Geberit AG - Annual Report 2015

8.1 Economic Performance (EC)

Management Approach - Economic Performance

As a key objective of the company, the economic performance of the Geberit Group is under the strategic control of the Board of Directors and the operational management of the Group Executive Board (aspects economic performance, market presence, indirect economic effects).

With its innovative solutions for sanitary products, Geberit aims to achieve sustained improvement in the quality of people’s lives. Its proven, focused strategy for doing so is based on four pillars: Focus on sanitary products, Commitment to innovation and design, Selective geographic expansion and Continuous optimisation of business processes.

For detailed explanations of the four strategic pillars, see Business Report > Business and financial review > Strategy and goals.

For a discussion of the economic position of the Geberit Group, see Business Report > Business and financial review.

G4-EC1 Economic performance

Significant indicators for the generation and distribution of value in accordance with the GRI requirements can be found in the financial report:

G4-EC2 Financial implications of climate change

The UN climate change conference in Paris (COP21) and the agreement reached by its participants to limit global warming to well below 2 °C – and to 1.5 °C if possible – represent far-reaching goals for limiting climate change. Now, there is a growing need to take action to minimise climate change and its consequences. One of the most visible effects of climate change that we are already experiencing is the limited availability of water resources in many areas, which is becoming a major issue in the eyes of the public. In the 2015 Global Risks Report published by the World Economic Forum (WEF), water scarcity was classified as the top risk in terms of impact for the first time. Consequently, one of the Sustainable Development Goals drawn up by the UN in September 2015 focuses on ensuring the availability and sustainable management of water and sanitation for all.

By 2010, the World Bank had already forecast that the adjustment to an increase in temperature of the global climate of two degrees Celsius between 2020 and 2050 would cost between USD 70 and 100 billion per year. 20 percent of this is attributable to water supply and flood protection measures. Around a third of the global population is already living in regions in which water resources are scarce. Europe is increasingly affected, especially the southern and eastern Mediterranean region where, according to the European Commission’s Green Book, available water resources will halve within the next 50 to 100 years. For people in economically weak regions in particular, this trend is often associated with a lack of drinking water, hygiene problems caused by waste water and slower economic growth. Sustainable water use is essential for ensuring viable social and economic development around the world. Water is of central importance for nutrition, health, the environment, the economy and energy production. Sensible water management therefore calls for cross-sector solutions.

These trends will determine the sanitary technologies of the future. Water-saving, resource-efficient products will become increasingly important. Geberit is taking advantage of the opportunity to meet the growing worldwide demand for water-saving products and to contribute towards the diligent handling of water, thus making a name for itself as a leader in sustainability. Products classified as special water-saving products already make a substantial contribution to Group sales.

Compared to these relatively high chances of success, Geberit is exposed to an average risk of natural disasters triggered by climate change which can fundamentally affect production areas or transport areas. None of the production sites are particularly at risk in this respect, however.

As Geberit does not operate in the classically energy-intensive industries, there are currently no special CO₂ regulations such as statutory emission limitations. However, the acquisition of the former Sanitec Group increases the company’s exposure to such regulations, meaning that their future development must be carefully monitored.

In addition, Geberit is indirectly affected by higher energy or raw materials prices and by generally increasing requirements in terms of energy management. With its internal energy master plan, the targeted introduction of the ISO 50001 energy management system, and the measures related to its CO₂ strategy, see aspect emissions), Geberit is reacting proactively and is working continuously on saving energy, improving its energy efficiency and reducing its CO₂ emissions.

As far as corporate risks are concerned, the Audit Committee of the Board of Directors introduced a comprehensive system for the monitoring and management of the risks associated with the company’s business activities, including the risk category CO₂ emissions, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 4).

G4-EC3 Scope of the organization’s defined benefit plan obligations

The Geberit Group sponsors defined benefit plans for its employees in Switzerland, Germany, Austria and the USA. For further details on pension and benefit plans, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 3 > Retirement benefit plans and Financial Report > Consolidated financial statements Geberit Group > Notes > Note 17.

G4-EC4 Significant financial assistance received from government

Significant assistance received from the public sector includes:

For information on income taxes, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 26.
Investment subsidies for new investments to promote the respective business location and secure jobs: CHF 0.88 million (Slovenia: CHF 0.8 million, remainder in Germany and Austria)
Contributions received to support training and part-time employment prior to retirement: CHF 1.2 million
Support for apprentices and subsidies for severely disabled persons: CHF 0.07 million

The public sector is not represented on the Board of Directors of the Geberit Group.

8.2 Market Presence (EC)

Management Approach - Market Presence

Geberit has grown from a family-run firm into a listed global company that has proven its ability to adapt to a rapidly changing environment. Within its core strategy, see Management approach economic performance, Geberit’s aim is to ensure that production plants and sales companies alike function well as units which enjoy a high degree of autonomy. A high level of acceptance among the local workforce is a fundamental part of this, thanks in part to an attractive pay structure and the involvement of local know-how at the management level.

G4-EC5 Ratio of standard entry-level wage compared to local minimum wage

Geberit pays market-rate wages, taking into account local circumstances and laws. When selecting employees and determining their assignment in the company, Geberit attaches great importance to qualifications appropriate to the task description. In accordance with their qualifications, the majority of Geberit employees at the 35 production sites and at the sales companies are paid well above the minimum wage range. Stability and a high level of motivation among employees are important to Geberit. This is being encouraged at the new site in India, for example, by means of a comparatively attractive pay structure. The applicable requirements on minimum wages are well met.

G4-EC6 Procedures for local hiring

Geberit has no personnel policy or employment practices providing for the preferential treatment of persons from local vicinities in connection with the hiring of members of management boards for the respective country organisations. However, Geberit would like to establish organisations at its production and sales sites that function on a local basis, which is why it often integrates locally appointed managers. For example, the sales companies in India and China are both headed by managing directors who have been recruited locally.

8.3 Indirect Economic Impacts (EC)

Management Approach - Indirect Economic Impacts

Indirect economic impacts arise primarily due to positive side-effects from direct economic action. Geberit aims to achieve sustained improvement in the quality of people’s lives through innovative solutions in sanitary technology. The economy benefits from this in several respects: through the contribution to a durable, resource-efficient sanitary infrastructure, through know-how transfer in the sanitary industry, via impetus for the economy in regional economic areas, and through orders with suppliers. There is no management approach to indirect economic impacts in the narrower sense. Instead, the company works with the stakeholders concerned to identify the best solutions in each case.

Geberit pursues a clear strategy as part of its social engagement, and therefore supports social projects each year that exhibit a relationship to the topic of water and sanitary facilities, as well as to Geberit’s core competencies and corporate culture. Equally important is the aspect of personal and professional education: by getting actively involved in the social projects in developing regions across the world, apprentices become familiar with other cultures as well as acquiring new social, linguistic and professional competencies. Furthermore, the Group’s social engagement in the form of social projects makes a tangible contribution to implementing the follow-up programme to the United Nations millennium development goals, which seeks to give all humans access to clean drinking water and basic sanitation by 2030.

The “GemeinwohlAtlas” (Common Good Atlas), which was initiated by the University of St. Gallen in 2014, was also used in 2015 to systematically investigate and represent with transparency the social benefits of Swiss organisations and companies. Geberit once again had a good overall ranking in the survey and even placed first among the private companies.

G4-EC7 Investments in infrastructure and services primarily for public benefit

Donations and financial contributions, including product donations, totalling CHF 2.6 million (previous year CHF 3.3 million) were made during the reporting year. In addition, Geberit employees contributed 1,657 hours of charitable work (previous year 2,770 hours). Geberit also supports facilities for disabled persons and long-term unemployed, where simple assembly and packaging work in the amount of around CHF 6.2 million was carried out in 2015 (previous year CHF 5.5 million), see also Key figures Sustainability > Employees and society.

The focus was on the following projects and partnerships in 2015:

Conducting a social project near Durban in South Africa: renovation of the sanitary installations at Cottonlands Primary School – a school attended by around 1,000 children, plus voluntary work for supporting orphan children in the neighbouring “Liv Village” by the team of Geberit apprentices.
Renewal of the partnership with Helvetas on projects relating to clean drinking water and sanitary facilities for a further two years, and supporting the Helvetas campaign for clean drinking water and latrines with a substantial contribution.
Cooperation with the charitable organisation “Swiss Water Partnership” to promote international dialogue on the topic of water.
Various local initiatives and collection campaigns in Poland, England, France, Germany and Switzerland round off the Geberit Group’s social engagement at the local level.
The volunteering project in Nepal that was planned for 2015 in cooperation with Helvetas and with the involvement of Geberit employees was postponed by one year due to the earthquake in the spring of 2015.

G4-EC8 Indirect economic impacts

Geberit forms part of the value chain in the construction industry. It has significant indirect economic impacts “downstream” on the customer side at planners, plumbers and end users, as well as “upstream” at suppliers and transport companies. Continuous investment in 35 production plants in Europe, China, India and the USA, as well as the logistics centre in Germany, will strengthen these individual economic areas.

Geberit know-how and products significantly reduce the burden on water and waste water systems. According to one model calculation, all dual-flush and flush-stop cisterns installed since 1998 have so far saved around 20,200 million cubic metres of water in comparison with traditional flushing systems. In 2015 alone, the water saved amounted to 2,280 million cubic metres. This is more than half of the annual consumption of all German households.

Geberit is committed to sustainable sanitary systems which, as elements in construction, help to shape the infrastructure as a whole. For example, Geberit actively worked on adapting the applicable standard for the dimensioning of waste water piping to smaller diameters. This is important so that the full functionality of the piping system is ensured even with lower quantities of waste water. Geberit also supported WELL (Water Efficiency Label), a product classification system for water-saving and resource-efficient sanitary products that was introduced in 2011. Similar to its work in the field of waste water hydraulics, Geberit also played a major part in ensuring that topics such as noise insulation and fire protection, as well as hygiene in drinking water and sanitary areas, have been developed to the benefit of the end user and laid down in standards and recommendations.

Geberit lends impetus to the sanitary industry with innovation and new products that are sold and implemented worldwide by wholesalers, plumbers and planners. In 2015 alone, around 30,000 customers were provided with education and further training on Geberit products and software tools in the 25 information centres in Europe and overseas, see Business Report > Business and financial review > Financial Year 2015 > Customers. Education and training for 255 apprentices and students continues to be supported, as does research on sanitary technology and green building through cooperation with Tongji University (CN).

The indirect economic impacts on suppliers and transport companies are also significant. The Group’s cost of materials in 2015 was CHF 755.0 million (previous year CHF 646.0 million). Geberit has relations with a total of approximately 2,200 suppliers. The company does not have its own transport fleet and contracts external transport companies for logistics services.

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8. Economy (EC)