Corporate Social Responsibility

Combined Separate Non-financial Report

The term “sustainability” is commonly used in a variety of ways. At KSB, we define sustainability as aligning our business with environmental, social and economic values. As well as responsible use of natural resources and the environment, it includes our responsibility towards our employees and our commitment to society. We present these issues in a separate combined non-financial report pursuant to sections 315b and 315c in conjunction with sections 289c to 289e of the HGB [Handelsgesetzbuch – German Commercial Code]. The report fulfils the requirements of the CSR Directive Implementation Act [CSR-Richtlinie-­Umsetzungsgesetz] and combines the statement at company level with the Group statement outside of the management report.

The concepts outlined here apply to both the Group and to KSB AG (on 17 January 2018 the conversion into the new legal form KSB SE & Co. KGaA took legal effect); any instances where this is not the case are duly indicated. All information in the non-financial report relates to the former KSB AG in 2017. References to information not included in the group management report and any captions in this section represent supplementary information and are not part of the separate non-financial report. PricewaterhouseCoopers GmbH, Mannheim, performed a limited assurance engagement on the information in this report in accordance with ISAE 3000 (Revised) and issued an independent assurance report.

The concepts and activities outlined in this report follow the principles of the UN Global Compact  in the areas of human rights, labour standards, the environment and anti-­corruption.

In accordance with our business model, we aim to supply customers worldwide with high-quality pumps and valves, as well as related support services. The vast majority of our products are developed in-house and are manufactured in factories on four continents. Our products are sold via our own sales organisation, supported by dealer networks composed of selected partners. KSB’s business model is presented in our group management report on page 56.

By signing the UN Global Compact in 2010, we committed ourselves to aligning our business activities with ten universal principles. But it is not only our managers and employees who endorse the principles of the Global Compact – our suppliers and business partners also share these commitments. We ask our strategically most important business partners whether and to what extent they use these or comparable standards as a source of orientation.

KSB’s sustainability principles are binding for all locations and companies of the KSB Group. These principles are set forth in our sustainability policy which applies to the entire Group. Our progress in these areas is regularly reviewed by a committee. Group management also receives a compliance report twice a year as well as an annual review of management issues relating to quality, the environment and occupational health and safety.

KSB operates a globally integrated management system in order to fulfil the same high standards worldwide with regard to quality, risk, environment, occupational health and safety, and sustainability. The management system is process-oriented and complies with the requirements of the international ISO 9001, ISO 14001, OHSAS 18001 and ISO 26000 standards as well as the UN Global Compact. It governs the organisational processes and workflows, responsibilities, procedures and processes at Group level and at our individual locations.

33.3%
 Percentage of renewable energy in our power consumption
(KSB AG: 51.0 %)

Key sustainability topics for KSB

We continually assess the requirements and expectations of the various stakeholders  with regard to our company. In 2016, we carried out an analysis of this for the first time in order to identify the key sustainability topics for KSB. Against the background of the new requirements defined in the HGB for non-financial reporting, the results were evaluated by the relevant specialist departments and our sustainability committee together with Group management in 2017. This enabled us to identify aspects and factors necessary for understanding the development and performance of the business and the position of the company as well as the impact of our activities on the following issues:

  • Environment (resource efficiency, manufacturing of energy-­efficient products, emissions and product safety)
  • Combating corruption and bribery (compliance)
  • Respecting human rights (sustainability in the supply chain)
  • Employee concerns (training and development, equal ­opportunities, occupational health and safety)

These issues are directly related to our manufacturing ­activities, our products, our business partners and our employees. Our products also directly contribute towards protecting the environment, for example, by saving energy or through their use in waste water treatment applications.

KSB’s corporate responsibility also includes our commitment to society. In this section we report on our social engagement, including activities which do not have a direct or material impact on our business success.

KSB does not see any material risks, as assessed based on the net evaluation method, associated with our own business or the business relations of the company, its products and services which have or could have a serious negative impact on non-financial aspects, like the environment, anti-corruption, human rights, employee concerns and social issues. All other risks with an impact on our business activities are described in the group management report from page 75.

The non-financial report – unless otherwise stated – encompasses 28 key companies within the KSB Group. We have chosen these companies due to their impact in terms of aspects such as energy consumption and the percentage of employees involved. The 28 Group companies include all consolidated subsidiaries with production plants and two service companies with energy-intensive workshops.

Social commitment: In 2017, KSB supported an aid project to repair well pumps in Ivory Coast (large image), improving the drinking water supply for almost 2,000 Ivorians. Alongside measures to secure water supply, educational initiatives are central to KSB’s social commitment.

To spark an interest in technology and science among young people, KSB regularly invites children and youngsters to its factories (small image) and supports projects run by the Wissensfabrik – Unter­nehmen für Deutschland e.V. [Knowledge Factory – Companies for Germany] initiative.

Financial aid: In India, KSB is regularly engaged in initiatives around its ­locations. These benefit socially disadvantaged children, the disabled, the ­elderly and the sick (image on the right). As well as providing financial support, we also support facilities and organisations by donating technical equipment. In 2017, we financed multiple projects in Asia for supplying school facilities with water.

In Nepal (image on the left), this enabled two schools in Dakshinkali and Bhaktapur to solve problems with water supply and sanitary facilities.

Energy consumption
Total KSB AG Europe*** Asia / Pacific Americas Middle East / Africa
Total energy consumption* 273,750 MWh 94,868 MWh 141,900 MWh 38,258 MWh 80,432 MWh 13,160 MWh
Total electricity** 156,407 MWh 37,260 MWh 58,296 MWh 33,708 MWh 53,202 MWh 11,200 MWh
Electricity from renewables 52,064 MWh 18,989 MWh 23,629 MWh 5,712 MWh 19,908 MWh 2,815 MWh
CO2 emissions 97,248 t 22,072 t 31,042 t 29,916 t 28,871 t 7,418 t
*Electricity, gas, fuel oil, district heating, wood, etc.
**Total deviates due to rounding
***Including KSB AG

Environment

As a manufacturing company, we strive to minimise our impact on the environment and to reduce energy consumption as far as possible. By pursuing this approach, we help to conserve natural resources and also increase the economic efficiency of our products in times of rising raw material prices. Furthermore, we avoid economic and legal risks which could potentially result from environmental damage and failure to comply with laws and regulations.

KSB follows the internationally recognised ISO 14001  environmental management system to ensure we deal responsibly with the natural environment. To date, we have established the environmental management system at 37 production and assembly locations (KSB AG: 3 locations), covering 90 percent of our production operations. As part of an evaluation process, we ask our strategically most important suppliers whether they comply with the requirements of applicable national or international environmental management standards. In 2017, we wrote to 1,058 of these suppliers, 537 of which responded. The proportion of these suppliers using recognised environmental standards as a source of orientation was 45 %.

In order to reduce energy consumption and CO2 emissions, we conduct regular energy audits at our European locations. The resulting measures include the energy-efficient refurbishment of our buildings and foundries. To help cut electricity consumption, for example, we use high-efficiency lights and sensor-controlled lighting. We are also continually expanding our video conference system worldwide in order to minimise the need to travel for our employees and to keep the associated costs and impact on the environment as low as possible.

We regularly record our energy consumption and CO2 emissions so we can analyse this data. In the year under review, our energy consumption was 273,750 megawatt hours (KSB AG: 94,868 megawatt hours). With regard to energy consumption, 33.3 % (KSB AG: 51.0 %) of our energy came from renewable sources. We want to increase this percentage. In accordance with Scope 1 and Scope 2 of the GHG protocol , we calculated CO2 emissions of 97,248 tonnes (KSB AG: 22,072 tonnes).

Waste is produced during the manufacturing and transport of industrial products. KSB strives to keep waste levels as low as possible, returning materials to the material cycle wherever possible. For example, we collect paper and metal which is then sent for recycling.

We are reducing the volume of hazardous substances by progressively modernising our existing plants. If we discover any environmental pollution at our locations, we set aside provisions to meet the liabilities for the necessary clean-up work. In 2017, these provisions amounted to € 775,000 for KSB AG.

In order to minimise the impact of our business activities on the environment, we ensure that our manufacturing processes are as environmentally friendly as possible. We go even further than this by aiming to produce products that only require a small amount of electricity during their service life and that contribute towards preserving our environment.

 Number of employees trained in compliance topics:
5,240

Our energy-efficient products help reduce the amount of energy consumed by our customers. Our specialists adopt an integrated approach to optimising our customers’ plants, analysing the entire hydraulic system and the complete life cycle of the plant. This enables us to ensure that all system components are perfectly matched.

Our declared goal is continual growth in the area of energy-efficient products. The benefits are three-fold: reducing the environmental impact caused by our customers, increasing our sales revenue and ensuring the future viability of our company. Digital transformation also plays a key role by helping us to identify potential energy savings in our customers’ plants. In the year under review, we set up a Business Innovation Lab  where we develop new business models to be implemented as part of the process of progressive digitalisation.

If products fail to meet a sufficient standard of quality, this could result in accidents and environmental pollution. We therefore attach great importance to the safety of our products. During the manufacturing process, we comply with recognised standards such as CE  and established quality management systems. We are therefore able to design processes such that systematic errors during product manufacturing can be avoided. Furthermore, we introduced an internal certification process: “Made by KSB”. It ensures an equally high standard of quality at 13 locations which exceeds the requirements of the international quality management standard. Our internal certification stands for quality, short delivery times, professional support services and optimum manufacturing processes.

Combating corruption and bribery (compliance)

Our customers and business partners expect KSB to conduct business with integrity. That is why compliance with legal regulations and Group-wide directives is part of our core values. The actions of a single individual can result in a permanent loss of trust in our company and seriously compromise our reputation.

To support employee compliance, we have developed a binding compliance management system. It ensures that legal requirements and internal KSB rules are adhered to, securing the success of our business in the long term. The compliance system is designed to ensure that KSB and its employees always act in line with applicable laws and directives.

Group management is responsible for organising compliance, monitored by the Supervisory Board’s Audit Committee. A Group Compliance Officer is responsible for compliance management and reports to Group management on relevant topics every six months. Support is provided by a Group Compliance Committee, consisting of top-level managers from the company.

In the year under review, we revised our Compliance Manual which describes structures and processes to ensure compliant conduct. It also sets out responsibilities and compliance instruments.

A core element of our compliance system is the KSB Code of Conduct which applies across the entire Group. It describes the key legal and business policy principles, providing our employees with guidance for their actions. The Code also sets forth the corporate values which govern our conduct in our daily work: honesty, responsibility, professionalism, trust and appreciation. On this basis, we have formulated and communicated specific principles and rules of conduct.

In order to avoid risks resulting from a loss of reputation and legal repercussions, KSB introduced two binding Corporate Directives, one covering compliance with cartel / anti-­trust law and one dealing with the prevention of corruption. Both of these directives help to prevent potential violations. Employees receive appropriate training in recognising potential risks and receive practical guidance on impeccable conduct.

Our goal is to train all relevant employees in cartel / anti-­trust law and the prevention of corruption. Using a global matrix of requirements, we ensure that all personnel with customer or supplier contact are familiarised with these topics. Currently, 5,240 employees across the Group have received this training. We carry out this training at three-year intervals, with interim demand being met via additional training sessions every six months.

In the event that employees become aware of violations or are unsure whether their actions are compliant, they refer the matter to the compliance organisation, and specifically to the designated Compliance Officer. If necessary, reports will be treated anonymously. In addition, any circumstances that give rise to legal or anti-trust concerns can be reported directly to an independent ombudsperson, who can process potential cases without naming informants. If reliable evidence is presented, then this is pursued. In 2017, the ombudsperson received one notification of suspected compliance violation. We were also notified of another suspected instance via an e-mail contact form. When the compliance organisation receives relevant information, the necessary steps and measures for clarifying the situation are initiated following a precisely specified procedure. KSB does not tolerate any violations of compliance by its employees. If investigations reveal sufficient evidence of a violation, this will have consequences for the individual concerned. Depending on the severity, sanctions range from a disciplinary warning to immediate termination of employment; law enforcement agencies may also be involved.

96
 Social projects actively supported by KSB or financially supported with at least EUR 5,000.

Respecting human rights

By signing the UN Global Compact, KSB committed itself to respecting and supporting the protection of international human rights. We have also pledged not to indirectly tolerate violations of human rights, for example when it comes to selecting our suppliers. As a company, we comply with the conventions of the International Labour Organisation  (ILO). Basic conduct requirements within the workforce are governed by the KSB Code of Conduct. We are aware that human rights infringements are not only morally unacceptable, they can also damage a company’s reputation and thus result in financial losses.

KSB is therefore committed to combating all forms of forced and child labour. We do not tolerate any discrimination in our work environment on the basis of individual characteristics such as age, race, religion, appearance, gender, sexual orientation, disability or marital status. Furthermore, we respect the freedom of association and the right to collective bargaining in our companies. We also observe government sanctions such as embargoes and issue internal export control directives.

In order to identify and avoid risks in the supply chain, we practice active supplier management. For every order we place, the supplier declares that it complies with the rules in our Code of Conduct’, which corresponds with the human rights principles defined in the UN Global Compact. This enables us to make sure we avoid purchasing raw materials from areas of conflict where violations of human rights may have been involved in their production. We do not cooperate with companies that are known to have committed human rights violations.

In 2017, we wrote to 1,058 of our strategically most important suppliers asking whether they implement measures to counteract human rights violations. Of the 537 companies that replied, 445 confirmed such measures are implemented.

Our employees can contact the compliance organisation or an ombudsperson regarding human rights issues, following the same procedure as for suspected compliance violations.

Employee concerns

Our company is defined by the people within it. Their commitment, skills and knowledge ultimately decide our economic success. KSB currently employs more than 15,000 staff. In order to achieve sustainable success, we continue to require well qualified experts. A lack of specialist personnel would harm KSB’s economic future.

Age structure
Age Total KSB AG Europe* Asia / Pacific Americas Middle East / Africa
Under 25 8 % 12 % 9 % 6 % 8 % 6 %
26 – 39 35 % 28 % 29 % 39 % 38 % 52 %
40 – 54 40 % 36 % 40 % 47 % 36 % 30 %
Over 55 17 % 23 % 22 % 9 % 17 % 13 %
As figures have been rounded, the total may deviate from 100.
*Including KSB AG
Training hours
Total KSB AG Europe* Asia / Pacific Americas Middle East / Africa
Hours per employee 17,6 11,9 14 16 10 65
*Including KSB AG

In order to stand our ground in the intense competition for top talent, we must succeed in recruiting highly qualified expert engineers, securing their professional development and creating a long-term bond between them and KSB. Potential applicants and colleagues should perceive us as an attractive employer. We foster and develop our own talent to prepare them for high-level specialist and leadership positions, as well as pursuing structured succession planning.

A three-stage scheme enables us to systematically expand our employees’ skill sets. It differentiates between company-wide, departmental and individual professional development measures. Annual performance evaluation interviews between managers and staff determine what is required. We offer task-oriented training measures covering technology, business, information technology and communication. In 2017, each member of our staff completed an average of 17.6 hours of professional development activities (KSB AG: 11.9). Regional differences (see chart below) emerge principally due to uneven qualification levels among new employees, meaning that more specialised training is required in some of our companies.

Our range of training options seeks to support our staff throughout their professional life. The goal is to strengthen our colleagues’ capacity for self-directed learning, and we intend to initiate a corresponding expansion of the training we offer over the next few years. Our training is delivered using the latest learning techniques including e-learning and webinars. We also value the potential of learning from one another and foster the establishment of communities which facilitate the direct exchange of knowledge and experience.

Health and family: Possibilities for reconciling the commitments of work and family are highly valued by many KSB staff. Family days like the one held at the Halle factory in 2017 allow a glimpse behind the scenes of working life at KSB. At the same time, children get the chance to try out their craft work skills (large image).

In implementing its company health management system, KSB seeks not only to protect its employees against occupational injuries and diseases but also to provide individualised preventive healthcare. At the Frankenthal location, company doctor Parvin Shahidi Asl (small image) looks after employees’ health.

Well qualified staff: Innovative companies need specialist staff. Vocational training at KSB means practical learning (image on the left). A wide range of professional development opportunities for enhancing and expanding new skills are available to employees. These are delivered using the latest learning techniques including e-learning and webinars (image on the right).

In order to meet demand for specialist staff, we are continually engaged in training young talent. Our German locations participate in the country’s dual vocational education system. In the year under review, we trained a total of 229 young people to take on a role in our company. 2017 saw us invest around EUR 6.6 million in vocational training.

KSB offers attractive prospects for dedicated young people. Promising talent can benefit from a career springboard we provide via vocational training, work placements and student projects.

Those who take up vocational training or dual work / degree programmes with KSB experience practical learning. Alongside specialist skills, we set great store by the sense of responsibility exercised by our trainee staff. They are, for example, also involved in social and ecological projects around their locations.

Many Western countries are experiencing ageing populations, and companies are affected by this demographic shift. We thus monitor the age profiles of our staff in different regions so that we can take timely action in ensuring we achieve the right balance in each company, for example, by recruiting younger trainees in sufficient numbers. It is then possible for us to distribute valuable knowledge within the company across different age groups.

Workforce by gender
Total KSB AG Europe* Asia / Pacific Americas Middle East / Africa
Male employees 85 % 84 % 83 % 89 % 87 % 87 %
Female employees 15 % 16 % 17 % 11 % 13 % 13 %
Male managers 89 % 92 % 89 % 90 % 88 % 90 %
Female managers 11 % 8 % 11 % 10 % 12 % 10 %
*Including KSB AG

KSB is committed to diversity and equal opportunities internationally. The binding human resources principles we updated in the year under review harmonise with the conventions of the ILO and apply to all KSB companies. In keeping with these principles, when recruiting we focus solely on the professional requirements of the role to be filled and the individual performance and potential of the candidate. Clear responsibilities have been established to ensure this. Management works to ensure that the principles of equal opportunities and diversity are realised in company practice. Our human resources staff communicate these principles within the Group and adapt them where required. They also foster an awareness of this important topic and offers corresponding training and advice.

We have no doubt that diversity improves performance within our company. So we want to see leadership positions filled by diverse personalities, all giving their best for KSB. As well as recruiting more non-German candidates for management roles, we have set ourselves the goal of increasing the number of women in leadership positions. We wish to be seen as a fair company and an attractive employer for women with all kinds of qualifications. Currently, the proportion of female managers is 11 %. In terms of our workforce as a whole, women make up 15 %. In order to support our female staff, we are strengthening the measures taken by KSB to reconcile the commitments of family and work. Such measures include offering childcare during the school holidays. We also offer advice on caring for family members, and both male and female staff can benefit from our flexible working time models.

We aim to reduce the risk of occupational accidents to avoid injuries to staff and limit periods of leave, with a focus on measures implemented in production areas. Appropriate training sessions, instruction and further preventive measures are implemented regularly. In the year under review, 35 of our manufacturing and assembly plants (including all of KSB AG’s factories) were certified according to the OHSAS 18001 occupational health and safety management system. This represents 85 % of our locations. The requirements for prevention set out in the standard serve to increase levels of occupational health and safety.

However, health awareness at work is an important topic also at our administrative departments. We therefore offer training including an annual e-learning course on safety in the office.

Investment in the health and well-being of our staff is also an investment in our own successful future. KSB thus takes a holistic approach to actively implementing its company health management system.

This sees us fulfilling not only the legal requirements of the company health service, but also offering voluntary healthcare services such as screening for skin cancer, flu vaccinations and events relating to healthy eating and exercise. Staff aged over 50 are additionally offered an annual preventive medical check-up covering their cardiovascular system, metabolism and musculoskeletal system. If necessary, further tests or treatment are recommended.

KSB greatly values the active engagement of its employees in the development of the company and its work processes. In 2016 we undertook a global survey of around 11,000 members of staff from the Group companies with the highest sales revenues. Respondents offered their opinions on their company, working environment and engagement. The results revealed opportunities for improvements. These were translated into measures which we promptly started to implement.

Society

An awareness of our social responsibility motivates us to get involved in social initiatives. As a successful company, KSB is committed to sustainable development and well functioning cooperation within our society. With this goal in mind, and in line with our donation directive, we support organisations and projects dedicated to the education, social support and protection of children and young people. We are also committed to supporting the disadvantaged. In the event of disasters we provide assistance for both people and organisations. In the year under review, we actively participated in or provided financial support of at least EUR 5,000 to a total of 96 social projects.

Education for young people is a core element of our commitment to social issues. It is important for us that young people develop their skills early enough to then pursue a career that offers the right fit for their talents and capabilities. For this reason we joined other companies to found the initiative Wissensfabrik – Unternehmen für Deutsch­land e.V. [Knowledge Factory – Companies for Germany].

The provision of financial support for aid projects has a long tradition at KSB. This includes ongoing support for social developments in the areas around our locations. We donate regularly to projects seeking to supply people with clean drinking water, for which we also provide non-cash support such as pumps.

More information on our social commitment is available at www.ksb.com/csr

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