Corporate Social Responsibility

Combined separate non-financial report

We understand sustainability to mean a focus on environmental, economic and social values. As well as the responsible use of resources and the environment, this also includes our responsibility to our employees and our social commitment. We present these issues in a combined separate non-­financial report pursuant to Sections 315b and 315c in conjunction with Sections 289b to 289e HGB [Handelsgesetzbuch – German Commercial Code]. The report fulfils the requirements of the CSR Directive Implementation Act [CSR-Richtlinie-Umsetzungsgesetz] and combines the statement at company level with the Group statement outside of the management report.

The concepts outlined here apply to both the Group and to KSB SE & Co. KGaA; any instances where this is not the case are duly indicated. All information in the non-financial report relates to KSB SE & Co. KGaA and the Group in 2018. References to information not included in the group management report and any captions in this section represent supplementary information and are not part of the separate non-financial report. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft performed a limited assurance engagement on the information in this report in accordance with ISAE 3000 (Revised) and issued an independent assurance report.

In the areas of human rights, labour standards, the environment and anti-corruption, the concepts and activities set out in this report follow the principles of the UN Global Compact.

In accordance with our business model, we aim to supply customers worldwide with high-quality pumps and valves, as well as related support services. The vast majority of our products are developed in-house and are manufactured in factories on four continents. Our products are sold via our own sales organisation, supported by dealer networks composed of selected partners. KSB’s business model is presented in our group management report on page 76.

By signing the UN Global Compact in 2010, we committed ourselves to aligning our business activities with ten universal principles. But it is not only our managers and employees who endorse the principles of the Global Compact – our suppliers and business partners also share these commitments. We ask our strategically most important business partners whether and to what extent they use these or comparable standards as a source of orientation.

KSB’s sustainability principles are binding for all locations and companies of the KSB Group. These principles are set forth in our sustainability policy which applies to the entire Group. A committee chaired by a member of Management regularly reviews progress in these areas. Management also receives a compliance report twice a year as well as an annual review of management issues relating to quality, the environment and occupational health and safety.

KSB operates a globally integrated management system in order to fulfil the same high standards worldwide with regard to quality, risk, environment, occupational health and safety, and sustainability. The management system is process-oriented and complies with the requirements of the international ISO 9001, ISO 14001, OHSAS 18001 and ISO 26000 standards as well as the UN Global Compact. It governs the organisational processes and workflows, responsibilities, procedures and processes at Group level and at our individual locations.

104
 KSB has actively or financially contributed at least € 5,000 each to 104 social projects.

We continually assess the requirements and expectations of the various stakeholders  with regard to our company. In 2018, specialist departments and our sustainability committee – with the involvement of Management – reviewed and confirmed the key sustainability topics defined for KSB in the previous year. The aspects and factors necessary for understanding the development and performance of the business and the position of the company as well as the impact of our activities on the following issues remain the same:

  • Environment (resource efficiency, manufacturing of ­energy-efficient products, emissions and product safety)
  • Combating corruption and bribery (compliance)
  • Respecting human rights (sustainability in the supply chain)
  • Employee concerns (training and development, equal ­opportunities, occupational health and safety)

STATE OF THE ART: KSB takes ecological aspects into account when planning and building plants. The newly established production facility in Moscow meets the requirements for environmentally friendly construction. With modern insulation, an efficient heating system and insulated windows, we keep the new plant’s energy requirements to a minimum. This enables us to not only conserve resources but also to reduce our operating costs.

KSB is currently carrying out energy-­efficient refurbishments of its buildings to reduce energy consumption and CO2 emissions. Regular energy audits of our European locations help to achieve this.

HEALTHY RIGHT FROM THE START: To promote health awareness of its youngest employees, KSB organises an annual AzubiFit seminar at its Halle location. Aimed at trainees in their first year at KSB, the seminar teaches junior staff how to stay healthy and fit.

KSB takes a holistic approach to implementing its company health management system. We know that good physical and mental health are essential for our employees to deliver their very best performance for our clients.

Energy consumption
Total KSB SE & Co. KGaA Europe*** Asia / Pacific Americas Middle East / Africa
Total energy consumption* 283,139 MWh 92,703 MWh 136,874 MWh 35,549 MWh 96,519 MWh 14,197 MWh
Total electricity** 160,803 MWh 37,488 MWh 56,339 MWh 30,778 MWh 61,978 MWh 11,708 MWh
Electricity from renewables 51,135 MWh 19,158 MWh 23,259 MWh 5,208 MWh 19,688 MWh 2,980 MWh
CO2 emissions 101,339 t 21,215 t 29,555 t 28,139 t 35,860 t 7,785 t
*Electricity, gas, fuel oil, district heating, wood, etc.
**Total deviates due to rounding
***Including KSB SE & Co. KGaA

These issues are directly related to our manufacturing activities, our products, our business partners and our employees. Our products also directly contribute towards protecting the environment, for example, by saving energy or through their use in waste water treatment applications.

KSB’s corporate responsibility includes our commitment to society. This section is an entirely voluntary report on our social engagement activities which do not have any direct or material impact on our business success.

KSB does not see any material risks, as assessed based on the net evaluation method, associated with our own business or the business relations of the company, its products and services which have or could have a serious negative impact on non-financial aspects, like the environment, anti-corruption, human rights, employee concerns and social issues. All other risks with an impact on our business activities are described in the group management report from page 96.

The non-financial report – unless otherwise stated – encompasses 28 key companies within the KSB Group. We have chosen these companies due to their impact in terms of aspects such as energy consumption and the percentage of employees involved. The 28 Group companies include all consolidated subsidiaries with production plants and two service companies with energy-intensive workshops.

Environment

As a manufacturing company, we act responsibly when using natural resources. Our goal is to minimise the impact on the environment and reduce energy consumption to a minimum. In this way, we not only conserve natural resources, but also increase the cost-effectiveness of our products through lower raw material costs. Furthermore, we avoid economic and legal risks which could potentially result from environmental damage and failure to comply with laws and regulations.

31.8
 Percentage of renewable energy in our power consumption: (KSB SE & Co. KGaA: 51.1 %)

KSB follows the internationally recognised ISO 14001 ­environmental management system to ensure we deal ­responsibly with the natural environment. We have so far established the environmental management system at 37 production and assembly locations (KSB SE & Co. KGaA: 3 locations); this means 90 percent of our locations are covered. We conduct regular evaluations of our strategically most important suppliers to determine whether they comply with the requirements of applicable national or international environmental management standards. In 2018, we reviewed one third of our 618 suppliers via online research. The proportion of these suppliers using recognised environmental standards as a source of orientation was 61 %. In a supplier survey conducted in 2017, the proportion was 45 % for 547 respondents.

We carry out regular energy audits at our major European locations to reduce energy consumption and CO2 emissions. The resulting measures include the energy-efficient refurbishment of our buildings and foundries. To help cut electricity consumption, for example, we use high-efficiency lights and sensor-controlled lighting. We are also continually expanding our video conference system worldwide in order to minimise the need to travel for our employees and to keep the associated costs and impact on the environment as low as possible.

We regularly record our energy consumption and CO2 emissions so we can analyse this data. In the year under review, our energy consumption was 283,139 megawatt hours (KSB SE & Co. KGaA: 92,703 megawatt hours). 31.8 % (KSB SE & Co. KGaA: 51.0 %) of the energy we consumed came from renewable sources. This percentage decreased by 1.5 for the entire Group compared with the previous year, a result which is primarily due to higher electricity consumption in the USA, where our subsidiary GIW Industries, Inc. operates an energy-intensive foundry. As the share of renewable energies in the USA, at 12.5 %, is far below the Group average, the increase in consumption influenced the corresponding key indicator for the Group. We calculate the CO2 emissions in accordance with Scope 1 and Scope 2 of the GHG protocol. The Group’s emissions in the year under review amounted to 101,339 tonnes of CO2 (previous year: 97,248 tonnes of CO2 / KSB SE & Co. KGaA: 21,215 tonnes of CO2, previous year: 22,072 tonnes of CO2). Although the figures in the Regions Europe and Asia / Pacific improved, total carbon dioxide emissions increased slightly compared with the previous year. The reason for this rise were significantly higher emissions in the Region Americas, where the figure increased by around 7,000 tonnes.

By gradually modernising our systems, we are reducing the amount of hazardous substances used in our manufacturing processes. If we discover any environmental pollution at our locations, we set aside provisions to meet the liabilities for the necessary clean-up work. Provisions totalling € 835 thousand have therefore been recognised for KSB SE & Co. KGaA in the financial statements.

In order to minimise the impact of our business activities on the environment, we ensure that our manufacturing processes are as environmentally friendly as possible. We go even further than this by aiming to produce products that only require a small amount of electricity during their service life and that contribute towards preserving our environment. For example, our circulators, standardised water pumps and electric motors already exceed the minimum energy efficiency requirements of the European Union defined in the ErP ­Directive.

Our energy-efficient products help reduce the amount of energy consumed by our customers. Our specialists adopt an integrated approach to optimising our customers’ plants, analysing the entire hydraulic system and the complete life cycle of the plant. This enables us to ensure that all system components are perfectly matched.

We attach great importance to the quality and safety of our products in order to prevent accidents and environmental pollution. In production, we comply with recognised standards such as CE and use established quality management systems. We are therefore able to design processes such that systematic errors during product manufacturing can be avoided. Furthermore, we introduced the internal “Made by KSB” certification process. It ensures an equally high standard of quality at 13 locations which exceeds the requirements of the international quality management standard. Our internal certification stands for quality, short delivery times, professional support services and optimum manufacturing processes.

Combating corruption and bribery (compliance)

For KSB, lawful conduct is an important and indispensable part of corporate responsibility. Our customers and business partners expect KSB to act with integrity. That is why compliance with legal regulations and Group-wide directives is part of our core values. The actions of a single individual can result in a permanent loss of trust in our company and seriously compromise our reputation.

To support employee compliance, we have developed a binding compliance management system. It ensures that legal requirements and internal KSB rules are adhered to, securing the success of our business in the long term. The compliance system is designed to ensure that KSB and its employees always act in line with applicable laws and directives.

Group management is responsible for organising compliance, monitored by the Supervisory Board’s Audit Committee. A Group Compliance Officer is responsible for compliance management and reports to Group management on relevant topics every six months. Support is provided by a Group Compliance Committee, consisting of top-level managers from the company.

Our Compliance Manual describes structures and processes designed to ensure compliant conduct. It also sets out responsibilities and compliance instruments.

A core element of our compliance system is the KSB Code of Conduct which applies across the entire Group. It describes the key legal and business policy principles, providing our employees with guidance for their actions. The Code also sets forth the corporate values which govern our conduct in our daily work: honesty, responsibility, professionalism, trust and appreciation. On this basis, we have formulated and communicated specific principles and rules of conduct.

In order to avoid risks resulting from a loss of reputation and legal repercussions, KSB issued two binding Corporate Directives, one covering compliance with cartel / anti-trust law and one dealing with the prevention of corruption. Both of these directives help to prevent potential violations. Employees receive appropriate training in recognising potential risks and receive practical guidance on impeccable conduct.

Our goal is to train all relevant employees in cartel / anti-trust law and the prevention of corruption. Using a global matrix of requirements, we ensure that all personnel with customer or supplier contact are familiarised with these topics. The training is repeated every three years, most recently for all personnel in 2017. Any interim needs for training are covered twice a year. In the year under review, we trained 546 employees across the Group on compliance issues.

OPEN COMMUNICATION: Lunch and breakfast breaks with executives provide a direct line to KSB’s Corporate Management. Employees exchange ideas with Dr Stephan Timmermann, CEO, in an informal atmosphere.

KSB not only offers its employees the opportunity to actively participate in the company’s affairs through talks with representatives of top management, it also provides a social intranet which has been available to staff since 2018. This network provides a way for employees to help shape internal communication.

SUCCESS CAN BE LEARNT: At KSB, people can develop themselves, advance their knowledge and acquire new skills. By mastering ever more demanding tasks, employees ensure the future viability of the company. KSB supports its workforce with a comprehensive range of training opportunities.

Spring 2018 saw the launch of the International Service Academy in which service employees from all over the world deepen their specialist knowledge. Its training programme runs over two years and includes several training placements at KSB’s German locations. The aim is for these qualified specialists to then contribute towards globally promoting the company’s service business.

Age structure
Age Total KSB SE & Co. KGaA Europe* Asia / Pacific Americas Middle East / Africa
Under 25 9 % 12 % 9 % 10 % 8 % 7 %
26 – 39 35 % 30 % 29 % 39 % 38 % 51 %
40 – 54 39 % 35 % 40 % 44 % 35 % 29 %
Over 55 17 % 23 % 22 % 8 % 19 % 13 %
As figures are rounded, the total may deviate from 100.
*Including KSB SE & Co. KGaA
Training hours
Total KSB SE & Co. KGaA Europe* Asia / Pacific Americas Middle East / Africa
Hours per employee 15 9 11 13 9 64
*Including KSB SE & Co. KGaA

In the event that employees become aware of violations or are unsure whether their actions are compliant, they refer the matter to the compliance organisation, and specifically to the designated Compliance Officer. If necessary, reports will be treated anonymously. In addition, any circumstances that give rise to legal or anti-trust concerns can be reported directly to an independent ombudsperson, who can process potential cases without naming informants. If reliable evidence is presented, then this is pursued. In 2018, the ombudsperson received two notifications of suspected compliance violation. However, a review revealed that neither of the cases constituted compliance violations. In 2018, our compliance organisation also received three reports of suspected compliance violations. As a consequence, the responsible employees initiated the necessary steps and measures for clarifying the situation following a precisely defined three-stage procedure. KSB does not tolerate any violations of compliance by its employees. If investigations reveal sufficient evidence of a violation, this will have consequences for the individual concerned. Depending on the severity, sanctions range from a disciplinary warning to immediate termination of employment; law enforcement agencies may also be involved.

Respecting human rights

KSB supports and respects the protection of international human rights. To underline our commitment, we joined the UN Global Compact. We have also pledged not to indirectly tolerate violations of human rights, for example when it comes to selecting our suppliers. As a company, we comply with the conventions of the International Labour Organisation (ILO). Basic conduct requirements within the workforce are governed by the KSB Code of Conduct. We are aware that human rights violations are not only morally unacceptable, they can also damage a company’s reputation and thus result in financial losses.

SHARED EXPECIENCES: KSB encourages employees to take part in sports events. In 2018, 160 women and men participated in the Company Cup on the Hockenheimring. In addition, employees have many opportunities to do sports together and keep fit.

Everyone who works at KSB is part of a large team. It is therefore a great idea to experience something together after work as well. In Frankenthal (Pfalz), more than 150 employees attended an after-work party and took the opportunity to socialise outside of the usual work environment.

Workforce by gender
Total KSB SE & Co. KGaA Europe* Asia / Pacific Americas Middle East / Africa
Male employees 85 % 83 % 83 % 89 % 81 % 87 %
Female employees 15 % 17 % 17 % 11 % 19 % 13 %
Male managers 89 % 92 % 89 % 89 % 85 % 93 %
Female managers 11 % 8 % 11 % 11 % 15 % 7 %
*Including KSB SE & Co. KGaA

In 2018, KSB committed itself for the second time to abide by the UK Modern Slavery Act. We are thus committed to conducting our entire business – including our supply chain – free from all forms of forced labour, slavery or human trafficking.

We do not tolerate any discrimination in our work environment on the basis of individual characteristics such as age, origin, religion, appearance, gender, sexual orientation, dis­ability or marital status. Furthermore, we respect the freedom of association and the right to collective bargaining in our companies. We also observe government sanctions such as embargoes and issue internal export control directives.

In order to identify and avoid risks in the supply chain, we practice active supplier management. For every order we place, the supplier declares that it complies with the rules in our Code of Conduct, which corresponds with the human rights principles defined in the UN Global Compact. This enables us to make sure we avoid purchasing raw materials from areas of conflict where violations of human rights may have been involved in their production. We do not cooperate with companies that are known to have committed human rights violations.

Our employees can contact the compliance organisation or an ombudsperson regarding human rights issues, following the same procedure as for suspected compliance violations (see page 27).

Employee concerns

Motivated and high-performing employees form the basis for economic success. At KSB, more than 15,000 people are committed to serving our customers. In the competition for talent, we want to position ourselves as an attractive employer. Our aim is to recruit qualified experts such as engineers and service professionals for our company and continue to develop their skills in order to remain successful in the age of digitalisation.

The “digital natives” – young people who have grown up in the digital age – in particular expect a personal approach from potential employers. KSB therefore introduced a recruitment concept in 2018 to reach this target group even more effectively. The primary aim is to win creative young professionals for a talent pool. Contact is mainly made through social media and job fairs. Interested applicants apply via a web site and receive feedback from KSB within one day. The goal is to have a sufficient number of young talents to fill positions even faster in the future.

15
 Number of training hours per employee (KSB SE & Co. KGaA: 9)

We want to develop and expand the skills and knowledge of our employees. We are fostering our best and brightest employees to prepare them for high-level specialist and leadership positions. Structured succession planning is also part of our approach.

A three-stage scheme enables us to expand our employees’ skill sets. It differentiates between company-wide, departmental and individual professional development measures. Annual performance evaluation interviews between managers and staff determine what is required. We offer training measures covering engineering, business, information technology and communication. In 2018, each member of our staff completed an average of 15 hours of professional development activities (KSB SE & Co. KGaA: 9). Regional differences (see chart on page 27) emerge due to uneven qualifi­cation levels among new employees, meaning that more specialised training is required in some of our companies.

Our range of training options seeks to support our staff throughout their professional life. The goal is to strengthen our colleagues’ capacity for self-directed learning, and we intend to initiate a corresponding expansion of the training we offer over the next few years. In the year under review, we set up an Internet-based platform for the entire Group via which our employees can access the full range of KSB training courses. In addition to greater use of e-learning, this learning centre also enables the direct exchange of knowledge and experience among users and thus supports mutual learning.

In order to meet demand for specialist staff, we are continually engaged in training young people. Our German locations participate in the country’s dual vocational education system. In the year under review, we trained a total of 237 young talents to take on a role in our company. 2018 saw us invest around EUR 7.3 million in vocational training.

Those who take up vocational training or dual work / degree programmes with KSB experience practical learning. Alongside specialist skills, we set great store by the sense of responsibility exercised by our trainee staff. They are, for example, also involved in social and ecological projects around their locations.

At KSB, diverse personalities and cultures work together. We draw our strength from the diversity of these individuals and are committed to being an equal opportunities employer.

Diversity and equal opportunities form the basis upon which the people at KSB work together. Our binding human ­resources principles harmonise with the conventions of the ILO and apply to all KSB companies. In keeping with these principles, when recruiting we focus solely on the professional requirements of the role to be filled and the individual performance and potential of the candidate. Clear responsibilities have been established to ensure this.

Management works to ensure that the principles of equal opportunities and diversity are realised in company practice. Our Human Resources department communicates these principles within the Group and adapts them where required. HR also fosters an awareness of this important topic and offers corresponding training and advice.

A diversity of personalities always means a diversity of ideas and perspectives. That is why we are convinced that a mixed team of employees will improve performance in our company. So we want to see leadership positions filled by diverse personalities, all giving their best for KSB. As well as recruiting more non-German candidates for management roles, we have set ourselves the goal of increasing the number of women in leadership positions. We wish to be seen as a fair company and an attractive employer for women with all kinds of qualifications. Currently, the proportion of female managers is 11 %. In terms of our workforce as a whole, women make up 15 %. In order to support our female staff, we are strengthening the measures taken by KSB to reconcile the commitments of family and work. Such measures include offering childcare during the school holidays. We also offer advice on caring for family members, and both male and female staff can benefit from our flexible working time models.

The rising average age of the population in many Western countries also affects companies. We thus monitor the age profiles of our staff in different regions (see chart on page 27) so that we can take timely action in ensuring we achieve the right balance, for example by recruiting younger trainees in sufficient numbers. It is then possible for us to distribute valuable knowledge within the company across different age groups.

KSB greatly values the active engagement of its employees in the development of the company and its work processes. 2018 saw us hold regular informal meetings for the first time in which employees and members of Management shared ideas and information. In addition, we set up a social intranet in the year under review. Through this social network, employees can actively participate in shaping internal communication at KSB.

We offer our employees many opportunities to help bring their work and private life into a healthy balance. For example, we support sports and leisure activities that our employees do together. This increases the motivation of the workforce and at the same time promotes identification with our company.

Preventing accidents in everyday working life is an absolute priority for KSB. Due to the increased level of risk, the focus of our measures is on production areas. Appropriate training sessions, instruction and further preventive measures are implemented regularly. In the year under review, 35 of our manufacturing and assembly plants (including all factories of KSB SE & Co. KGaA) were certified according to the OHSAS 18001 occupational health and safety management system. This represents 85 % of our locations.

KSB adopts a transparent approach to accident awareness and prevention. In 2018, we therefore installed digital displays in the entrance areas and production halls at four of our German locations. We use these to provide daily updates on key figures from occupational health and safety with the aim of raising employee awareness and facilitating constructive dialogue on the subject of accident prevention.

Health awareness at work is an important topic also at our administrative departments. We therefore offer training including an annual e-learning course on safety in the office.

We invest in the health and well-being of our employees. KSB thus takes a holistic approach to actively implementing its company health management system. This sees us fulfilling not only the legal requirements of the company health service, but also offering voluntary healthcare services such as colon cancer screening, skin cancer screening and flu vaccinations.

SOCIAL COMMITMENT: KSB is committed to social issues and attaches particular importance to education for children and young adults and to supporting international projects that provide drinking water. Our company also helps with donations in the event of a disaster.

As part of its traditional Christmas donation campaign, KSB supported four projects in Germany and three in Africa and Asia with € 40,000. This benefited a school in the Gao region of Mali where € 10,000 were invested in improving the water supply and sanitary facilities.

In 2018, KSB supported several aid projects in Africa to supply people with clean drinking water. In Gambia, three well pumps ensure that the inhabitants of a village have access to the most important nutrient.

Society

We are committed to social issues and strive to foster sustainable development and well-functioning cooperation within society. With this goal in mind, and in line with our donation directive, we support organisations and projects dedicated to the education, social support and protection of children and young people. We are also committed to supporting the disadvantaged. In the event of disasters we provide assistance for both people and organisations.

In the year under review, we actively participated in or provided financial support of at least € 5,000 each to a total of 104 social projects. In doing so, we are supporting the 17 global goals defined by the United Nations for sustainable development. For example, our commitment helps to combat poverty, enables people to lead healthy lives, ensures education, provides clean water and sanitation, and eliminates inequalities.

Education for young people is a core element of our commitment to social issues. It is important for us that young people develop their skills early enough to then pursue a career that offers the right fit for their talents and capabilities. For this reason we joined other companies to found the initiative Wissensfabrik – Unternehmen für Deutschland e.V. [Knowledge Factory – Companies for Germany].

The provision of financial support for aid projects has a long tradition at KSB. This includes ongoing support for social developments in the areas around our locations. We donate regularly to projects seeking to supply people with clean drinking water, for which we also provide non-cash support such as pumps.

More information on our social commitment is available at www.ksb.com/csr.

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