10.3 Economic Performance

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.

How Geberit implements integrated sustainability and thus creates value is shown in a separate graphic. The vision of achieving sustained improvement in the quality of people’s lives with innovative sanitary products represents the starting point. To bring this vision to fruition, Geberit continuously refines its products, systems and services and sets new standards as a market leader in the area of sanitary products. Values such as integrity, team spirit, enthusiasm, modesty and an ability to embrace change are core factors. The long-term core strategy is based on four pillars: Focus on sanitary products, Commitment to design and innovation, Selective geographic expansion and Continuous optimisation of business processes. This strategy is implemented on the basis of six growth and earnings drivers. The sustainability strategy supplements the core strategy and the growth and earnings drivers with twelve concrete modules. These modules strengthen the business model and the added value for various stakeholders in the areas People, Planet and Performance in a targeted manner. The results of Geberit’s activities show the diverse added value in the three dimensions of sustainability. At the same time, the results contribute to the UN Sustainable Development Goals (SDGs) set out in the 2030 Agenda for Sustainable Development (see SDG-Reporting ). Goal number 6 – “Clean Water and Sanitation” – and goal number 11 – “Sustainable Cities and Communities” – are a key focus for Geberit. However, significant contributions are also made when it comes to “Decent Work and Economic Growth” (goal number 8) and “Industry, Innovation and Infrastructure” (goal number 9).

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

For a description of the economic position of the Geberit Group, see Business Report > Business and financial review > Financial Year 2018.

VALUE ADDED AND ITS DISTRIBUTION (GRI 201-1)

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

Direct Economic Value Added

• Sales and operating profit, see Financials > Consolidated financial statements Geberit Group Statements of cashflows.

Economic Values Passed On

• Operating expenses excluding personnel expenses, see Financials > Consolidated financial statements Geberit Group
  > Income statements.
• Personnel expenses, see Key figures sustainability > Employees and society.
• Payments to providers of capital, see Financials > Consolidated financial statements Geberit Group Statements of cashflows.
• Social engagement, see Chapter 8.2 Society > Social responsibility.

Retained Economic Values

• Investments in and divestments of property, see Financials > Consolidated financial statements Geberit Group Statements of cashflows.
• Share buyback, see Financials > Consolidated financial statements Geberit Group > Notes > Note 22.

OPPORTUNITIES AND RISKS DUE TO CLIMATE CHANGE (GRI 201-2)

One of the visible effects of climate change is the limited local availability of water resources in many places. In the risk analyses periodically published by the World Economic Forum (WEF), water scarcity was classified as one of the four highest risks in terms of impact, according to the 2019 Global Risk Report. This trend has an influence on the development of sanitary technology. 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 big opportunities, Geberit is exposed to an average risk of natural disasters potentially 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.

The manufacture of ceramic sanitary appliances is a resource-intensive and energy-intensive process that has become a part of Geberit production. This increases the company’s exposure to CO₂ regulations, meaning that their future development must be carefully monitored. However, these risks are currently still low – only one ceramic plant in Sweden pays CO₂ taxes. With the definition of a long-term CO₂ target in 2016 that is compatible with the two-degree target set out in the Paris Agreement (science-based), an increasingly detailed understanding is becoming established within the company regarding CO₂ emissions. The goal is to reduce absolute CO₂ emissions (Scopes 1 and 2) by 6% between 2015 and 2021 to under 240,000 tonnes (based on organic growth). This target was already achieved at the end of 2018.

In addition, Geberit is indirectly affected by higher energy or raw material 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 GRI 305), Geberit is reacting proactively and working continuously on saving energy, improving its energy efficiency and reducing its CO₂ emissions. For example, Geberit is continuously investing in the infrastructure of ceramic production. By the end of 2018, eleven tunnel kilns for ceramic production had been equipped with state-of-the-art burner technology, bringing the scheduled retrofitting project to a conclusion. Each kiln can bring about energy savings of over 20%.

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 Financials > Consolidated financial statements Geberit Group > Notes > Note 4.

BENEFIT PLAN OBLIGATIONS (GRI 201-3)

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

FINANCIAL ASSISTANCE RECEIVED FROM GOVERNMENT (GRI 201-4)

Assistance received from the public sector includes:

• Income taxes, see Financials > Consolidated financial statements Geberit Group > Notes > Note 25.
• Investment subsidies to promote the respective business location and secure jobs: CHF 0.08 million.
• Contributions received to support training and part-time employment prior to retirement: CHF 0.52 million.
• Various other subsidies: CHF 0.2 million.

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

MANAGEMENT APPROACH SOCIOECONOMIC COMPLIANCE

The Geberit Code of Conduct describes the basic principles that have to be met in order for Geberit to be an exemplary, reliable and fair business partner and employer. The Geberit Compass, a key compliance element, describes the cornerstones of the corporate culture, namely the joint mission, the shared values, the operational principles and the success factors to be considered by all employees. This was presented and explained in the Group-wide employee magazine, which is published in six languages.

In order to guarantee compliance with the requirements of the Code of Conduct, Geberit has established an effective compliance system that focuses on the following six key topics: antitrust legislation, corruption, product liability, data protection, employee rights and environmental protection. In practice, the system comprises various elements such as guidelines, continuous training, job orientation for new employees, e-learning campaigns, info circulars, compliance-related audits, annual reporting on the Code of Conduct and the Geberit Integrity Line – a whistleblower hotline for employees. A separate Integrity Line has been available for suppliers since 2017.

As only very few companies work with agents, there is no significant risk exposure in this area. Nevertheless, a Code of Conduct for business partners was drawn up in 2016 based on the Geberit Code of Conduct and communicated to the agents by the managing directors of the local sales companies.

Corporate Legal Services is responsible for implementing the compliance topics of antitrust legislation, corruption, product liability and data protection, while Corporate Human Resources is responsible for employee rights, and environmental protection falls under the remit of Corporate Environment and Sustainability.

As part of the annual reporting on the Code of Conduct for Employees, compliance with the requirements set out there is subject to controls. All companies receive over 50 questions on the above-mentioned key topics. In addition, on-site audits are performed by the Internal Audit Department and corrective measures taken in the event of misconduct. The audits also comprise special interviews with the managing directors of the individual companies on the topics mentioned in the Code of Conduct. The respective information is verified. The findings from the survey and audits form the basis for the annual Compliance Report submitted to the Group Executive Board and are published in the annual report.

With respect to measures and objectives in the Code of Conduct, see also Sustainability strategy.

SANCTIONS DUE TO NON-COMPLIANCE (GRI 419-1)

One significant incident relating to historical contamination occurred during the financial year, see also GRI 307-1.