Corporate responsibility and sustainability fiscal year 2016/2017

Sectra endeavors to improve society – while maintaining favorable profitability – 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.

Sectra considers its corporate culture to be a crucial factor in ensuring that the company’s business is fair, honest and complies with applicable laws. Combined with the company’s quality and control processes, the corporate culture helps to guide the decisions and actions of its managers, partners and employees during the course of their daily work.

 

Facts based on fiscal year 2016/2017 and status April 30, 2016.

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 is a description of Sectra’s work related to various sustainability issues that are particularly important to the company’s long-term development.

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. In accordance with medical technology regulations, Sectra follows quality control procedures designed to improve the safety and clinical effectiveness of its products after they are delivered to customers. 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.

The company’s products are developed, manufactured, marketed, sold and maintained in accordance with quality-control procedures and processes. Sectra’s operations are certified in accordance with the SS-EN ISO 9001:2008, SS-EN ISO 13485:2003 and ISO 13485:2003/CMDCAS quality standards. This means that internal and external consultants review the company every year to assess compliance with the requirements of the standards 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). Use of these systems and products requires rigorous documentation.

Risk management

Given the fact that customer confidence is a critical success factor, Sectra has always prioritized 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 (assessed probability multiplied by assessed financial impact) 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, Note 30 Risks and risk management.

RISKS WITH HIG RISK INDEX MEASURES TO LIMIT RISK
Leaks of confidential information and cyber security threats

As a result of IT advances and a growing number of cyber security 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 and have a serious effect on the company’s sales.

Confidentiality agreements are signed with all employees. Employees in the Secure Communications business 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 2016/2017, additional resources were set aside to improve the Group’s IT security.

Intellectual property right disputes

Sectra invests considerable resources in product development. During the preceding fiscal year, Sectra began selling a system for digital pathology – a new field with patents from various players, which increases the risk of patent disputes.

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 currently holds some 30 patents.
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 anti-corruption measures. The code 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 in 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 EUR, GBP and USD

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 impact on the Group’s operating profit in 2016/2017.

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. A larger number of partners outside Europe is contributing to a higher risk of potential credit risks, particularly in oil countries.

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.

Business ethics and anti-corruption measures

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 sub-suppliers, 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. Sectra 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 a number of specific audit procedures in selected subsidiaries worldwide.

Employee satisfaction, development and well-being

The key to Sectra’s success lies in its competent employees and their dedication to solving customer problems. An enormous amount of energy is devoted to employing the right people and creating a 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 uses its annual employee surveys and reviews to monitor employee satisfaction and development. One of the Group-wide goals monitored by Sectra 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. The result for 2016/2017 was 3.9 (3.9).

On the balance-sheet date, Sectra had 638 (625) permanent employees and some 30 project employees. The employee turnover rate in 2016/2017 was 14.0% (8.6). Sectra’s personnel have extensive expertise and a solid educational background. 80% of its employees have a university degree and many have completed postgraduate studies.

The Group takes a proactive approach to occupational safety and health issues by offering health screenings, wellness programs and training opportunities. This has resulted in a low rate of absences due to illness, corresponding to 2.1% (1.7).

Equality and diversity

Sectra works continuously to promote gender equality in order to achieve gender balance and diversity. The Group’s employees come from some 30 different countries and bring experience from a range of cultures and settings. Of these employees, 71% (69) are men and 29% (31) are women. As of the balance-sheet date, 33% (44) of Group Management were women. For more information, refer Sectra's Annual Report.

Taxes

Sectra pays taxes in accordance with the prevailing regulations in the countries where it operates.

Environment and policy

The Group’s activities are largely comparable with working in a traditional office environment. Sectra primarily develops and sells 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.

In order to meet customers’ sustainability requirements on Sectra as a supplier, the Group developed a new environmental plan during the fiscal year. The plan describes the environmental impact and environmental goals of the Group’s business activities and the measures taken to achieve these goals. The environmental plan is part of Sectra’s quality management system.

The company’s operations are not subject to notification or permit requirements under the Swedish Environmental Code. From an environmental perspective, the digital radiography systems that Sectra develops, for example, are highly advantageous. The introduction of digital technology is helping to reduce the use of film and chemicals with a high environmental impact as well as travel and transportation.

Sectra’s environmental policy

Sectra shall strive to reduce its impact on the environment and contribute to a favorable environment in which to live. Decisions are to balance considerations regarding what is ecologically motivated, technically possible and economically viable.

Sectra shall contribute to an improved environment by:

  • being efficient in its use of resources and reducing waste quantities as far as possible as well as the effect that waste can have on our environment
  • using modern information technology as extensively as possible, thereby contributing to energy savings and reduced emissions
  • selecting materials for our products that provide the least possible environmental impact and which are, at the same time, economically viable without compromising the quality of our products
  • prioritizing purchased products and services that cause less environmental impact than otherwise comparable alternatives
  • working to recycle used materials where possible
  • providing a safe and pleasant working environment for our employees

Since February 1998, Sectra AB has been listed in the REPA registry for the recycling of packaging. Sectras business operations has been quality certified in accordance with ISO9001/TickIT since April 1996.

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