Sustainability approach

Sustainability strategy

Our approach is to create (added) value from raw materials in a responsible manner. The consistent focus on a sustainable and long-term business model has brought great changes with it in recent years. For this purpose, we invest in the product portfolio as well as in the production processes in line with a sustainable transformation. We additionally support the "Paris Convention" of the Paris Climate Conference as well as the "European Green Deal". On this basis, we pursue the strategic goal of actively contributing to minimising global warming. CO₂ reduction targets for our emissions from Scope 1 and Scope 2 in line with the Science Based targets Initiative are crucial levers for this. We have also developed initial approaches to recording and reducing the emissions from Scope 3 (see "CO₂ and energy").

The Group-wide sustainability strategy is practised in the entire corporate group and supported by the Board of Directors. This is also demonstrated by our joining the United Nations (UN) Global Compact.

The sustainability goals are centrally defined and coordinated; the HVAC and Doors Divisions are responsible for the decentralised implementation. For this purpose, they are developing specific plans with individual measures and expanding their product portfolios in this direction.

Sustainability governance

Arbonia is organised in a decentralised way and has a holding structure. Group Management – consisting of the CFO and the two CEOs of the divisions – determines together with the Executive Chairman of the Board of Directors the targets and measures with which the strategy specified by the Board of Directors will be implemented. The responsibility for the operational business lies with the divisions.

Sustainability is an essential part of the group strategy. The CFO is responsible for managing the topic within the Group. This person develops the sustainability strategy together with the sustainability committee and representatives from the Corporate Communications & Investor Relations Department, who are responsible for the Group-wide coordination. The sustainability committee consists of a representative of the HVAC Division and one representative each from the Wood Solutions Business Unit and the Glass Solutions Business Unit of the Doors Division. The divisions or their companies coordinate individual measures with the Group functions and implement them. Group Management evaluates important initiatives and projects on a monthly basis.

The Board of Directors of Arbonia is continuously informed about new legal requirements for sustainable corporate governance. It takes on the decision-making and control function for all measures and evaluates the performance on the basis of defined targets. This concerns Internal Audit and thus risk assessment, for example. In the reporting year, Internal Audit sent the Board of Directors 14 audit reports on risks and the implementation of planned measures. These reports are also available to external auditors. The Board of Directors is also continually involved in examining possible transactions in the form of due diligence processes. The Board of Directors can order investigations or call in external consultants via the audit committee in all areas of competence. The Nomination and Compensation Committee has decided in consultation with the entire Board of Directors to also integrate climate targets in the variable compensation of Group Management for the first time starting in financial year 2023.

Materiality analysis

The present third sustainability report is based on a materiality analysis that we carried out in 2020. In this process, the relevant topics were determined on the one hand for long-term business success and on the other hand in respect to important effects on the environment and society. The analysis was based on a wide spectrum of contents that included GRI standards and requirements of the Sustainability Accounting Standards Board (SASB), criteria of ESG rating agencies, as well as an industry benchmark. A core team consisting of the Group CFO, the sustainability officers, as well as representatives of the divisions and of various corporate functions consolidated the selection of topics. The relevancy of the topics was then assessed in a workshop. The CFO as well as representatives of the two divisions, HVAC and Doors, as well as of various corporate functions (e. g. Human Resources and Legal & Compliance) took part in this validation. The process was supported by an external specialist. The result of the analysis is mapped in the following materiality matrix:

Ethics and integrity

We are aware of our economic, ecological, and social responsibility and in our Code of Conduct, we commit to 1.) respecting human rights, with particular regard to the prohibition of child labour, 2). ensuring the health and occupational safety of employees, 3.) cooperating with suppliers who have committed to sustainable operating activities and fulfil their social responsibility, 4.) observing environmental protection standards, and 5.) carefully using resources.

Arbonia designated a compliance officer in each division during the reporting year. They are responsible for implementing Group specifications in the corresponding subsidiaries.

The reporting year was characterised by new due diligence and reporting obligations concerning conflict minerals and child labour that will be applied for the reporting year 2023 for the first time. When selecting suppliers, Arbonia increasingly takes into account whether they observe the due diligence obligations and obtains corresponding supplier evaluations via the analysis platform EcoVadis.

Code of Conduct
In the reporting year, the audit committee of the Board of Directors approved changes to the Code of Conduct and the whistleblowing directive (rules for reporting wrongdoing) in connection with the new EU whistleblower directive. The Code of Conduct is supplemented by further directives such as for example the anticorruption directive, the directives regarding insider trading, and the directive for protection against sexual harassment, bullying, and discrimination at the workplace. The Code of Conduct and some of the further directives have been translated into up to twelve languages and can be called up in the Intranet by white collar employees. In the reporting year, a water policy and a waste policy were also introduced Group-wide, and the existing competition directive was updated due to statutory changes.

Upon joining the Arbonia Group, all employees sign the Code of Conduct and commit to upholding the values as well as the ethical and social principles. The compliance with this requirement as well as the implementation of training sessions on the Code of Conduct is reviewed by Internal Audit, which reports on this to the Board of Directors.

In addition to the Code of Conduct, the Board of Directors issued the "Supplement to the Code of Conduct" in 2018, which specially addresses blue collar employees. This contains in-depth regulations for production – for example, concerning resource handling, occupational safety and environmental protection. It does not include topics such as competition law. The "Supplement to the Code of Conduct" is hung in the factory halls in the form of posters and explained to the employees by the plant or shift managers in training courses.

Whistleblowing concept
The employees are called upon to actively participate in observing the Code of Conduct, including the "Supplement to the Code of Conduct" (together "Code of Conduct" in the following). For this reason, the Board of Directors issued a whistleblowing directive in 2013 and has introduced whistleblowing reporting units. The whistleblowing concept is currently being further developed based on the EU Whistleblowing Directive and in accordance with the national regulations of the individual EU countries. All employees who identify violations of the Code of Conduct are requested to report them to the internal or legally prescribed external reporting units. The CEOs of the divisions, the divisional compliance officer, the head of compliance, and the head of Internal Audit function as internal reporting units. The protection of reporting employees is a central element of the whistleblowing concept. Whistleblowers must not be subject to any disciplinary, legal, or other actions that could be to their detriment due to their reporting.

The Board of Directors is informed about all whistleblowing reports and the associated investigations as well as initiated measures. No suspicious cases were reported through whistleblowing in the reporting year. No sanctions were imposed due to non-compliance cases either.

Code of Conduct training
White collar employees attend Code of Conduct training regularly and as needed. New companies or sites are trained as part of their integration. These training courses deal with all key topics of the Code of Conduct and discuss in more detail individual further instructions and topics, such as non-compliance risks, conflicts of interest, insider trading, data protection, competition and cartel law, as well as corruption. Whistleblowing is also a central topic of these training courses. The employees are shown where they can make whistleblowing reports and how and what further steps are initiated by Arbonia. All training courses for employees are given by Arbonia Compliance.

To take digitisation into account in the compliance area as well, Group Management approved the introduction of various compliance e-learning courses for white collar employees and a training video with the most important contents from the "Supplement to the Code of Conduct" for blue collar employees. These projects were developed further in the reporting year, so that both topics can be introduced in 2023.

Risk management

Our risk management process has been institutionalised for some time now and consists of the following: Every three to five years, the risk catalogue is created again from the bottom up as well as from the top down on the level of the business units, divisions, and the Group using a Greenfield approach. The existing risks are continuously reviewed and – if necessary – adapted as well as supplemented with new risks. The risk catalogue comprises strategic, operative, financial, economic, as well as external risks. They form the basis for the risk analysis workshops that take place annually on the Group and division level with external, independent support.

A wide and varied group of responsible people take part in the workshops (generally eight to twelve participants per workshop). In the first step, the central changes in respect to the previous year are discussed and integrated in the risk catalogue. In the second step, the participants rate the risks in respect to extent of loss, probability of occurrence, and effect on reputation. In addition, they discuss and define the cash flow relevance and the opportunity / risk ratio. This yields a corresponding risk matrix and associated expected values for the risks. A comparison with the previous year as well as a plausibility check come at the end of the group discussion. After the workshops, the risk owners define how to handle the risks. Furthermore, they develop corresponding measures for a defined period of time to minimise the risk. These measures are reviewed and updated every half-year.

The results of the workshops are aggregated over all divisions (bottom up), and a comparison with the Group is also made (top down). Group Management then discusses and adopts this assessment. This includes a quantification of the risks and a catalogue of measures to minimise the greatest risks. The entire risk profile is presented to the audit committee as well as to the Board of Directors.

Stakeholder engagement

As Arbonia, we maintain an intensive exchange of ideas with all stakeholders who have a significant influence on the economic, social, and ecological goals of the company. This group of internal and external stakeholders includes customers, employees, shareholders and investors, analysts, public authorities, neighbours and communities at the company sites – but also partners such as transport companies, suppliers, research institutes and associations, as well as the general public. The exchange of ideas with these groups takes place in the context of personal discussions, meetings, conferences and trade fairs, as well as surveys. An overview of dealings with the individual stakeholders is given in the table "Inclusion of stakeholders and their concerns".

Memberships in the most important chambers and associations – including Swissmem (association of the Swiss mechanical, electrical, and metalworking industries), SwissHoldings, or the German-Swiss Chamber of Commerce – allow us to have a continuous exchange of information with sector-related companies and relevant interest groups. We have also been a signatory of the UN Global Compact since the end of 2021 and will fill out the Communication on Progress questionnaire for the first time in 2023.

In addition to our global engagement, we as Arbonia support communities at our production sites. This is demonstrated by numerous donor programmes and the support of non-profit organizations. Many companies sponsor sports activities for young people and adults. The companies of Arbonia also help to finance scholarships to universities of applied science.

Inclusion of stakeholders and their concerns