Maintaining high standards, living social commitment

SFS acts with foresight for the future and takes its economic, environmental and social responsibility seriously. In doing so, it not only increases the value of the company in the long term, but also helps promote sustainable development with its forward-looking solutions.

The precautionary principle plays a central role at SFS, which is why it is also enshrined in the Group’s Corporate Principles and Code of Conduct. SFS understands sustainability to be the right balance between economic success, environmental friendliness and social responsibility while respecting human rights and taking the needs of current and future generations into account. This attitude lays the foundation for the Group’s partnership with the various stakeholder groups. However, the precautionary approach also serves to reduce or prevent negative impacts on society and the environment that have been or could be caused by the company.

Taking responsibility, exemplifying values, fulfilling duties
By fulfilling its duties of care with regard to human rights, SFS protects its employees, creates attractive jobs, lives up to its social responsibility and remains sustainably competitive in the long term. As a signatory of the UN Global Compact, SFS is committed to the United Nations’ Declaration of Human Rights. In keeping with this commitment, SFS completes the new predefined questionnaire that simultaneously replaces the progress report required in the past. Among other things, the principles of the UN Global Compact relate to the protection of international human rights and the abolition of forced and child labor. SFS wants to prevent or reduce the risk of human rights violations to the greatest extent possible, both at its own locations and within its entire supply chain. We are therefore increasingly incorporating human rights into our business processes and have been working with our suppliers since 2023 to conduct regular assessments that incorporate both social and ecological criteria ( see also Environment: Initial assessment successfully conducted with pilot group).

The Code of Conduct of the SFS Group specifies the guidelines that apply to all management bodies and employees of SFS in their work environment. It is based on integrity as well as fair and ethical conduct. It is a central element in efforts to promote SFS’s sustainable, positive development in a continuously changing international environment. Our Corporate Principles, another core compliance element, contain a description of the cornerstones of the Group’s corporate culture: partnership, commitment, community, success, change. Both documents were translated into more than ten languages and their contents were communicated and made available to all employees. They form the basis of the values embraced by SFS.

To ensure compliance with the requirements of the Code of Conduct, SFS has established an effective compliance system that focuses on the following seven topics:

• Anti-corruption
• Antitrust law
• Insider trading
• Data protection
• Foreign trade compliance
• Information security
• Personal integrity violations

In practice, the system comprises various elements such as guidelines, regular training, induction of new employees, e-learning campaigns, periodic newsletters, integration of compliance-related topics into internal audits, annual reporting on the Code of Conduct and a central reporting office for employees and external partners.

By including compliance obligations and the requirements of the UN Global Compact in the General Terms and Conditions of Purchase, the SFS Standards are applied to suppliers as well; similarly, corresponding provisions are incorporated into contracts with sales partners.

The Tax, Legal & Compliance unit is responsible for implementing compliance-related topics.

Compliance with the requirements of the Code of Conduct for employees is monitored as part of annual reporting on the Code of Conduct for employees. All companies report relevant incidents to the Group Compliance Officer. In the year under review, the Group Compliance Officer and the local compliance officers received and examined a total of 25 reports of compliance violations. In addition, specific compliance-relevant topics are examined sporadically within the scope of internal audits. The results of the reports and audits form the basis for the annual compliance report submitted to the Board of Directors.

Compliance audits conducted to identify weak spots
SFS conducted internal compliance audits at its companies in the US and Italy for the first time during the year under review. The audit contents primarily address the Code of Conduct as well as the internal and external reporting channels available to the employees in the event of compliance-related or any other type of violations. The results of the investigation varied and can be summarized as follows:

• One of the four companies audited was certified as having a very high level of awareness of relevant compliance-related issues. Its employees have extensive knowledge of the SFS Code of Conduct and also know the reporting channels available in the event of compliance violations.
• One other company scored satisfactorily with respect to its knowledge of the Code of Conduct. It was discovered, however, that certain details were unclear concerning both the assignment of responsibilities and the reporting channels available. The problem identified has since been resolved through newly defined responsibilities as well as more intense communication with employees.
• Another unit audited was rated as “good” in terms of its management’s knowledge of compliance-related issues. Measures aimed at increasing employees’ familiarity with the Code of Conduct were implemented with the goal of raising employees’ awareness of the importance of the Code of Conduct.
• The fourth company audited, which is still a fairly recent addition to the SFS Group, understandably revealed a low level of awareness of the Code of Conduct. The weak points were identified with the help of the audit and suitable countermeasures were implemented. These included communication campaigns and regular training sessions on the content of the Code of Conduct as well as on the reporting channels available in the case of or in suspected cases of compliance and human rights violations.

Overall, the introduction of the internal compliance audit was perceived as being an efficient tool for identifying opportunities and risks in this area. As a result and in connection with the financial audits, compliance audits will be conducted at SFS companies in two more countries in 2023.

Potential business risks assessed
In addition to assessing SFS’s opportunities and risks in the areas of compliance and human rights, the Group Executive Board and Board of Directors also conduct a regular and comprehensive evaluation of the Group’s key business risks. To that end, a holistic risk assessment is conducted at least once a year in which the relevant risks are systematically classified according to the likelihood of occurrence and the severity of the potential consequences. Potential risks and actions to contain these risks were examined once again during the year under review. This review focused on the following issues:

• Ensuring the energy supply and how to deal with higher energy and commodity prices
• Loss of data and impairment of going concern due to cyberattacks
• Warranty risks due to recalls
• Geopolitical instabilities
• Compliance risks
• Currency fluctuations

Critical issues taken into account through involvement of stakeholder groups
To ensure that we consider more than merely the internal perspective when assessing both critical issues as well as potential opportunities and risks for the company, we get our external stakeholder groups involved on a regular basis. We offer our stakeholders a variety of different platforms for expressing critical concerns and discussing them with us. These include meetings with customers and vendors, investor and analyst calls as well as a wide range of internal and external events (Sustainability Day, Annual General Meeting, etc.). We also receive valuable feedback on critical issues through our cooperation with academic institutions, communication with the media and surveys conducted among employees. The summary below shows the issues addressed in this context in 2022 and how we dealt with them:

Customers/analysts/investors: Enquiries regarding positioning and ESG measures
During the year under review, SFS was contacted by customers on numerous occasions with self-disclosure requests as part of suppliers’ ESG assessments. Customers, analysts and investors alike also expressed an interest in sustainability ratings. A major customer in the automotive industry also requested that SFS disclose its CO₂ consumption via the online questionnaire provided by the CDP (Carbon Disclosure Project). All requests were assessed and responded to individually.

A future expansion of reporting through the inclusion of additional ratings is likely. SFS completed the CDP’s questionnaire and shared it with the customer in question. Since it was late to participate, however, SPS has not yet received a score. SFS will participate in the CDP rating process again in 2023 and the score will be open to public inspection.

Employees: 120 sustainable development ideas were submitted in connection with the Group’s Sustainability Day
A Sustainability Day was held at the Heerbrugg (Switzerland) site for the first time in 2022. There, some 800 employees visited a variety of different booths where they learned new information about topics related to healthcare and occupational safety as well as SFS’s current sustainability initiatives. Employees submitted 120 ideas to the “sustainable improvements” contest. All ideas submitted were then assessed and commented on by a six-person jury with members from different areas of the company. Everybody who submitted an idea received feedback about whether and how their proposal for improvement will be implemented. Around 90% of the ideas were aimed at improving environmental protection and reducing emissions. The proposals can be broken down into four sub-categories:

• Ideas for protecting biodiversity
• Ideas related to digitalization and material savings
• Ideas related to sustainable nutrition
• Ideas on the use of renewable energies or saving energy

The other 10% fall into the social realm and mainly broach topics such as improvements to childcare, work/life balance and social engagement options.

While the lion’s share of the ideas from the environmental realm were handled in 2022, the main focus in 2023 will be on implementing improvement projects from the social realm.

Population/media: Questions about the planned wind turbine
SFS published two media releases on the planned wind turbine in the year under review and conducted a public information event on the project. Numerous questions regarding the height of the planned turbine, the possibility of noise emissions for residents as well as landscape and animal protection were asked both at this event and through media inquiries.

The turbine has a hub height of approx. 135 meters, which makes it much more efficient and nature-friendly than multiple smaller turbines. The electricity produced will be fed directly into the existing infrastructure. The planned turbine will be able to comply with the noise protection requirements prescribed by law without any issues and the electricity will be produced precisely where it will be used. No further encroachments on nature are needed. The potential for conflict with flying animals is extremely low. The wind turbine’s shadow module ensures that the turbine is deactivated automatically if it were to impact the residential area. For other answers to frequently asked questions, please refer to the online FAQs (only in German). Additional questions can be submitted via the contact form.

Investors/media: Business activities with Russia and/or Belarus
Numerous countries have imposed sanctions against Russia and Belarus due to Russia’s war on Ukraine. To what extent does this impact SFS?

While SFS had generated sales with customers from Russia and Belarus until the sanctions were introduced, they were minor compared to the Group’s total sales. As soon as the sanctions had been introduced, SFS discontinued these business activities in accordance with the regulations issued.

Investors/analysts: Reshoring/nearshoring supply chains
More businesses are shifting their focus back to regional supply chains due to the COVID-19 pandemic, which impacted global supply chains quite heavily. Is this also the case at SFS?

SFS was able to maintain a high delivery capability overall in the past few years and thanks to good positioning and material availability, has been able to supply customers reliably most of the time. The “local-for-local” strategy of supplying customers locally based on local production facilities resulted in a good level of delivery readiness and was/is a vital competitive advantage.

External ratings show fields of action where improvements can be made
Even if the evaluation by external rating agencies and standardized assessments often only paint a fairly one-sided picture of a company’s sustainable development, SFS actively deals with them and makes an effort to incorporate the identified fields of action into its sustainability strategy. SFS’s ratings in 2022 were as follows:

• Ecovadis: Bronze Rating, 54/100 (valid until April 2023)
• Inrate, zRating: 67/100
• MSCI: AA
• SAQ 5.0: B86 (rating for headquarters in Heerbrugg, Switzerland)

• UN Global Compact: Rating pending
• CDP: Rating pending, SFS is having the CDP questionnaire officially evaluated for the first time in 2023