Sustainable development

Climate-smart products increasingly important

Sustainability initiatives are based on a knowledge of the environmental impact of operations, the increasing demand for green products and the intention to be a responsible and attractive company. ASSA ABLOY’s sustainability initiatives are integrated throughout the value chain – from sourcing to recycling.

The overall sustainability program is based on the Group’s Code of Conduct and an ongoing risk ­analysis and involves both internal and external stakeholders.

Ongoing improvements in manufacturing processes and new products actively help customers to reduce their energy consumption and environmental impact. Climate-smart products account for an ever-increasing share of sales and include the eco-certified Trio-E hinged door, an electronic lock cylinder with halved energy consumption, and the Orion energy management system from VingCard Elsafe.

Code of Conduct

The Code of Conduct establishes the principles that ASSA ABLOY applies in relation to its employees, suppliers and other stakeholders. The Code is based on international standards, is consistent across the global organization and is available in 22 languages. ASSA ABLOY monitors the implementation of the Code of Conduct and deals immediately with any non-compliance.

The Code of Conduct is available to all employees, who are required to read and abide by it and related policies. Whistle-blowing procedures are in place to enable employees to report infringements.

Suppliers are informed of ASSA ABLOY’s Code of Conduct and undertake in writing to comply with it in their collaboration with the Group.

ASSA ABLOY’s way of working

Social responsibility and sustainable development are based on ASSA ABLOY’s Code of Conduct. The Board of Directors has the overall responsibility, while the Executive Team handles operational management of sustainability and the Group’s strategies.

Appointed coordinators at divisional and Group company level are responsible for the availability and implementation of sustainability and environmental guidelines, programs and tools. HR functions at Group and divisional level monitor social and ethical issues. The divisions and their companies are responsible for compliance with the Group’s Code of Conduct and for reporting back to Head Office.

A committee led by ASSA ABLOY’s HR director monitors compliance with the Code of Conduct and includes two employee representatives. Matters dealt with by the committee include whistle-blowing cases

In addition to information and guidelines, ASSA ABLOY’s intranet also provides tools to support Group companies in their sustainability initiatives. These tools include a database of previous best practice in the Group. This database includes all the facts, reporting and monitoring relating to the sustainability program. Statistics and reports can be extracted from the database to enable Group companies to compare their performance with other ASSA ABLOY Group companies and assess the measures to be taken.

Sustainability program

The first sustainability program was launched in 2007 and completed in 2010 with all the targets fulfilled. In 2011 the Group continued work on the sustainability program with increased targets for Group companies, and the number of Group companies integrated into the sustainability program and reporting to the Group increased by 25 percent. During the year ASSA ABLOY increased the accuracy and the level of detail in internal reporting to increase control and ensure continuous progress in the Group.

New targets for 2015 have been drawn up for all divisions in the Group. These include chemical handling, energy efficiency, health and safety, supplier relations, product development, employee issues and overall control. The program has made it possible to introduce procedures for quality and environmental management and to establish a structure for ongoing improvements in day-to-day operations, providing a stable basis for a sustainable future for the Group.

Corporate governance

ASSA ABLOY complies with the Swedish Code of Corporate Governance, which forms part of the NASDAQ OMX rules governing the Stockholm Stock Exchange. The principles of the Code are that companies should either comply with the rules or explain any deviation from them. The Code stipulates responsibilities and procedures for the Annual General Meeting, ASSA ABLOY’s Board of Directors and the Executive Team.

Supplier control

Auditing and improving the supplier base is a continuous task, and supplier selection is based on standardized criteria for both quality and sustainability. Good supplier control and jointly agreed action plans result in increased product quality and sustainable processes.

Suppliers are also required to comply with the Code of Conduct. Quality and sustainability audits are carried out before new suppliers are approved, and these audits are prioritized for suppliers deemed to be in a risk category.

The system used to monitor suppliers’ compliance with the Code of Conduct includes factors such as wages, overtime, noise levels, protective equipment, chemical handling, accident reporting, environmental management systems, and health and safety training.

Any supplier failing to comply with these requirements is asked to implement necessary improvements, and the contract is terminated if non-compliance continues.

Supplier selection process

The process has three stages:

  • Supplier self-assessment – the supplier assesses its ­ability to meet ASSA ABLOY’s requirements.
  • On-site audit – the sustainability audit assesses how well a potential supplier meets requirements.
  • Extended sustainability audit – this complements the standard audit.

After the audit, the supplier is graded green, yellow or red. Green means the supplier is approved; yellow means the supplier needs to improve within a specific time frame; and red means the supplier is not approved.

A red or yellow grade can be upgraded through an improvement plan. If no action is taken, the supplier is immediately classed as red. All purchases from the supplier are then stopped until a green grade has been achieved.

Audits performed

In 2011 ASSA ABLOY performed 493 sustainability audits. At year-end, 461 active suppliers had satisfied the minimum standards for quality and sustainability and were classed as reliable. 19 suppliers were blacklisted. On-site sustainability audits have been extended to a wider geographical area. In 2012 suppliers in all low-cost countries will be included in the annual sustainability audit.

All new suppliers in low-cost countries carry out a self-assessment of their sustainability according to a standardized process before they can be considered as potential suppliers to the Group. This is followed by an on-site audit.

Screening will continue, with annual monitoring of previously approved suppliers.

ASSA ABLOY’s supplier database

The Group’s suppliers are listed, graded and monitored in a supplier database. Both quality and sustainability audit reports are regularly entered in the database. Suppliers are listed with a standardized name, geographical location, type of products and other information so that good suppliers can be used by many Group companies with similar needs.

The database also lists non-approved and blacklisted suppliers to ensure that they are not used again. Sustainability audit results override quality audit results regarding non-compliance. This means that a supplier rejected for sustainability non-compliance is either stopped immediately or must wait until the deficiencies have been addressed for approval.

Sales of climate-smart products increasing

The Group is continuously focusing on energy-efficient products, which account for an ever-increasing share of sales. Demand for sustainable or green products is increasing, and it is important for the Group to develop green products and get them certified and included in databases used by architects for building specification. The increased use of various certifications for sustainable and green construction means that the characteristics of ASSA ABLOY’s products are becoming more important.

ASSA ABLOY has a number of climate-smart products, which combined with increased security help the customer to reduce their energy consumption and create a better quality indoor environment. A detailed understanding of the customer’s needs and increased environmental requirements as well as competence development of the Group’s employees are important aspects for strengthening market position.

One example is the Orion energy management system from VingCard Elsafe. This intelligent solution uses information from the door lock to control the temperature setting depending on the guest’s presence in the room, resulting in lower heating and cooling costs and increased guest comfort. Several installations have shown that, thanks to the system’s considerable energy savings, the investment is recouped within two years. Customer installations of the Orion system have been found to reduce energy consumption by around 20–30 percent, and more in some cases. The system, which was launched in late 2010, was awarded a prize for best climate-smart technology, and sales of the system were very strong in 2011.

Another example is that ASSA ABLOY was the first door manufacturer to achieve certification of its hinged door to the American UL Environment (Underwriters Laboratories) standard, UL IRS 102. These standards measure the health and environmental impacts of door manufacture and use. The Trio-E door is the first door to be certified to these sustainability standards on the North American market.

Product development

ASSA ABLOY’s ambition to achieve world-class product development involves looking at the environmental impact of every product, and not just focusing on climate-smart products.

Group companies use the Group’s product innovation process and environmental checklist for all new product development.

The product innovation process has three important elements:

  • Product management – addressing the strategic aspects of the process.
  • Voice of the Customer – ensuring the company develops products that customers want.
  • The Gateway process – ensuring that development projects are structured and efficient.

The Group has carried out product life cycle analyses to evaluate the stages in which the largest environmental impact occurs. The amount of materials used accounts for a significant part of a product’s environmental impact, and this is something ASSA ABLOY has successfully addressed in Value Analysis/Value Engineering (VA/VE) in product development. In the case of electromechanical products, standby power consumption is of major significance for environmental impact. A number of new products have therefore been launched with sharply reduced energy consumption in standby mode.

ASSA ABLOY can reduce its environmental impact and costs through a reduced and efficient use of chemicals, energy and materials in the production process. The Group’s environmental checklist provides a structured review of materials selection, design and manufacturing processes to reduce the amount of hazardous materials and ensure that processes are sustainable and efficient. One important area is reducing the amount of packaging materials for different customer groups and delivery formats.

Manufacturing

Energy

ASSA ABLOY’s ambition is to reduce energy consumption and emissions of harmful greenhouse gases. The Group is therefore implementing a three-stage approach to reduce energy consumption.

The first stage is to concentrate manufacture in as few plants as possible in order to maintain full capacity, efficient working practices and high quality.

The second stage is to introduce smart solutions that reduce energy and water consumption in both offices and plants.

The third stage is to evaluate alternative energy sources, which combined with innovative product design can make manufacturing processes even more energy-efficient.

Water consumption

Efforts to improve water efficiency have focused on plants with surface treatment processes, where most of the consumption occurs.

Technical improvements in the purification and reuse of water in the production process have reduced water consumption. In 2011 new very eco-friendly purification technology was installed in one of the Group’s large production plants in Israel. This technology is based on the purification of waste water using electricity instead of chemicals and results in very high water purification, very little waste and a low operating cost.

Waste management

The Reduce, Reuse, Recycle principle is applied across the organization by reducing the amount of material in products, designing products that can be upgraded rather than replaced, and enabling recycling of production waste and the products at the end of their life cycle. The Group has refined the monitoring of waste in various types of materials with the aim of better monitoring and reducing the amount of waste.

Hazardous chemicals

ASSA ABLOY also works continuously to reduce hazardous substances in the production process and find substitutes for them. Most production plants have, for example, phased out chlorinated organic solvents successfully.

Health and safety

ASSA ABLOY is committed to providing a safe working environment and eliminating risks that can cause accidents or impair the health and wellbeing of employees. The aim is to create a culture where everybody contributes to improved health and safety.

ASSA ABLOY has defined a number of targets intended to lead to ongoing improvements. These targets are based on a zero vision for work-related accidents.

Health and safety audits are included in the internal audits, and risk assessment is carried out routinely. Incident reporting and analysis are used to identify preventive measures.

All units are graded and compared with each other. As a result, special initiatives can be implemented at plants with the greatest need.

Sales and customers

ASSA ABLOY’s communication with its customers is primarily through the sales force, and its image as a sustainable company is often based on the customer’s relationship with the sales representatives.

ASSA ABLOY’s requirements with regard to the Code of Conduct and business ethics therefore form an important part of the Group’s sales training. Sustainability can provide new business opportunities.

A responsible employer

Factory compliance audits covering areas such as working conditions, human rights, human resources issues, the work environment, workplace culture and skills development are conducted regularly at ASSA ABLOY’s factories. These audits are conducted by external auditors in accordance with internationally accepted procedures to obtain an impartial view of the situation at each factory. In 2011 independent audits were conducted at two production plants in China with excellent results.

The audits are followed by measures to implement improvements where needed.

Stakeholders

ASSA ABLOY’s stakeholders in the area of sustainable development include shareholders, investors, customers, suppliers, employees, local communities, NGOs and the media. The company’s policy of openness means listening to these stakeholders and taking on board their views.

During the year ASSA ABLOY held round-table discussions and separate meetings with a number of investors. At ASSA ABLOY’s annual capital market day in 2011 the Group reported on its sustainability program and investors were given an opportunity to ask questions. Requests from investors have generally concerned making more information externally available about sourcing in low-cost countries, such as procedures for establishing new operations, due diligence procedures, suppliers, sourcing volumes, indicators for and information on supplier audits, and information on non-approved suppliers. Investors have also requested increased transparency with regard to the targets for each monitored area. These meetings have proved valuable and given the Group important feedback on issues such as suppliers, the sustainability agenda and new business opportunities for green products.

SUSTAINABILITY Integrated in each part of the value chain

CUSTOMERS
ASSA ABLOY’s ambition is to supply high-quality products that fulfill customer requirements, have a long life and are manufactured with minimal use of resources and environmental impact during their life cycle.

INNOVATION
New products are evaluated from a life cycle perspective. Many recently developed products save energy as a result of improved insulation and ­intelligent control of various door opening solutions.

SOURCING
The Group’s suppliers in risk areas are evaluated from a sustainability ­perspective. Suppliers failing to comply with the Group’s requirements are encouraged to make improvements or will otherwise be phased out.

MANUFACTURING
Manufacture of the Group’s products should be carried out safely and with the least possible environmental impact. Hazardous processes are gradually being phased out and replaced by eco-friendly alternatives.

SALES
ASSA ABLOY respects laws and regulations concerning business ethics in the countries in which it operates and requires all partners to act in the same way.

Some of the results of the sustainability program
Targets Results 2008 Results 2009 Results 2010 Results 2011 Trend
Energy consumption – 15 percent reduced consumption 2015 compared with 2010, based on normalized values. 482 GWh 491 GWh 605 GWh 590 GWh¹
Organic solvents – Phase out all use of ­perchloroethylene and trichloroethylene.² 42 tonnes 44 tonnes 32 tonnes 22 tonnes
Health and safety
Zero vision and targets for improvement:
– IR, injury rate = number of injuries per million hours worked.
– ILDR, injury lost day rate = number of days lost due to injuries per million hours worked.
IR: 8.7
ILDR: 166
IR: 8.4
ILDR: 150
IR: 7.8
ILDR: 141
IR: 8.03
ILDR: 1444

ISO 14001 – Compliance at all factories with ­significant environmental impact.5 63 62 69 75
Suppliers – Sustainability appraisals – Code of Conduct requirement for all suppliers. Sustainability audits of suppliers in risk category. 100 sustainability audits in China 178 sustainability audits in China 376 sustainability audits in China 493 sustainability audits in Asia
Gender equality – Improve current levels of gender equality at senior levels. Level 2: 0 %
Level 3: 11 %
Level 4: 17 %
Level 5: 23 %
Level 2: 0 %
Level 3: 15 %
Level 4: 18 %
Level 5: 20 %
Level 2: 0 %
Level 3: 16 %
Level 4: 18 %
Level 5: 24 %
Level 2: 0 %
Level 3: 15 %
Level 4: 19 %
Level 5: 26 %

¹ For comparable units. Total energy consumption amounted to 632 GWh including units acquired during the year and increased reporting.
² Plants with totally closed washing processes will be phased out when the machinery is taken out of service. Read more about the updated target in the 2011 Sustainability Report.
3 For comparable units. The total injury rate (IR) was 8.9 including units acquired during the year and increased reporting.
4 For comparable units. The total injury lost day rate (ILDR) was 161 including units acquired during the year and increased reporting.
5 Number of certificates and corresponding certifiable systems for North American units. The change is due to the closure of plants under the restructuring program and to the addition of a number of new plants with certificates.

The 2011 Sustainability Report will be published in connection with the 2012 Annual General Meeting.

NUMBER OF REPORTING UNITS

The number of reporting units in the Group has increased from 204 to 256.

ACCIDENTS PER MILLION HOURS WORKED

2011 and 2010 relate to comparable units.

ENERGY USE

2011 and 2010 relate to comparable units.

USE OF CHLORINATED ORGANIC SOLVENTS (PER AND TRI)

2011 and 2010 relate to comparable units.

SUSTAINABLE DEVELOPMENT PROGRAM IN BRIEF

Code of Conduct

Whistle-blowing

Internal audits

Due diligence directive

Tools for supplier control

Employee survey

Sustainability program

Sustainability strategy for product development including checklists

Employee survey

Marketing and sales training

Training in supplier control

Updated Code of Conduct

Sales companies and offices are included in reported figures

Increased monitoring of energy consumption and CO2

Launch of joint recruitment and selection guide

Increased audit of suppliers in low-cost countries

Targets for 2015 are defined for all monitored areas

Increased reporting of ­environmental data

25 percent more Group companies included in reporting

Improved analysis and benchmarking opportunities between Group companies

Updated Code of Conduct