ITEM 1. BUSINESS

Item 1.  BUSINESS Company Background Avery Dennison Corporation (“Avery Dennison” or the “Company,” “Registrant,” or “Issuer,” and generally referred to as “we” or “us”) was incorporated in Delaware in 1977 as Avery International Corporation, the successor corporation to a California corporation of the same name incorporated in 1946. In 1990, we merged one of our subsidiaries into Dennison Manufacturing Company (“Dennison”), as a result of which Dennison became our wholly-owned subsidiary and in connection with which we changed our name to Avery Dennison Corporation. You can learn more about us by visiting our website at www.averydennison.com. Our website address provided in this Annual Report on Form 10-K is not intended to function as a hyperlink and the information on our website is not, nor should it be considered, part of this report or incorporated by reference into this report. Business Overview and Reportable Segments Our businesses produce pressure-sensitive materials and a variety of tickets, tags, labels and other converted products. We sell most of our pressure-sensitive materials to label printers and converters that convert the materials into labels and other products through embossing, printing, stamping and die-cutting. We sell other pressure-sensitive materials in converted form as tapes and reflective sheeting. We also manufacture and sell a variety of other converted products and items not involving pressure-sensitive components, such as fasteners, tickets, tags, radio-frequency identification (“RFID”) inlays and tags, imprinting equipment and related solutions, and shelf-edge pricing, productivity and consumer engagement solutions. Our reportable segments for fiscal year 2021 were: • Label and Graphic Materials (“LGM”); • Retail Branding and Information Solutions (“RBIS”); and • Industrial and Healthcare Materials (“IHM”). In 2021, our LGM, RBIS and IHM reportable segments made up approximately 65%, 26% and 9%, respectively, of our total net sales. In 2021, international operations constituted a substantial majority of our business, representing approximately 75% of our net sales. As of January 1, 2022, we operated nearly 200 manufacturing and distribution facilities in over 50 countries. For information regarding the impacts of the COVID-19 pandemic on our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7). LGM LGM manufactures and sells Fasson ® -, JAC ® -, and Avery Dennison ® -brand pressure-sensitive label and packaging materials, Avery Dennison ® - and Mactac ® -brand graphics, and Avery Dennison ® -brand reflective products. LGM’s business tends not to be seasonal, except for certain outdoor graphics and reflective products. Pressure-sensitive materials consist primarily of papers, plastic films, metal foils and fabrics, which are coated with internally-developed and purchased adhesives, and then laminated with specially-coated backing papers and films. They are then sold in roll or sheet form with either solid or patterned adhesive coatings in a wide range of face materials, sizes, thicknesses and adhesive properties. A pressure-sensitive, or self-adhesive, material is one that adheres to a surface by press-on contact. It generally consists of four layers: a face material, which may be paper, metal foil, plastic film or fabric; an adhesive, which may be permanent or removable; a release coating; and a backing material to protect the adhesive from premature contact with other surfaces that can also serve as a carrier for supporting and dispensing individual labels. When the products are to be used, the release coating and protective backing are removed, exposing the adhesive so that the label or other face material may be pressed or rolled into place. Because they are easy to apply without the need for adhesive activation, self-adhesive materials can provide cost savings compared to other materials that require heat- or moisture-activated adhesives, while also offering aesthetic and other advantages over alternative technologies. 1 Table of Contents Label and packaging materials are sold worldwide to label converters for labeling, decorating and specialty applications in the home and personal care, beer and beverage, durables, pharmaceutical, wine and spirits, and food market segments. When used in package decoration applications, the visual appeal of self-adhesive materials can help increase sales of the products on which the materials are applied. Self-adhesive materials are also used to convey variable information, such as bar codes for mailing or weight and price information for packaged meats and other foods. Self-adhesive materials provide consistent and versatile adhesion and are available in a large selection of materials, which can be made into labels of varying sizes and shapes. Our graphics and reflective products include a variety of films and other products that are sold to the architectural, commercial sign, digital printing and other related market segments. We also sell durable cast and reflective films to the construction, automotive and fleet transportation market segments and reflective films for traffic and safety applications. We provide sign shops, commercial printers and designers a broad range of pressure-sensitive materials that allow them to create impactful and informative brand and decorative graphics. We offer a wide array of pressure-sensitive vinyl and specialty materials designed for digital imaging, screen printing and sign cutting applications. In LGM, our larger competitors in label and packaging materials include UPM Raflatac, a subsidiary of UPM Corporation; Lintec Corporation; Ritrama SpA, a subsidiary of the Fedrigoni Group; Flexcon Corporation, Inc.; and various regional and local companies. For graphics and reflective products, our largest competitors are 3M Company (“3M”) and the Orafol Group. We believe that entry of competitors into the field of pressure-sensitive adhesives and materials is limited by technical knowledge and capital requirements. We believe that our technical expertise, size and scale of operations, broad line of quality products and service programs, distribution capabilities, brand strength and product innovation are the primary advantages in maintaining and further developing our competitive position. RBIS RBIS designs, manufactures and sells a wide variety of branding and information solutions to retailers, brand owners, apparel manufacturers, distributors and industrial customers. This segment experiences some seasonality, with higher volume generally in advance of the spring, fall (back-to-school) and holiday shipping periods. In recent years, as the apparel industry has moved to more frequent seasonal updates, this segment has experienced less seasonality. The branding solutions of RBIS include creative services, brand embellishments, graphic tickets, tags, and labels, and sustainable packaging. RBIS’ information solutions include item-level RFID solutions; visibility and loss prevention solutions; price ticketing and marking; care, content, and country of origin compliance solutions; brand protection and security solutions; and Vestcom®-brand shelf-edge solutions. More broadly, our Intelligent Labels platform, a high-value product category that includes our item-level RFID solutions, offers solutions that enable our customers to gain greater visibility into their supply chains, improve inventory accuracy, increase automation and labor efficiency, reduce waste and enhance the consumer experience. In RBIS, our primary competitors include Checkpoint Systems, Inc., a subsidiary of CCL Industries Inc.; R-pac International Corporation; and SML Group Limited. We believe that our global distribution network, reliable service, product quality and consistency, and ability to serve customers consistently with comprehensive solutions close to where they manufacture are the key advantages in maintaining and further developing our competitive position. IHM IHM manufactures and sells Fasson ® -brand and Avery Dennison ® -brand tapes and other pressure-sensitive adhesive-based materials and converted products, mechanical fasteners and performance polymers. Our pressure-sensitive adhesive-based materials are available in roll form and in a wide range of face materials, sizes, thicknesses and adhesive properties. These materials and converted products are used in non-mechanical fastening, bonding and sealing systems for various automotive, electronics, building and construction, general industrial, personal care, and medical applications. IHM also manufactures and sells Yongle ® -brand tapes for wire harnessing and cable wrapping in automotive, electrical and general industrial applications. The mechanical fasteners are primarily precision-extruded and injection-molded plastic devices used in various automotive, general industrial and retail applications. For industrial and healthcare materials and converted products, IHM’s primary competitors include 3M; Tesa-SE, a subsidiary of Beiersdorf AG; Nitto Denko Corporation; and numerous regional and specialty suppliers. For IHM’s fastener products, there are a variety of competitors supplying extruded and injection molded fasteners and fastener attaching equipment. We believe that entry of competitors is limited by technical knowledge and capital requirements, and that our technical expertise, size and scale of operations, broad line of high-quality, cost-effective solutions and product innovation are the most significant advantages in maintaining and further developing our competitive position. 2 Table of Contents Research, Development and Innovation As a global leader in materials science, we seek out opportunities in the markets we serve and innovate to develop and introduce new products and solutions. Our years of experience creating solutions for customers and our core capabilities in materials science, engineering and process technology enable us to drive continuous innovation throughout our industries. Our innovation efforts focus on anticipating market and customer needs, and applying technology to address them. Our investment in innovation goes beyond our research and development efforts, with initiatives that aim to accelerate growth, expand margins and ensure customer success by leveraging scalable innovation platforms and delivering sustainability initiatives and cutting-edge technologies. Many of our new products result from our research and development efforts. These efforts are directed primarily toward developing products and operating techniques and improving productivity, sustainability and product performance, often in close association with our customers or end users. These efforts provide intellectual property that leverages our research and development relating to adhesives, as well as printing and coating technologies, films, release and ink chemistries in LGM and IHM. We focus on research projects related to RFID, external embellishments, and data and digital solutions in RBIS and medical technologies in IHM, in each case for which we have and license a number of patents. Additionally, our research and development efforts include sustainable innovation and design of products that advance the circular economy, reduce materials and waste, use recycled content, and extend product end-of-life or enable product recycling. Acquisitions and Venture Investments In addition to our investments to support organic growth, we have pursued complementary and synergistic acquisitions. During 2021, we acquired CB Velocity Holdings, LLC (“Vestcom”), an Arkansas-based provider of shelf-edge pricing, productivity and consumer engagement solutions for retailers and consumer packaged goods companies, for $1.47 billion, as well as ZippyYum, LLC (“ZippyYum”), a California-based developer of software products used in the food service and food preparation industries, and JDC Solutions, Inc. (“JDC”), a Tennessee-based manufacturer of pressure-sensitive specialty tapes, for an aggregate of approximately $43 million. During 2021, we also made three venture investments in companies developing innovative technological solutions that we believe have the potential to advance our businesses. For information regarding our acquisitions, see Note 2, “Acquisitions,” in the Notes to Consolidated Financial Statements contained in our 2021 Annual Report, which is incorporated herein by reference. Patents, Trademarks and Licenses The loss of individual patents or licenses would not be material to us taken as a whole, nor to our operating segments individually. Our principal trademarks are Avery Dennison, our logo, and Fasson. We believe these trademarks are strong in the market segments in which we operate. Human Capital Resources Our Global Workforce With approximately 75% of our 2021 net sales originating outside the U.S. and approximately half of our net sales originating in emerging markets (Asia Pacific, Latin America, Eastern Europe and Middle East/Northern Africa), our employees are located in over 50 countries to best serve our customers. Approximately 84% of our employees at year-end 2021 were located outside the U.S. and approximately 68% were located in emerging markets. The charts below show our global employee population by region and operational function. Over 21,000 of our approximately 36,000 employees at year-end 2021, representing approximately 58% of our global workforce, were in Asia Pacific, serving our customers in that region. By function, approximately 67% of our global workforce worked in the operations of our manufacturing facilities worldwide or in positions directly supporting them from other locations. Workforce by Region: Asia Pacific 58 % North America 20 Europe 17 Latin America 5 Workforce by Function: Operations 67 % Non-Operations 33 3 Table of Contents Talent & Development Attracting, developing and retaining a pool of diverse and highly-skilled talent is critical to our ability to continue achieving sustainable growth. We provide ongoing support and resources to our teams worldwide to ensure that our employees’ skills evolve with our business needs, industry trends and human capital management best practices and enable increased productivity, peak performance and career growth. We have robust talent review and succession planning processes, which define and provide individually targeted development opportunities for our team members. We emphasize on-the-job development and coaching, and also provide facilitator-led and direct-access on-line training, special projects and, in some cases, cross-functional or cross-regional work assignments. Diversity, Equity & Inclusion (DE&I) Continuously advancing an inclusive culture and equitable practices that enable and empower a diverse workforce is essential to our remaining at the forefront of materials science and manufacturing. In 2021, we leveraged our Regional DE&I Councils, Employee Resource Groups (ERGs) and broader organization, to better understand where we were, our strengths and our opportunities, and from there define where we aspired to be. These efforts included both qualitative and quantitative inputs from across the enterprise, including a formal inclusion assessment survey conducted by an independent third party through which we heard from approximately 15,000 of our employees worldwide, a three-year rolling pipeline analysis focused globally on women and in the US also on Black/African American, Asian and Hispanic/Latinx employees. After a great deal of organizational exploration, reflection and dialogue, we crafted and deployed our go-forward DE&I strategy. In 2021, females in manager and above roles increased from 34% in 2020 to 35% in 2021. We also introduced a formal, global DE&I infrastructure under the leadership of a global DE&I Director. This team is dedicated to helping advance our efforts around DE&I and guide and support the efforts of our ERGs and Regional DE&I Councils. ERGs continue to be an integral part of our DE&I strategy. ERGs create opportunities for employees to learn and experience greater belonging. ERGs bring together employees who have shared interests and a common desire to make our company a more open and inclusive workplace. ERGs serve as a sounding board and valuable way for employees to collectively amplify their voices. Our ERGs currently include 24 groups focused on driving inclusion and advancement for women, employees of color, LGBTQ+ employees, veterans and others. Pay & Benefits Our compensation philosophy is to offer market-based, competitive wages and benefits in all markets where we compete for talent – all of our employees were paid at least the applicable legal minimum wage, and 96% of our employees were paid above the applicable legal minimum wage at year-end 2021. Pay is positioned around the market median, with variances based on knowledge, skills, years of experience and performance. In addition to base wages, our compensation and benefit programs — which vary by region, country and business unit — include short-term incentives, long-term incentives (e.g., cash- or stock-based awards), employee savings plans, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work arrangements, and employee assistance programs. We regularly evaluate pay equity, making adjustments where needed. In 2020, we expanded our review to include race/ethnicity in addition to gender, and in 2021, increased the scope to include non-managerial professional employees as well as shop floor employees in the U.S. Workforce Health & Safety Safety is one of our highest priorities and we work hard to ensure our manufacturing facilities, distribution centers and administrative offices focus on safety, so that anyone working in or visiting one of our locations feels and remains safe from injury. Our global Recordable Incident Rate of 0.21 in 2021 was significantly lower than the Occupational Safety and Health Administration manufacturing industry average of 3.1 in 2020 (the most recent available industry average). Employee Engagement Because we believe that an engaged workforce is a more innovative, productive and satisfied workforce, promoting retention and minimizing employee turnover, we annually conduct a global employee engagement survey. Our business and functional teams use the results of our survey to identify and implement actions to address potential 4 Table of Contents opportunities for improvement. While employee engagement is the result of many factors, we believe strong, encouraging and open leadership, as well as a continued effort to foster a collaborative, supportive culture, leads to strong workforce engagement. We want all our employees to strive to be their best and to feel that they have the support necessary to deliver exceptional results for themselves and our company. Manufacturing and Environmental Matters We use various raw materials – primarily paper, plastic films and resins, as well as specialty chemicals purchased from various commercial and industrial sources – that are subject to price fluctuations. Although shortages can occur from time to time, these raw materials are generally available. In 2021, while our supply chains were tight, we worked to actively manage through a dynamic supply and demand environment in which demand across the majority of our businesses and regions was strong while raw material, freight and labor availability was constrained. We produce a majority of our self-adhesive materials using water-based emulsion and hot-melt adhesive technologies. A portion of our manufacturing process for self-adhesive materials utilizes organic solvents, which, unless controlled, could be emitted into the atmosphere or contaminate soil or groundwater. Emissions from these operations contain small amounts of volatile organic compounds, which are regulated by federal, state, local and foreign governments. We continue to evaluate the use of alternative materials and technologies to minimize these emissions. In connection with the maintenance and acquisition of certain manufacturing equipment, we invest in solvent capture and control units to assist in regulating these emissions. We have developed adhesives and adhesive processing systems that minimize the use of solvents. Emulsion adhesives, hot-melt adhesives, and solventless and emulsion silicone systems have been installed in many of our facilities. Based on current information, we do not believe that the cost of complying with applicable laws regulating the emission or discharge of materials into the environment, or otherwise relating to the protection of the environment, will have a material effect upon our capital expenditures, consolidated financial position, results of operations or competitive position. For information regarding our potential responsibility for cleanup costs at certain hazardous waste sites, see Note 8, “Contingencies,” in the Notes to Consolidated Financial Statements contained in our 2021 Annual Report, which is incorporated herein by reference. Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed with, or furnished to, the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on our investor website at www.investors.averydennison.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. This website address is not intended to function as a hyperlink and the information located there is not, nor should it be considered, part of this report or incorporated by reference into this report. We also make available on the investors section of our website under Corporate Governance – the following documents as currently in effect: (i) Amended and Restated Certificate of Incorporation; (ii) Amended and Restated Bylaws; (iii) Corporate Governance Guidelines; (iv) Code of Conduct, which applies to our directors, officers and employees; (v) Code of Ethics for our Chief Executive Officer and Senior Financial Officers; (vi) charters of the Audit and Finance, Talent and Compensation, and Governance Committees of our Board of Directors; and (vii) Audit Committee Complaint Procedures for Accounting and Auditing Matters. These documents are also available free of charge upon written request to our Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203. Reports filed with or furnished to the SEC may be viewed at www.sec.gov. 5 Table of Contents