Corporate responsibility and sustainability fiscal year 2017/2018

Sectra endeavors to improve society by helping to make it healthier and safer. Acting responsibly with respect to customers, employees, regulations and the environment is a natural consequence of Sectra’s vision and mission statements.

Below is a description of Sectra’s work related to the environment, social conditions/personnel, respect for human rights and anticorruption, and additional issues that are particularly important to the company’s long-term development. These descriptions constitute Sectra’s sustainability report, together with pages 2-7 in Sectra's Annual Report 2017/2018. On these pages, Sectra presents the Group’s vision and how the company’s mission statements and product offerings help customers make people’s lives healthier, safer, and more secure.


Working together with Sectra is to be viewed as a stamp of quality for customers as well as employees and partners. Sustainable business practices and continuous improvements are an integral part of Sectra’s quality-control process.

Below you can read about Sectra’s work related to various sustainability issues that are particularly important to the company’s long-term development.

High quality and customer satisfaction

Customer satisfaction

For a medium-sized company such as Sectra, which competes with some of the largest companies in the world, it is important to have a clear profile and focus. Customer confidence is highly important in the industries where the company operates, and Sectra has chosen to focus on customer satisfaction. The probability that a company will be chosen as supplier is higher if it has high customer satisfaction16 and it also creates job satisfaction and helps to improve the well-being of its personnel.

In all markets, the company regularly conducts its own customer satisfaction surveys based on a Net Promoter Score (NPS). These surveys provide important information for achieving high customer satisfaction and continuing to develop as a company. Sectra’s goal is to achieve an NPS of at least 20% for all sub-areas and products measured. In 2017/2018, the goal was achieved by a healthy margin for 16 of the 17 sub-areas. Customer feedback on Sectra reflects high quality deliveries. External surveys, such as “Best in KLAS” presented on page 22, shows an equally positive result as in the company’s own surveys.

 

Fact about NPS

The Net Promoter Score (NPS) is calculated based on the answer to the question “Would you recommend Sectra, our products and services to a friend or colleague?”. Customers answer the question on a scale from 0 to 10. Respondents who give a 9 or 10 are referred to as ambassadors, and those who give between 0 and 6 are referred to as critics. A 7 or 8 is seen as neutral.

The NPS is calculated by subtracting the percentage of critics from the percentage of ambassadors. The NPS interval is between -100 (only critics) and 100 (only ambassadors). A positive NPS value (higher than 0) is considered good.

Quality and product safety

Quality control and product safety are highly important, since Sectra’s products and services can mean the difference between life and death for individuals and large groups of people. Moreover, some Sectra products handle sensitive and confidential information that may be crucial for national security.

In accordance with medical technology and other regulations, Sectra follows quality control procedures designed to continuously improve the safety and effectiveness of its products before, during and after they are delivered to customers. IT security is another field deeply rooted in processes, procedures, products and services. Sectra also has procedures and processes in place to follow up security and quality in its products and services before, during and after delivery. For example, incidents involving Sectra’s products and services are systematically investigated in order to identify the underlying causes. Based on these investigations, corrective and/or preventive measures are taken for the products in question and, in certain cases, reports are submitted to the relevant authorities.

Sectra’s operating areas are certified according to relevant standards in their respective areas, including ISO 9001:2015, ISO 27001:2013, ISO 13485:2016 and ISO 13485:2016/CMDCAS. This means that internal and external consultants review the company every year to assess its compliance with these standards and its internal processes and notify Sectra of any need for corrective actions. The company also works with its own certification programs and internal training courses for employees and distributors. The company’s products are subject to industry-specific regulations and requirements. Sectra’s crypto products are evaluated and approved by security authorities since they are used to protect highly sensitive information. Sectra’s medical IT systems comply with European regulations for CE marking, the Medical Device Directive 93/42/EEC, while products sold in North America have been approved by the US Food and Drug Administration (FDA).

Social conditions and employees

Ensuring employee satisfaction and development

The key to Sectra’s success lies in its competent, responsible employees and their dedication to solving customer problems. A great deal of energy is devoted to employing the right people and creating a corporate culture where all employees are always there for the customer. Ongoing skills training and frequent customer visits help to improve quality and give the company a greater understanding of customers’ day-to-day operations.

Sectra’s personnel have extensive expertise and a solid educational background. 84% of its employees have a university degree and many have completed postgraduate studies.

In order to retain and develop competent and dedicated employees, employees and managers work together to identify development needs and draw up development plans in conjunction with regular performance appraisals. This is conducted using an established process for personnel management, which is part of the company’s management system. Sectra also monitors employee satisfaction through annual employee surveys. One of the Group-wide goals monitored by Sectra in the surveys is whether its employees have a good “gut feeling” when coming to work. The goal is to achieve a result of more than 3.5 on a scale of 5. In 2017/2018, the goal was achieved by a healthy margin and the outcome was 4.0 (3.9).

The company encourages its employees to grow and develop as individuals. At Sectra, you can start as a recent graduate and gradually progress to adopt a role as an expert or a senior position. For instance, there is an annual program where coworkers can be nominated by colleagues and then appointed as seniors or fellows, with additional benefits and responsibility. Sectra also encourages internal mobility between departments and between the Group’s companies around the world. This spreads the company’s combined expertise and promotes collaboration within the Group.

All new employees take part in “rookie” training, where personnel from around the world meet to learn about fundamental values, processes and management systems, products, IT security and other important areas. Internal and external courses, training programs, various certification programs and supervision help to ensure that employees have the correct skills for their role and their duties.

Sectra employees

Recruitment

Over the past year, Sectra has worked to optimize and clarify its internal processes for recruitment, personnel, training and other measures designed to improve skills and achieve certification. This included updated guidelines for better system support through the introduction of a new HR system and a new central function for recruitment support.

Work environment

The basis for the company’s work environment initiatives is that all employees should feel involved in activities related to the work environment through an interplay where experience and opinions about the environment are taken into account in everyday working procedures. This is described in Sectra’s work environment policy.

Example of work environment goals:

  • No employee shall be exposed to any risk of injury or sickness due to their work.
  • All Sectra employees shall experience a good quality of life in their work with respect to physical, psychological and social conditions.
  • The company shall take rapid and conscientious action to ensure its employees can return to work after long-term illness, work-related injury or other problems.

The Group takes a proactive approach to occupational health and safety issues, for example, by offering health screenings, wellness programs and training opportunities.

Equal opportunities, diversity and respect for human rights

Sectra’s workplace shall be distinguished by equal opportunities and equal treatment, with everyone assuming responsibility for the treatment of their fellow human beings. In line with the company’s policy in the area, Sectra works continuously to promote equal opportunities in order to achieve gender balance and diversity.

The policy states that the company’s position on human rights is that no form of discrimination will be tolerated regardless of ethnic or national origin, skin color, gender, sexual orientation, religion, political opinions, nationality or social origin. Sectra has zero tolerance towards all forms of discrimination, bullying and harassment. Sectra considers the risk of human rights violations as small in both its own operations and for its subcontractors.

Sectra’s organization has global operations, where language skills and the ability to operate in different cultures are important success factors. For example, the Group’s employees come from some 30 different countries and bring experience from a range of cultures and settings.

The availability of women engineers is low in Sectra’s technologyintensive niche areas, but the company is seeking to achieve a better gender balance. Of the Group’s employees, 79% (78) are men and 21% (22) are women. As of the balance-sheet date, 30% (33) of Group Management were women. For more information, refer to Note 2 in the Annual report 2017/2018. The way employees experience equal opportunities and equal treatment at the company is followed up in the annual employee survey.

Risk management

Given the fact that customer confidence is a critical success factor, Sectra prioritizes stable, long-term growth over rapid, high-risk expansion. Because Sectra is active in several industries and a large number of markets, the Group’s overall exposure to political and market risks, for example, is limited. To prevent risks, the company has established a number of policy documents that explain Sectra’s values and how its managers and employees are expected to conduct themselves. These documents include policies governing risk management, information security, the Code of Conduct, equality, the environment, work environment and financial matters.

Business and financial risks are analyzed continuously and measures to reduce the Group’s risk exposure are taken as needed. The risks with the highest risk index in the annual review performed by the Board and Executive Management are described below. Read more about the company’s risk assessment for the coming year in the Annual Report 2017/2018, Note 30 Risks and risk management.

Policies and processes

Sectra has established the following policies and processes in the company’s management system for controlling its sustainability work:

  • Code of Conduct
  • Policy and process for managing information security risks
  • Policy and process for managing medical technology risks
  • Environmental policy and environmental plan
  • Work environment policy
  • Policy for gender equality and diversity
  • Policy for gender equality on the Board of Directors
  • Policy for salaries and bonus payments
  • Policy and process for whistleblowing

Risks with high risk index

 

RISKS WITH HIGH RISK INDEX MEASURES TO LIMIT RISK
(Risk index = assessed probability multiplied by assessed financial impact)
Leaks of confidential information and cybersecurity threats

Employees of the company are exposed to, or have access to, confidential information. As a result of IT advances and a growing number of cybersecurity breaches in society, there is now a greater risk that important confidential information belonging to Sectra and its customers could be exposed. Leaks of confidential information could impact customer confidence in the company, have a serious effect on the company’s sales and result in fines or compensation claims.

Confidentiality agreements are signed with all employees. Employees in the Secure Communications operating area undergo security checks and are provided with mandatory training for handling confidential defense information. Sensitive information is handled in small groups and, in special cases, a logbook is kept with the names of the people who have access to the information. Executive Management and employees in particularly exposed positions use Sectra’s solutions for secure mobile telephony. In 2017/2018, additional resources were set aside to improve the Group’s IT security. Internal training courses and security tests are performed regularly.

Intellectual property right disputes

The focus on business ethics has increased, both within the company and in the global business environment. This is particularly true when it comes to corruption and bribery, which have received greater attention in the media due to a number of international scandals. According to Executive Management’s assessment, the company’s risks in this area are increasing as a result of the growing number of international distribution partners, which are more difficult to monitor using internal procedures.

To ensure a return on its R&D investments, the company analyzes the requirements for various products in terms of intellectual property rights in order to identify and protect these products through patents. Sectra’s patent portfolio currently includes 22 patent families.

Risks related to business ethics

The focus on business ethics has increased,both within the company and in the global business environment. This is particularly true when it comes to corruption and bribery, which have received greater attention in the media due to a number of international scandals. According to Executive Management’s assessment, the company’s risks in this area have increased over the past fiscal year as a result of the growing number of international distribution partners, which are more difficult to monitor using internal procedures.

Sectra has a Code of Conduct that contains a strict anti-bribery policy, which is intended to limit the risk of individual instances of bribery. For more information, refer to the heading Business ethics and combating corruption. The Code of Conduct is included in all distribution agreements and Sectra is entitled to terminate its business relationships at short notice if the code is not followed. Other measures include ongoing assessments of subsidiaries and partners and specific audit procedures for selected subsidiaries each year.

Currency exchange risks

The Group’s exposure to currency exchange risks mainly arises through transactions in foreign currencies in the form of customer and supplier payments and, to a lesser extent, in connection with the translation of foreign subsidiaries’ income statements and balance sheets. The Group’s largest exposures are in USD, EUR and GBP.

Sectra continuously monitors risks and cash flows in foreign currencies. Subsidiary financing is carried out in the local currency. The Group does not currently hedge its transaction exposure since the costs involved in effectively managing hedging contracts are deemed to be higher than any potential gain. Currency effects had a positive negative impact on the Group’s operating profit in 2017/2018.

Outstanding accounts receivable

The Group’s customers primarily include government authorities, public healthcare providers and other reputable customers with high credit ratings, although payment practices vary between countries. Sectra is exposed to greater credit risks in countries where many of its customers are privately owned, such as the US. An increase in the number of partners outside Europe is contributing to a higher risk of potential credit problems.

Sectra has procedures in place to ensure thorough credit ratings of its customers and partners. To minimize credit risks in fixed-price projects, Sectra makes extensive use of advance partial payments and bank guarantees.

Product liability and property risks
Through its operations, Sectra assumes product liability, which means that personal injury or damage to property caused by the company’s systems at the premises of a customer or third party could lead to compensation claims. Increased sales of cloud services are leading to greater risk exposure and a need for new types of insurance, such as cyber insurance. The terms and conditions for the cover offered by these types of insurance is, however, not clear. Insurance needs are evaluated on an annual basis. Insurance policies have been taken out for the property and liability risks to which the Group is exposed. The probability of risk pursuant to product responsibility is low, as Sectra has historically never had any claims. However, the overall risk is increasing due to a rise in cyber threats in society. Any claims that may arise due to cyber threats may have a substantial financial impact on the operations.
Patient security
The medical IT systems developed and sold by Sectra may impact patient security. Along with an increase in the number of cybersecurity incidents around the world, new and stricter requirements from local authorities and the EU have contributed to higher risk. An incident relating to patient security or the loss of patient information may result in the loss of customers, reduced sales and fines or compensation claims. The company’s products are developed, manufactured, marketed, sold and maintained in accordance with quality-control procedures and processes. For more information, refer to the heading Quality and product safety. After its products are delivered to customers, Sectra follows quality-control procedures designed to improve the safety and clinical effectiveness of its products. Incidents involving Sectra’s products are investigated systematically in order to identify the underlying causes. Based on these investigations, corrective or preventive measures are taken for the products in question and, in certain cases, reports are submitted to the relevant authorities. Sectra’s products are assessed in compliance with organizations such as the US Food and Drug Administration (FDA), which reduces the company’s risk with respect to patient security. Regular internal and external audits are conducted.

Business ethics and anti-corruption measures

Working together with Sectra is to be viewed as a stamp of quality for customers as well as employees and partners. Sectra considers its corporate culture, in combination with its Code of Conduct, to be crucial factors in ensuring that the company’s business is fair, honest and complies with applicable laws. The company’s corporate culture, Code of Conduct and quality and control processes help to guide the decisions and actions of its managers, partners and employees during the course of their daily work.

Sectra pays tax in each country where it operates in accordance with prevailing law and OECD:4 Transfer Pricing Guidelines, which helps to boost development in the local community in each country.

Code of Conduct

Sectra conducts global business, with its principal exposure to countries in Europe and the US. The company’s model for working with customers, distributors and strategic partners is based on responsibility, transparency and knowledge sharing. Sectra has worked with several of its customers for more than 20 years. These close, long-term partnerships play a very important role in Sectra’s success. Accordingly, it is vital that the company’s efforts to increase its market shares and win the loyalty of new customers do not jeopardize its business ethics and responsibility.

Sectra’s Board has established a Code of Conduct that addresses various areas, such as product safety, work environment, confidential information, anti-corruption, conflicts of interest, use of social media and competition. It also describes the values and basic principles that Sectra expects its Board members, managers, employees, consultants and partners to follow. When it comes to external parties and subsuppliers, this is regulated through the terms of agreement or (in the case of large companies over which Sectra has only a minor influence) in the choice of sub-supplier. The Code of Conduct is included in all distribution agreements and Sectra is entitled to terminate its business relationships at short notice if the code is not followed. Should this happen, Sectra is also entitled to transfer its ongoing service agreements to a new partner or take over the agreements itself, making it clear to the counterparty in question that Sectra treats such breaches with the utmost seriousness.

Combating corruption

The company does not tolerate corruption and works proactively to ensure that neither the company nor its partners are involved in any form of corrupt activities. As part of this work, Sectra’s external auditors carry out a number of specific recurring audit procedures in subsidiaries worldwide.

As part of its Code of Conduct and anti-corruption policy, Sectra has introduced a whistleblower system where employees and other individuals can report inappropriate behavior or other deviations. All employees must feel confident that they can report irregularities and serious incidents that impact the company without fear of adverse consequences. All reports made in accordance with this whistleblower policy will be given serious consideration and they will be handled professionally and in confidence.

Environment

Sectra’s environmental work is characterized by consistent environmental consideration and continuous improvement processes in respect of climate impact and resource use. This applies to both the internal and external environment.

Sectra’s environmental policy >>

External environment

The Group’s activities are largely comparable with working in a traditional office environment. Sectra primarily sells proprietary software and services and, to a lesser extent, physical products, including those from external suppliers. Proprietary physical products are produced by sub-suppliers in Europe. With respect to the resale of hardware, the Group’s external suppliers are large, global companies with processes and policies in place for key sustainability issues. Sectra’s management system includes an environmental plan. The plan describes the environmental impact and environmental goals of the Group’s business activities and the measures taken to achieve these goals.

From an environmental perspective, the digital radiology systems that Sectra develops, for example, are highly advantageous. By enabling remote viewing, these systems help to reduce the number of patient trips and meetings as well as the transportation of medical images.

The company’s operations are not subject to notification or permit requirements under the Swedish Environmental Code.

Internal environment

The company endeavors to ensure that its workplaces and premises are environmentally friendly and can save energy and resources by using technical equipment that is modern, green and energy efficient. Environmentally friendly alternatives are used where possible and when economically justified to minimize climate impact from travel and transportation. Telephone and videoconferencing are widely used.

Sectra and the UN Sustainable Development Goals

UN global goals

The UN Sustainable Development Goals (SDGs) aim to eradicate poverty and hunger, protect human rights for everyone, achieve gender equality and ensure the long-term protection of our planet and natural resources. By taking responsibility for how the company’s activities and goals impact the environment, Sectra is contributing to the UN SDGs and the realization of Agenda 2030.

UN Goal 3—Good Health and Well-Being: The focus in Sectra’s medical operations is on good health and well-being for patients and for society as a whole. Cancer diseases, osteoarthritis and orthopaedic surgery represent some of the most costly and resource-intensive areas in the healthcare sector. Sectra’s solutions facilitate and optimize diagnostics, planning and follow-up of patients in these areas.

UN Goal 5—Gender Equality: Sectra works actively to ensure the company’s workplaces are characterized by equal opportunities and equal treatment, with everyone assuming responsibility for the treatment of their fellow human beings. In line with the company’s policy in the area, Sectra works continuously to promote equal opportunities in order to achieve gender balance and diversity.

UN Goal 8—Decent Work and Economic Growth: A safe and secure workplace that supports employee rights and conditions is important for Sectra, both within its own operations and within the supply chain. Economic growth is one of the company’s prioritized financial goals, where we work to enhance cost efficiency in the long term and focus on software products with high margins.

UN Goal 9—Industry, Innovation, and Infrastructure: Within the critical infrastructure product segment, Sectra helps society to secure, for example, water and electricity supply and to protect these against different types of threats. Within the field of medical technology, Sectra helps healthcare providers to offer more efficient care in medical imaging by providing infrastructure, products and services for image sharing within and between different healthcare providers.

UN Goal 16—Peace, Justice and Strong Institutions: Within the secure communication product segment, Sectra helps politicians, authorities and the armed forces to ensure a functioning government. Using codes of conduct, Sectra also actively works to combat corruption and bribery and to comply with all laws and regulations in the areas where the company operates.

About Sectra's Sustainability Report

This is an excerpt from Sectra’s first Sustainability Report; for full version refer to the Annual Report 2017/2018. The report encompasses the Parent Company Sectra AB (Corp. Reg. No. 556064-8304) and all units included in Sectra’s consolidated financial statements for the 2017/2018 fiscal year. Refer to Note 12 on page 71 in the Annual Report 2017/2018. The Sustainability Report has been prepared in accordance with the provisions of the Swedish Annual Accounts Act, Chapters 6-7. Sectra’s principles for corporate governance are described in the Corporate Governance Report, which also presents the Board of Directors’ diversity policy. By signing the Annual Report and consolidated financial statements, the Board of Directors and the CEO have also approved the Sustainability Report. The auditor’s statement on the Sustainability Report is included in the auditor’s report presented on page 78 in the Annual Report 2017/2018.

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