Lifco strives to operate in a way that makes a positive and sustainable contribution to society. The company achieves this by acquiring and developing market-leading niche companies with the potential to deliver sustainable growth and good cash flows. The company’s main sustainability impact, and thus also its opportunities and risks, is in the operations of the subsidiaries. The company’s focus is on creating the conditions for sustainable value creation in the subsidiaries.
To strengthen the subsidiaries and provide clear governance across a broad range of activities, the Group is governed by financial targets, principles and values. A key part of this approach is to create an organisation that is better able to respond to rapid changes in society and enable the subsidiaries to be innovative in the way they face up to the challenges of the present while helping to shape sustainable solutions for tomorrow.
Acquisitions are a key element of Lifco’s business model and are driven by a clear philosophy based on long-term ownership. On pages 8–9 in the Annual Report 2018, the requirements on the takeover candidates are described. One of the requirements is the need to be running a sustainable business. This is ensured through an in-house developed due diligence process that is based on the UN Global Compact and its principles. Work on developing this process will continue in 2019.
The due diligence process is designed to ensure that Lifco does not acquire companies which are considered to violate the UN Global Compact’s principles on human rights, labour standards, environment and anti-corruption. This means, for example, that they must not be involved in human rights abuses, serious environmental damage or corruption. Nor does Lifco acquire or sell companies which manufacture weapons, tobacco, fossil fuels or uranium.
Code of Conduct
Lifco’s subsidiaries have a high degree of autonomy, and Lifco strives for minimal bureaucracy and simple processes. A fundamental requirement for this decentralised structure is that the subsidiaries operate in accordance with Lifco’s ethical principles. The ethical principles are set forth in Lifco’s Code of Conduct, which all subsidiaries are required to follow and which covers the companies’ relationships with employees, customers, suppliers, society and shareholders. All new employees in the Lifco Group must be informed about the Code of Conduct within one month of taking up their employment.
Lifco’s Code of Conduct is based on the following international principles: the Universal Declaration of Human Rights, the United
Nations Global Compact, the ILO Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises. The Code of Conduct also includes Lifco’s core values: respect for others, openness and pragmatism. Lifco has signed the UN’s sustainability initiative, Global Compact, which means that the Group has undertaken actively to implement the Global Compact’s ten principles for sustainable development in the four areas of human rights, labour standards, environment and anti-corruption. Lifco’s policies on the four areas are presented below.
Lifco shall inform its suppliers of the company’s values and business principles. Lifco shall not engage in business relationships with suppliers that violate the applicable legislation, fail to uphold fundamental human rights and neglect environmental issues.
All Lifco employees shall have the right to freedom of association and Lifco shall respect the right of all trade union members to negotiate collectively. Employees shall be recruited and promoted exclusively on the basis of their work qualifications and without regard to etnicity, religion, age, national origin, sex, sexual preference, political belief, trade union membership, marital status or disability that does not prevent the performance of the duties involved. Lifco does not tolerate any form of harassment or violence at the workplace. Forced labour and/or child labour are strictly forbidden in all operations of the company. Products from suppliers, their subcontractors or business partners that use child labour must not be accepted.
Lifco has undertaken to prevent or minimise and mitigate any harmful effects of the company’s operations or products on the environment. Lifco does, however, have subsidiaries which operate in areas where the environmental impact can sometimes be significant. To manage this challenge, Lifco works towards longterm goals, which enables the businesses to respond to changes in their operating environment. One example relates to the marine environment, where Lifco’s subsidiary Auto-Maskin is working on improving the efficiency of its diesel engines. The engines run on fossil fuel but are adapted for a transition to non-fossil fuels, which allows customers to make sustainable long-term investments while also extending the life of the products. Lifco strives continually to reduce the environmental impact of the company’s products throughout their lifecycles.
Gifts, entertainment, remuneration and personal benefits may only be offered to outside parties if they are of small value and consistent with current practice. No gifts, entertainment or personal benefits may be offered if they conflict with applicable laws or current practice. Gifts which do not meet these criteria must be reported to management, which will decide what action to take. None of Lifco’s employees should seek to obtain or accept gifts or benefits which can be assumed to affect their business decisions. Such gifts must be reported to the company’s management, which will decide how to handle the issue.
Risks and risk management
In 2017, Lifco conducted a survey of sustainability risks in its subsidiaries’ operations and value chains. The survey, which was based on Lifco’s Code of Conduct and the Global Compact principles, covered 22 groups of companies which together account for around 90 per cent of Lifco’s sales. Due to the subsidiaries’ differing business models and activities, the risk that Lifco as a group will be negatively affected is limited.
RISKS AT THE SUPPLIER LEVEL
Some of Lifco’s subsidiaries engage suppliers which operate in markets where there is a risk of human rights abuses and inadequate concern for the environment. The suppliers are informed about Lifco’s Code of Conduct on an ongoing basis and the majority of the subsidiaries concerned conduct audits of their suppliers to identify any deviations.
In some of Lifco’s subsidiaries there is a risk of corruption and fraud, especially in vulnerable markets. It is a requirement that all new employees be informed about Lifco’s Code of Conduct. Some subsidiaries have implemented additional procedures to further reduce the risk.
Competent and committed employees are a critical resource for the subsidiaries’ continued success and competitiveness. The subsidiaries take a targeted approach to improving their work environment and invest in training activities to retain and develop their employees.
In certain industries there is a demand for more environmentally friendly products while other industries may be affected by stricter environmental legislation. The subsidiaries concerned are investing in research and development to meet future requirements from customers as well as legislators. The handling of chemicals can pose risks to employees, local communities and the environment. The subsidiaries concerned carry out risk assessments and train their employees in how to handle chemicals. Lifco has 13 subsidiaries with environmental management systems certified under the ISO 14001:2015 standard.
Compliance with Lifco’s Code of Conduct is monitored by each subsidiary through audits, discussions with suppliers and by other means. Any deviations are reported to Lifco’s senior management. Monitoring of the Code of Conduct is integrated with the quarterly reports submitted by the subsidiaries to Lifco to ensure that these issues are given priority and reported correctly. If a deviation is identified, Lifco’s senior management will contact the chief executive of the company concerned, who will be tasked with producing an action plan and reporting on progress to Lifco’s Board of Directors. Two deviations from the Code of Conduct were reported in 2018. One subsidiary had not informed its employees of the Code of Conduct in accordance with the Group’s instructions, as the Code of Conduct had not been translated within one month of the acquisition. The translation will be completed in early 2019, and the Code of Conduct will then be implemented in the operations and integrated into employment contracts. The other deviation related to the behaviour of an individual employee and resulted in a dismissal as well as preventive training for relevant roles.
At 31 December 2018, Lifco had 4,926 (4,758) employees. The average number of employees during the year was 4,860 (4,107). Acquisitions added 201 (1,224) employees in 2018.
A key ingredient in the Group’s continuous improvement work is the use of management systems. Lifco encourages its subsidiaries to operate on the basis of principles for management systems and places a strong emphasis on ensuring that the subsidiaries’ own circumstances determine the level of implementation to avoid creating a static and slow-moving organisation. In 2018, 13 subsidiaries were certified under the ISO 14001:2015 environmental management standard, 35 were certified under the ISO 9001:2015 quality management standard, five were certified under OHSAS 18001 and one company is certified under ISO 50001:2011. See page 80 of the Annual report 2018 for a full list of certifications.
The subsidiary companies Lövånger Elektronik AB, Modul-System HH AB, Rapid Granulator AB, Texor AB and Zetterströms Rostfria AB are engaged in environmentally hazardous activities pursuant to the Swedish Environmental Code, which means that they are regulated by the environment committee at the relevant local authority.
Systems Solutions – Helping our customers take control of their value chains
Eldan Recycling is a global leader in the manufacture of equipment for profitable recycling and modern waste management that has customers worldwide. The company has more than 100 highly qualified and experienced employees, many of whom have worked for Eldan for 20–40 years. Their combined experience is a key factor behind Eldan’s unique flexibility and service. We have identified the ability to retain employees and experience in the company as a key success factor.
Eldan offers standard solutions for recycling of tyres, cables, electronics (WEEE), aluminium, refrigerators, household waste, magnesium and other waste. Yet the company is not limited to these areas, but also has solutions for recycling materials such as wind turbine blades, mattresses and casino tokens.
The idea behind Eldan’s business is to help its customers take control of their value chains and avoid unnecessary transports, specially long-distance transports to countries where it is harder to control the environmental impact and working conditions.
Demolition & Tools – Improving health, safety and the environment
The Brokk Group is a world-leading manufacturer of remote-controlled demolition robots, radiation-protected camera systems and other products. The group consists of a number of market-leading product companies as well as a number of sales companies around the world with a combined workforce of around 300.
Brokk’s remote-controlled demolition robots help to improve health and safety at thousands of construction sites, steelworks, mines, tunnels and other work sites around the world. As the machines are remote-controlled, the people operating them can always remain at a safe distance from where heavy work is carried out, for example where there is a risk of collapse, or where there are risks arising from heat, radioactive radiation or high concentrations of dust particles. In many cases, Brokk’s compact machines do the work that would otherwise be done with heavy hand-held tools, which have historically caused serious vibration injuries to the users. The majority of the machines supplied by Brokk are powered by electricity, which is good for the environment as well as improving health and safety at the work site.
Brokk machines are also used in clearing-up operations after disasters. They helped to clear Ground Zero in New York City after the terrorist attacks in 2001 and were used at Fukushima after the nuclear disaster caused by the devastating tsunami in 2011.
Dental – A more attractive workplace
Lifco strives continuously to find opportunities to strengthen its market position, and acquisitions are an important part of the business model. In September 2017, Lifco acquired the Chinese dental company Perfect Ceramic Dental (PCD). PCD is a dental laboratory which performs dental work. The company is headquartered in Shenzhen, China and has around 750 employees.
At the time of the acquisition, PCD had a relatively high staff turnover. Average annual staff turnover was 4.9 per cent, and around Chinese New Year the company repeatedly lost 20 per cent of its workforce. This occurred because many employees found new employers during the New Year holiday period. The company therefore had to devote significant resources to skills development, and high staff turnover was identified early on as an area for improvement in Lifco’s due diligence process. A lower staff turnover benefits both the employees and the business, as the skills remain in the company.
Since the acquisition, Lifco’s management team has taken a number of initiatives to improve the attractiveness of the workplace. Lifco has, for example, revised and refined remuneration policies, including bonus schemes and social benefits. Employees now receive additional days of leave as well as access to home finance and childcare. In addition, team leaders are offered courses in English to improve their language skills. Lifco and PCD have also improved the work environment by replacing the factory’s air conditioning system.
Since Lifco acquired the company, annual staff turnover has decreased to 3.9 per cent. During the first Chinese New Year after the acquisition, staff turnover was 12 per cent and the following year it dropped to 7 per cent, which is a decrease of 13 percentage points since before the acquisition.
Anonymous reporting on serious deviations from our Code of Conduct: https://report.whistleb.com/lifco
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