – tungsten, tantalum, tin and gold (also called 3TG) – are used in a variety of applications, from hearing aids and pacemakers, to laptop computers and GPS devices. About 10% of the world’s 3TG comes from “conflict regions,” countries in and around the African Congo, where the mining industry has been used to fund armed conflict and hu-man rights abuses. The remaining 90% is sourced from conflict-free regions, such as Peru and China. In other words, the term “conflict” can be misleading – not all Conflict Minerals come from conflict regions.Each year we report on our prog-ress in identifying Conflict Minerals in the supply chain. Our 2016 Conflict Minerals report is available on our website. Following are highlights of our progress in 2016:

• Equipment products containing Conflict Minerals are typically assembled from a large number of generic components.

• For 2016, we identified over 5,000 different equipment product components which potentially contained necessary Conflict Minerals, and 458 suppliers or manufacturers of these components to be contacted to determine the presence and origin of any Conflict Minerals.

Air Products contacted the suppliers and 51% responded to the request, as compared to 52% for 2015. Suppliers who did not respond or whose responses were incomplete were repeatedly contacted, at least four times, to obtain more infor-mation. Of the responses received, 50% reported that their products did not contain Conflict Minerals originated in the covered countries; and 50%, reported that the source of the Conflict Minerals was undetermined.

http://www.airproducts.com/~/media/Files/PDF/company/governance-conflict-minerals-report.pdf

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GRI Content Index G4-LA15

General Standard Disclosures Page Description

External Assurance

Strategy and Analysis

G4-1 2-3, 25 Vision and strategy No

G4-2 6, 25-28 Business impacts, risks and opportunities No

G4-3 4, 22 Organizational profile, name No

G4-4 4, 22 Brands, products and services No

G4-5 5, 23 Headquarters location No

G4-6 5, 23 Countries of operation No

G4-7 23 Ownership No

G4-8 22 Markets served No

G4-9 5, 22-23 Organizational scale No

G4-10 12, 14, 61-62 Employee demographics No

G4-11 14, 62 Collective bargaining No

G4-12 23, 72 Supply chains No

G4-13 23, 63 Significant changes No

G4-14 29 Precautionary principle No

G4-15 31 Charters subscribed to No

G4-16 31 Organizations subscribed to No

Identified Material Aspects and Boundaries

G4-17 23 Entity description No

G4-18 32-34 Defining report content No

G4-19 33 Material aspects No

G4-20 34 Aspect boundaries within the organization No

G4-21 34 Aspect boundaries outside the organization No

G4-22 24 Restatements No

G4-23 34 Significant changes in scope and boundaries No

G4-24 32-35 Stakeholder engagement No

G4-25 32 Stakeholder groups No

G4-26 33 Approach to engagement No

G4-27 33-34 Key topics and concerns No


General Standard Disclosures Page Description

External Assurance

Report Profile

G4-28 24 Report profile No

G4-29 24 Reporting period No

G4-30 24 Date of most recent report No

G4-31 24 Contact point No

G4-32 24 In accordance option No

G4-33 24, 41, 52 Assurance No

Governance

G4-34 29-30 Board structure No

G4-36 29-30 Executive responsibility No

G4-38 29 Governance body composition No

G4-39 29 Executive officer No

G4-40 30 Board nomination process No

G4-41 30 Board conflicts of interest No

G4-42 29 Governance on organization purpose No

G4-45 29 Board involvement in risks No

G4-46 29 Board review of risk management No

G4-48 30-31 Committee reviewing report No

G4-49 30 Communicating concerns to board No

G4-51 30 Remuneration for Board No

Ethics and Integrity

G4-56 15, 21, 68-69 Values, principles and norms No

G4-57 68-70 Advice mechanisms No

G4-58 70 Reporting mechanisms No

77

Standard Specific Disclosures Page Description Omissions

External Assurance

Category: Economic Performance (GROW)

Material Aspect: Economic Performance

G4-DMA 40 Disclosure on Management Approach No

G4-EC1 20, 41 Direct economic value generated and distributed Yes

G4-EC2 42-43, 50-52 Climate change risks and opportunities Employee compensation data is not publicly disclosed .

No

Category: Environmental (CONSERVE)

Material Aspect: Energy

G4-DMA 44-45 Disclosure on Management Approach No

G4-EN3 9, 20, 48-49 Energy consumption within the organization No

G4-EN5 20, 49 Energy intensity No

G4-EN6 9, 49 Reduction of energy consumption No

G4-EN7 46 Reductions in energy requirements of products and services No

Material Aspect: Water


G4-EN8 10, 21, 54 Total water withdrawal by source No

G4-EN9 55 Water sources significantly affected by withdrawal of water No

G4-EN10 55 Percentage and total volume of water recycled and reused No

Material Aspect: Emissions


G4-EN15 10, 20, 52 Direct GHG emissions (Scope 1) Yes

G4-EN16 10, 20, 52 Indirect GHG emissions (Scope 2) Yes

G4-EN17 10, 20, 52 Other indirect GHG emissions (Scope 3) Yes

G4-EN18 20, 52 GHG emissions intensity No

G4-EN19 52 Reduction of GHG emissions No

G4-EN20 53 Emissions of ozone-depleting substances No

G4-EN21 11, 20, 53 NOX, SOX, and other significant air emissions No

Material Aspect: Effluents and Waste


G4-EN22 10, 55 Water discharge No

G4-EN23 11, 20, 56 Total weight of waste by type and disposal method Air Products currently tracks hazardous waste on a global basis .

No

G4-EN24 48 Total number and volume of significant spills No



External Assurance

Material Aspect: Compliance


G4-EN29 21, 48 Environmental fines No

Material Aspect: Transport


G4-EN30 11, 50 Significant impacts of transporting products No

Material Aspect: Overall


G4-EN31 48 Environmental protection expenditures and investments No

Category: Social (CARE)

Sub-category: Labor Practices and Decent Work

Material Aspect: Employment


G4-LA1 14, 21, 62 Number and rates of new hires and employee turnover All requested data is not tracked in HR system .

No

G4-LA2 62 Employee benefits No

Material Aspect: Labor and Management Relations


G4-LA4 61 Minimum notice periods regarding operational changes No

Material Aspect: Occupational Health and Safety


G4-LA6 13, 21, 38-39 Safety performance No

Material Aspect: Training and Education


G4-LA9 21, 63 Average hours of training Training requirements are based on job function . Training hours by gender is not tracked .

No

G4-LA10 63 Programs for skills management and learning No

G4-LA11 63-64 Employees receiving regular reviews No

79


External Assurance

Material Aspect: Diversity and Equal Opportunity


G4-LA12 14, 21, 30, 62 Composition of governance bodies and employee demographics

No

Material Aspect: Supplier Assessment for Labor Practices


G4-LA14 73 Suppliers screened for labor No

G4-LA15 73-74 Significant negative impacts for labor practices No

Sub-category: Human Rights

Material Aspect: Investment


G4-HR1 73 Human rights clauses or screenings Percentage/ number of agreements with human rights clauses not tracked in 2015 .

No

Sub-category: Society

Material Aspect: Local Communities


G4-SO1 21, 71-72 Operations with local community engagement No

Material Aspect: Anti-corruption


G4-SO3 69 Operations assessed for risks No

G4-SO4 69 Communication and training on anti-corruption No

Material Aspect: Anti-competitive behavior


G4-SO7 69 Cases of anti-competitive and anti-trust behavior No

Material Aspect: Supplier Assessment for Impacts on Society


G4-SO9 72-73 New suppliers screened with society criteria No

80


External Assurance

Sub-category: Product Responsibility

Material Aspect: Customer Health and Safety


G4-PR1 58-59 Product health and safety No

Material Aspect: Product and Service Labeling


G4-PR3 58-59 Product and service information No

G4-PR4 58 Product incidents No

G4-PR5 67 Customer satisfaction No

Material Aspect: Customer Privacy


G4-PR8 60 Customer privacy breaches and complaints No

Material Aspect: Compliance


G4-PR9 58 Fines for non-compliance No

tell me moreairproducts.com

© Air Products and Chemicals, Inc ., 2017 (40791) 900-17-010-US

The information contained herein is offered without charge for use by technically qualified personnel at their discretion and risk. All statements, technical information and recommendations contained herein are based on tests and data which we believe to be reliable, but the accuracy or completeness thereof is not guaranteed and no warranty of any kind is made with respect thereto.

For more information , please contact us at:

Corporate Headquarters Air Products and Chemicals, Inc . 7201 Hamilton Boulevard Allentown, PA 18195-1501 T 610-481-4911 (Outside the U .S . and Canada +1-610-481-6799) F 610-481-5900

Regional Head Offices Air Products PLC Hersham Place Technology Park Molesey Road Walton-on-Thames Surrey KT12 4RZ UK T +44-1932-249200 F +44-1932-249565

Air Products Chemicals Europe B .V . Kanaalweg 15, P .O . Box 3193 3502 GD Utrecht Netherlands T +31-30-2857100 F +31-30-2857111

Air Products Asia, Inc . 2503-5, 25/F 148 Electric Road, North Point Hong Kong T +852-2527-1922 F +852-2527-1827

Air Products Asia, Inc . 2 International Business Park #03-32 The Strategy Singapore 609930 T +65-6494-2240 F +65-6334-1005

Air Products and Chemicals (China) Investment Co . Ltd . East Wing, Floor 1 Building #88, Lane 887 Zu Chongzhi Road Zhangjiang Hi-Tech Park Shanghai, 201203 P .R . China T +86-21-38962000 F +86-21-50805555

Indura S .A . Av . Las Americas 585 Cerrilos Santiago, Chile ZC-9230117

http://www.airproducts.com

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