1 Annual integrated report on our economic, environmental and social performance
2 In a nutshell Company name: Grundfos Manufacturing Hungary Ltd. Founded: 2000 Owner: Grundfos A/S Sites: Tatabánya (plants GMH1 and GMH2), Székeshehérvár (plant GMH3), Biatorbágy (Distribution Centre). Main products: electric motors and pumps Factual data of Grundfos Manufacturing Hungary Ltd (2011) gma GMH1 GMH2 GMH3 GMHD grundfos city Common functions tc r&d Location Tatabánya Tatabánya Székesfehérvár Biatorbágy Tatabánya Tatabánya Székesfehérvár Székesfehérvár Székesfehérvár Headcount * Opening Turnover (2010) million HUF million HUF million HUF million HUF N/A N/A N/A N/A Size m m m m m 2 N/A 300 m m 2 Operation Motor- and component production Pump assembly and pump component production Pump assembly and component production Warehouse and distribution Training Hospitality Finance, HR Technical Functions Customer / Supplier Relations Design and construction of hydraulic testing Product Eng. for GMH and other Grundfos plants Key products MG/MGE MS OEMmotors TP NB/NK SE/P/G SL/DW AP/KP MT (SPK) CH/CM CR N/A N/A N/A N/A N/A GMH1: Motor plant Tatabánya; GMH2: Pump plant Tatabánya; GMH3: Pump plant Székesfehérvár; GMHD: Distribution Centre Biatorbágy; TC: Technology Centre; R&D: Research&Development; MG/MGE: norm and frequency converter electric motors; MS: motor for submersible pumps; TP: in-line centrifugal pumps; NB/NK: single-stage norm and block pumps; SE/P/G: sewage grinder pumps; SL/DW: submersible effluent pumps; AP/KP: submersible drainage pumps; CH/CM, CR: centrifugal pumps; MT (SPK): immersible pumps for machine tools * (without the headcount of TC, R&D and Grundfos City)
3 Table of Contents 5 Sustainable 13 Table of Contents Sustainability in strategy 16 Management system: cooperation at group level 18 Environmental performance 18 Our role in local communities 25 6 Open and Trustworthy 27 Internal communication 30 External communication 32 Best Employer Survey Focused on people 33 Human resources strategy and developments 36 Employment 37 Employing workers with disabilities, role of the social worker 39 Career planning and performance 40 Wages and benefits 44 Training and education 45 Advocacy 46 Occupational health and safety 47 8 Independent 49 Ownership structure 52 Corporate governance 53 Economic sustainability 55 GSS 58 Employees as shareholders 58 Table of Contents 9 Partnership 59 1 Table of Contents 2 2 Introduction 4 3 About the report 7 4 Responsibility in corporate culture 9 Our philosophy: be think innovate 9 Grundfos Purpose 11 Grundfos Values 11 You are a leader only if you are followed Grundfos Leadership Principles 12 Code of Conduct 12 Our stakeholders 63 Partnerships Relentlessly ambitious 69 Our 10th anniversary in Strategy 73 Transfers and new products 75 Technological development 75 The fourth factory is being built GMH4 76 Business Excellence the result: 515 points 77 GSE Grundfos Shop Floor Excellence 78 Awards and recognitions 80 Relentlessly ambitious about future 81 The image of Grundfos for future employees GRI index 83
4 We know at Grundfos, that only responsible A Grundfos Magyarország főbb adatai and innovative corporate GMH1 GMH2 GMH3 GMHD grundfos city leadership is able to succeed közös funkciók Helyszín Tatabánya Tatabánya Székesfehérvár Biatorbágy Tatabánya Tatabánya in any organization. Thus, it is essential to articulate all this to our employees, Létszám * Megnyitás Forgalom (2011) partners and customers HUF HUF HUF and to present the efforts HUF Méret m m m m m 2 N/A we made Tevékenységek for Motor sustainability és Szivattyú Szivattyú Raktár Oktatás Pénzügy, HR komponens összeszerelés összeszerelés Elosztás Vendéglátás igazgató gyártás Vevői/ Műszaki gyártás Beszállítói and the achievements of kapcsolatok Kulcstermékek MG/MGE TP AP/KP N/A N/A N/A the last two years. MS MT (SPK) OEM- Motorok SE/P/G SL/DW CH/CM CR N/A N/A tc R&D Székesfehérvár Székesfehérvár N/A N/A 300 m m 2 Hidraulikus teszterek tervezése és kivitelezése N/A gma GMH és más Grundfos gyárak részére terméktervezés N/A GMH1: villanymotorgyár Tatabánya; GMH2: szivattyúgyár Tatabánya; GMH3: szivattyúgyár Székesfehérvár; GMHD: Elosztó központ Biatorbágy; TC: Technológiai központ; R&D: Kutatás és fejlesztés; MG/MGE: normál es frekvenciaváltóval egybeépített villanymotorok; MS: Búvármotorok búvárszivattyúkhoz; TP: száraztengelyű keringetőszivattyúk; NB/NK: egyfokozatú norm-, és blokkszivattyúk; SE/P/G: szennyvízszivattyúk; SL/DW: merülő szennyvíz- és építőipari szivattyúk; AP/KP: szennyvízátemelő szivattyúk; CH/CM, CR: centrifugálszivattyúk; MT (SPK): centrifugálszivattyúk szerszámgépekhez * (TC, R&D és City létszáma nélkül)
5 Introduction Introduction László Török, General Manager It has already been two years since our first sustainability report was published. Our initial plan was to come forward with a comprehensive publication in every two years, but the year of 2010 just happened to be so eventful, that an additional short summary was released in the following year, featuring the most important activities and accomplishments regarding sustainability in The reference period of the present report includes the years of 2010 and 2011 and it also aims to display the accomplishments of GMH about the contribution to the sustainable development of our company. Considering the fact that the years in question proved to be decisive regarding the development and social responsibility of our company, this time we intended to create a report with a broader spectrum and integrated approach. Our current and future employees, our suppliers and partners, furthermore, the social environment of Tatabánya and Székesfehérvár were defined as primary target groups of this report. All the opinions and expectations of our employees and external partners were heard prior to the creation of this summary, therefore, the basic characteristics and themes of this report were determined by these feedbacks. Basically, the years of 2010 and 2011 were spent dealing with the financial crisis. In this challenging time, when the attention of the world had shifted from environmental impacts to the performance of financial markets, Grundfos managed to maintain and even to increase its performance from every aspect. We are convinced that the route to success leads through sustainability. Therefore, this must be the foundation for all of our activities. -33% 3 4 The work safety is a truly indispensable element of every great workplace there were plenty of improvements in the last two years regarding this aspect. Although, accidents that result in loss of working time occasionally still occur, our aim is to keep them down as much as possible. As the first step, we targeted to fall below the rate of 10 accidents/10 million hours from the previous level of 15 accidents/15 million hours. This objective had been fulfilled by the beginning of 2012.
6 +50% Between 2010 and 2011 the revenues of GMH had increased from 72 billion HUF to 111 billion HUF, which is equal to a 50% growth. Besides the CR transfers the primary catalyst of the growth was the introduction of new products. Furthermore, there was significant increase in the sales of the current products. These achievements mean that our efforts to develop the efficiency and to gain the trust of the owners and the customers proved to be fruitful. Yet the most significant accomplishment of 2011 was certainly the decision that resulted in the commencement of construction of our fourth factory in Székesfehérvár. +17% In connection with the increased scope of tasks, the number of our employees had grown by 17%. In the last two years their average number had increased from 1621 to % During the last two years our productivity had increased by 12%. Increasing productivity and maintaining competitiveness had been defined as major goals for the Hungarian manufacturing company. In order to achieve this, we adjusted our organizational structure according to our strategic goals. We achieved great success with the Grundfos Shop Floor Excellence program (GSE) in financing working capital and increasing productivity. -50% One of the most important aims of this report is to present GMH as a company where the modern technologies and job stability are provided for the professional development of our employees. It is clearly apparent from the employee satisfaction index that we gained success also in this field. At Grundfos we always place high emphasis on employee commitment and motivation. It fills us with pride that the migration rates had decreased by 50% in the reference period (from 20% to below 10%). Of course, it is seriously challenging for a Hungarian company to approximate the usual Danish standards, but we continue to do everything we can to improve significantly. We believe that this is also an indispensable factor of the job stability, the growth and the constant development, so at the same time it is essential for sustainability. In 2011 GMH adopted the objectives of the Group. We analyzed how our corporate values connect us, all the employees of GMH and our environment. We also examined, whether our values reflect the mindset and language of our employees. In 2011 our Leadership Principles was also introduced. In our interpretation great leadership in Grundfos makes it possible to successfully deliver on short term commitments while contributing in building the Grundfos of the future which is an essential element of sustainable development. The Code of Conduct was renewed last year and has a more and more important role to play. Therefore, the range of signatories were broadened: it carries now the signatures of every local senior manager, not only of the Group Management. However, business ethics is indispensable not only for leaders. Every employee must be aware of the ethical boundaries, of how to proceed in certain cases and how to ask for help when facing any dilemmas. We know at Grundfos, that only responsible and innovative corporate leadership is able to succeed in any organization. Thus, it is essential to articulate all this to our employees, partners and customers and to present the efforts we made for sustainability and the achievements of the last two years. Besides the measurable results as outlined above, plenty of unique and exemplary initiatives were launched in the last two years. This includes our charity activities for aiding the people affected by the Haiti earthquake, the red sludge disaster or the Kenyan drought beyond the company support there was also financial aid coming from employee collaboration. This is what we consider employee responsibility! We increased the number of our employees with disabilities within TÁMOP program. We even employ a full-time social worker which is supposedly unique in this field of industry.
7 Introduction We made significant steps towards the local suppliers. The rate of Hungarian suppliers had already exceeded 20%, but to further improve this aspect the Supplier Excellence Program was introduced and a joint development program was launched with our suppliers. All these achievements and activities frame our intention to reduce CO 2 emission. Despite the significant economic development in the last few years, we managed to keep the CO 2 emission below the level of This fact clearly proves that it is possible to succeed in business and at the same time to pay attention to sustainability considerations. We believe that our performance must be comparable to other Hungarian companies, therefore, we used the GRI G3 Guidelines, basic values and indicators. Our report was prepared to fulfill the requirements of the B Application Level. Our first report was not certified by independent party, though, we tried to meet the general expectations of the certification process. This time we did measure ourselves. Considering the fact that one of our primary target groups is our employees, we asked the Workers Council (elected by them) to comment the report and to verify its data and information. I have high hopes that with this summary we successfully present our efforts for sustainability to all stakeholders. I wish pleasant reading to everyone! Tatabánya, 24 th August 2012 László Török General Manager
8 About the report The comprehensive reports made in every two years by Grundfos Manufacturing Hungary Ltd. (hereinafter referred to as GMH) explicate the company s performance in the given period, focusing particularly on economic, environmental and social fields. This next report, published in 2012 complies with B Application Level of the GRI Guidelines. Its reference period spans the calendar years of 2010 and Since 2010 happened to be quite eventful regarding social responsibilities, an additional short summary was published in the following year. GMH is a part of the Danish Grundfos Group, therefore, some values and regulations from group level will be presented in this report. However, all the performance data concern only GMH. This year we made remarkable progress regarding report preparation process. Focusing on our primary target groups (current and future employees, suppliers and partners) a targeted survey was made to have better picture about the opinions and expectations concerning the content of this report. The questionnaires were filled in by 537 people in total. 396 of them are current employees that is equivalent to 20.8% of the total number of employees, our aim was to involve more than 20%. Amongst the submitters there were also 66 suppliers, 31 students (potential future employee) and 44 other stakeholders. 31; 6% 17; 3% 2; 0% 2; 0% 8; 2% 3; 1% 66; 12% Figure 1. Distribution of survey respondents about sustainability report The members of our target groups uniformly emphasized the necessity for integrated presentation of the economic and environmental performance data and the accomplishments regarding employees and local communities. Therefore, we aimed to outline the fundamental relationships and to present our performance in detail. (From this point of view, this document rather reminds to an annual integrated financial and sustainability report.) ; 74% employee supplier family of employee NGO media industrial park professional affiliations student 1- not at all 5- very Figure 2. Importance of the Triple Bottom Line focus
9 About the report Two parallel initiatives were launched to define the focus topics of the report. On the one hand, we asked our stakeholders by the above-mentioned survey to determine the most important topics for themselves from the GRI Guidelines regarding sustainability reports. On the other hand, we asked our people, who were involved in the report preparation process, to define the most significant accomplishments and activities of the last year. The topics and their weighting were defined by the combined output of the two procedures. Figure 3. Themes considered most important according to our stakeholder survey The performance indicators are typically based on measurements. The exceptions with the indication of source can be found by the relevant data. There are no re-statements or data modifications comparing to the contents of previous reports. The scope, boundaries and measurement methods of this report are identical to the previous ones. The certification process we applied is considered trustworthy by the members of our primary target group, namely our employees: this report is verified and commented by the Workers Council (ÜT). Their statement can be found at the end of this document. ECONOMIC PERFORMANCE ENVIRONMENTAL PERFORMANCE balance sheet role in local economy procurement costumers, market presence state subsidies business ethics, corruption legal compliance other materials energy water biodiversity emissions to air climate change wastewater waste soil, groundwater product environmental footprint environmental footprint of distribution legal compliance other INTERNAL SOCIAL PERFORMANCE headcount, fluctuation benefits equal opportunities, diversity performance evaluation, career EXTERNAL SOCIAL PERFORMANCE 7 8 occupational health and safety training and education legal compliance union, workers council human rights child labour compulsory labour other partnerships, 259 local citizenship, 42 other, 22 donation, sponsorship,
10 Our philosophy Responsibility in corporate culture Grundfos Purpose Grundfos Values Leadership Principles Code of Conduct Since the foundation of Grundfos, sustainable development and social responsibility have always served as fundamental cornerstones for our corporate philosophy. It is truly exemplified by the fact that our goals and values are strongly connected to the basic principles of responsibility and sustainability. These considerations are also clearly expressed in our Innovation Intent and medium-term strategy. Our philosophy: be think innovate While examining the history of Grundfos Group it is easy to realize that only innovative and responsible corporate leadership can lead an organization to real success. We consider important to articulate this comprehensively to our partners and customers, therefore in 2001 the essence of our philosophy was summarized in three words.
11 Responsibility in corporate culture Strategy Customer Focus - Non trade GMH Globalization Operational Excellence Sustainability Financial Growing business Enlarge business through competence development and cost efficiency Reduce Operational Cost to increase competitiveness Save energy for competitive and sustainable operation Customers Satisfied customer: GMH as the first choice GMH is the most competent partner GMH supplies World Class quality products and provides on-time service GMH inspires and contributes to our sustainable profile and results Processes Development and Learning Effective translation of customer needs to GMH organization Define and ensure contribution on all levels to improve CRM function Leading in supply chain processes Driver for global NPI Transfer, Technology Continuous development of globalizationrelated competences Create an optimized and agile supply chain to reduce process waste Document and Implement information and knowledge management Continuously optimize energy reduction related processes throughout the entire supply chain Develop and Maintain knowledge and awareness about sustainability Innovation Intent Be (Be responsible) Responsibility is one of the fundamental elements of our philosophy and also serves as reference point for all of our activities. We are responsible for our employees and environment and not least for our customers who rely on us. Think (Thinking ahead) 9 10 We cherish those who take initiatives in high esteem. We are deeply convinced that the key to mutual success lies in the employee responsiveness for innovation. We need committed employees and progressive thinking to find the best solutions. We think first and then act. Innovate (Innovation is the Essence) It is our responsiveness for innovations that make Grundfos unique. We constantly seek for new solutions and answers to the ever-changing demands of the market. We face challenges bravely and are never afraid of taking initiatives.
12 Grundfos Purpose Grundfos is a global leader in advanced pump solutions and a trendsetter in water technology. We contribute to global sustainability by pioneering technologies that improve quality of life for people and care for the planet. Global leader means that Grundfos is acknowledged as leading actor in the pump industry by customers and competitors worldwide. We create, produce, sell and service high-quality pump solutions that set the standard in the industry. Advanced pump solutions means that we offer turnkey solutions to match the needs of customers no matter the complexity, application or scale of the solution required. Trendsetter in water technology means that we strive to be among the first in our industry to find ways of applying new technologies to water and wastewater movement and treatment. Contribute to global sustainability means that we run our business in an environmentally sustainable way, creating sustainable solutions all the way from cradle to grave. We are committed to making a significant contribution to reduce climate impact by lowering both our own and our customers CO 2 emissions. We create clean technologies and solutions that reduce water use, improve efficiencies, enable end-users to lower their water and energy consumption and introduce new ways of re-using resources. Pioneering technologies means that we will invent solutions that the world has never seen before. We will expand our business into new categories and areas using our technologies in new and creative ways with our customers needs as the starting point. Improve quality of life for people and care for the planet means that we care about people in the growing world and that our solutions must always balance human, social and environmental concerns. We wish to enable people to provide for themselves and to provide more comfort to more people at less cost to the environment and natural resources of the planet. We are ever committed to finding solutions for the poorest in the world and for people with special needs. Grundfos Values Grundfos is changing and developing ceaselessly, therefore, we need to define exactly what unites us, what makes us who we are. This is why we have taken a good look at our values to check if they are relevant to the business we are running today and to ensure that they reflect the mindset and language of our current and future employees. Our revitalized values provide the foundation for Grundfos and give us specific direction in our business: The so-called Value Day took place simultaneously in all companies and locations within the Grundfos Group on 20th of June The revitalized values were introduced to our employees through situational games and case studies. They also had a chance to discuss about how to translate the values into daily work. During the workshops all the employees had the opportunity to tell their personal experiences about the values. All the stories were uploaded to the global value website, which was made accessible to outsiders in 2012:
13 Responsibility in corporate culture Code of Conduct Grundfos is present in many countries worldwide, and those countries inevitably differ from the aspect of national characteristics, cultural norms and regulatory environment. These circumstances necessitated to have unified principles that draw up the appropriate business conduct for every possible case. The first Code of Conduct of the Group was released in February 2006, and ever since the managers traditionally sign it in their annual meeting. The basic values of Grundfos Group are summarized in the following topics: bribery, entertainment and gifts, fair and lawful competition, conflict of interest, confidentiality, acceptable accounting, labour rights, human rights, environment and political contribution. You are a leader only if you are followed Grundfos Leadership Principles Grundfos Group has great ambitions (explicated in detail in the chapter Relentlessly ambitious ), and great ambitions require highly qualified and authentic leadership. They need to define the goals, prepare the plans and follow up the realization of initiatives and developments. Great leaders have to be able to motivate the employees and also to recognize great performance, but at the same time their tasks include progressive decision-making and thus to take risks. Carsten Bjerg, the President of Grundfos Group created five leadership principles which serve to translate the basic values of the company into day-to-day leadership behavior. Compliance with legislation on national and international level is considered an unquestionable requirement. It is the corporate management s responsibility to ensure that the contracts fully comply with the regulations of Grundfos and also with the national and international rules. We rigorously oppose every ethical violation, particularly corruption. The Ethics Committee was formed by Grundfos Group in Its primary objective is to spread information about the principles of the Code of Conduct, to help with the interpretation of the regulations and to give general advice. As an independent committee its tasks include the investigations. of anonymous statements about violation of Grundfos Values. CODE OF CONDUCT how we practice it Leadership vision In our interpretation great leaders are able to successfully deliver on short term commitments while contributing in building the Grundfos of the future. Grundfos leadership principles You are present You inspire passion, curiosity and joy You empower people You build high-performing teams You invent tomorrow The Code of Conduct was renewed last year and it has a more and more important role to play, therefore, the range of signatories had been broadened: it carries now the signatures of every local senior manager. However business ethics are indispensable not only for leaders. A practical handbook was released to help with the interpretation. It shows the way how the values can be put into practice through presenting tough situations and serious dilemmas. The handbook is available in nine languages (including Hungarian) and every employee will receive it in 2012.
15 Grundfos runs its business in a responsible and ever more sustainable way. We make products and solutions that help our customers save natural resources and reduce climate impact. We take an active role in the society around us. Grundfos is a socially responsible company. We take care of our people also those with special needs.
16 The Grundfos Blueflux motors produced on our line are important not only because they are energy efficient but also because due to high orders they provide employment. This makes us, employees feel important and secure. Katalin Tóth, operator, GMH1
17 SUSTAINABLE By better utilisation of our trucks, avoiding of unnecessary airfreight, regular CO 2 exhaust reports of our forwarders, and the reduction of paperwork we try to reduce the environmental impact of our freight activities. Tibor Láng, Chief Logistic Specialist, Distribution Centre Sustainability in strategy SUSTAINABLE Besides customer-focus, globalization and manufacturing excellence, sustainability is also considered as one of the fundamental elements of our business strategy. There is an expectation towards every Grundfos company to run their business as an environmentally conscious production and service organization. Climate change growing responsibilities for companies The climate change is one of the most serious global problems of today. The Earth s growing average temperature is mainly caused by irresponsible greenhouse gas emissions. Grundfos has realized early that the companies have huge responsibilities in solving this issue we were amongst the first ones who took action. There are many components of a company s entire ecological footprint: for instance the emissions deriving from supply chain actors or employees commuting to work. We follow the CO 2 emissions coming from transportation and strive to reduce it by optimizing transports. Additionally, this includes the environmental impact of electricity and gas consumptions. t Climate strategy serves as central element for sustainability. Grundfos has aimed for no less than total carbon neutrality by applying a wide range of innovative technology and renewable energy sources. As a first step, it was prescribed to every subsidiary to measure carbon dioxide emissions from 2009, then other programs were initiated to reduce emissions. Our short-term objective is to keep the emissions of the Grundfos companies below the level of Figure 4. Direct and indirect carbon dioxide emissions From electricity consumption From gas consumption
18 Meet the energy challenge Products and their environmental impacts Meet the energy challenge now The pumps make up 10% of the world s energy consumption. Every plant, every enterprise and even every household uses pumps. By using energy saving equipment not only money can be saved but at the same time it also reduces carbon dioxide emissions. Originated in the design practice of the last decades pumps today are typically bigger in size and have greater reserve than necessary it is not coincidence that the two-third of them consume 60% more energy than needed. If all the enterprises in the world changed to energy-efficient pumps, it would cause 4% energy save in the world this is equivalent to the consumption of approximately 1 billion people. Further interesting information can be found on this topic: As an effect of the EuP directives, motors with lower energy-efficiency will soon be forced out of the market. IE3 is the strictest one of the newly introduced categories. Currently Grundfos is considered the only pump producer in Europe whose products are normally equipped with IE3 motors. The European centre of Grundfos engine production is located in Hungary. The motors that fall under the category of IE3 are marked with the so-called Grundfos Blueflux stickers this indicates that the given products meet the requirements of the highest level efficiency directives, and will even suit the new demands after the next shift of EuP in Every single new generation of our products our more and more energy efficient. Grundfos also manufactures products using renewable energy (sun, wind), which can be applied in territories lacking power supply. The European Union directives regarding energy using products are summarized in the Ecodesign directive this regulates for example the energy efficiency of electric motors and pumps. The manufacturers and developers of the products subject to the regulations are obliged already in the design phase to reduce the negative environmental impacts of their products for the entire life cycle. Besides increasing the energy using efficiency they also need to pay attention to the recyclability of materials used during production. The recycling rate of the Grundfos pumps is around 90-98%. The following energy saving products are manufactured in the Hungarian plants: MGE motors (with built-in frequency converter motors) CM Pumps equipped with MGE motors: TP, NB, NK, MT, CR, In 2010, within the project called Improvement of Motors (IOM) we examined the re-design possibilities for Grundfos MG/ML motors in order to make them fulfill the European Union requirements of energy efficiency, or even to exceed them.