8. Economy (EC)
8.1 Economic Performance (EC)
Management Approach – Economic Performance
As a key objective of the company, the economic performance of the Geberit Group is under the strategic control of the Board of Directors and the operational management of the Group Executive Board (aspects economic performance, market presence, indirect economic impacts).
With its innovative solutions in the field of sanitary products, Geberit aims to achieve sustained improvement in the quality of people’s lives. Its proven, focused strategy for doing so is based on the four pillars Focus on sanitary products, Commitment to innovation and design, Selective geographic expansion and Continuous optimisation of business processes.
For detailed explanations of the four strategic pillars, see Business Report > Business and financial review > Strategy and goals.
For a description of the economic position of the Geberit Group, see Business Report > Business and financial review > Financial Year 2017 > Market environment.
G4-EC1 Economic performance
Significant indicators for the creation and distribution of value in accordance with the GRI requirements can be found in the financial report:
Direct Economic Value Added
- Net sales and operating profit, see Financial Report > Consolidated financial statements Geberit Group > Statements of cashflows.
Economic Values Passed On
- Operating expenses excl. personnel expenses, see Financial Report > Consolidated financial statements Geberit Group > Income statements.
- Personnel expenses, see Key figures sustainability > Employees and society.
- Payments to providers of capital, see Financial Report > Consolidated financial statements Geberit Group > Statements of cashflows.
- Social engagement, see G4-EC7.
Retained Economic Values
- Investments in and divestments of property, see Financial Report > Consolidated financial statements Geberit Group > Statements of cashflows.
- Share buyback, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 22.
G4-EC2 Financial implications of climate change
The 2015 UN climate change conference in Paris and the agreement reached by its participants to limit global warming to below two degrees Celsius represent far-reaching goals for limiting global warming. One of the visible effects is the limited local availability of water resources in many places, which is becoming a major issue in the eyes of the public. In the Global Risks Report periodically published by the World Economic Forum (WEF), water scarcity was classified according to the most recent report as one of the five highest risks in terms of impact. The subject of water has also been included in the Sustainable Development Goals (SDGs) of the UN 2030 Agenda for Sustainable Development, which have been applicable since the beginning of 2016. Goal number 6 calls for people around the world to receive access to clean drinking water and sanitary facilities.
These trends will determine the sanitary technology of the future. Water-saving, resource-efficient products will become increasingly important. Geberit is taking advantage of the opportunity to meet the growing worldwide demand for water-saving products and to contribute towards the diligent handling of water, thus making a name for itself as a leader in sustainability. Products classified as special water-saving products already make a substantial contribution to Group sales.
Compared to these relatively big opportunities, Geberit is exposed to an average risk of natural disasters potentially triggered by climate change, which can fundamentally affect production areas or transport areas. None of the production sites are particularly at risk in this respect, however.
The manufacture of ceramic sanitary appliances is a resource and energy-intensive process that has become a part of Geberit production. This increases the company’s exposure to CO2 regulations, meaning that their future development must be carefully monitored. However, these risks are currently still low – only one ceramic plant in Sweden pays CO2 taxes. With the definition of a long-term CO2 target in 2016 that is compatible with the two-degree target set out in the Paris Agreement (science-based), an increasingly detailed understanding is becoming established within the company regarding CO2 emissions. The goal is to reduce absolute CO2 emissions (Scopes 1 and 2) by 6% between 2015 and 2021 to under 240,000 tonnes (based on organic growth).
In addition, Geberit is indirectly affected by higher energy or raw material prices and by generally increasing requirements in terms of energy management. With its internal energy master plan, the targeted introduction of the ISO 50001 energy management system and the measures related to its CO2 strategy (see aspect emissions), Geberit is reacting proactively and working continuously on saving energy, improving its energy efficiency and reducing its CO2 emissions. For example, Geberit is continuously investing in the infrastructure of ceramic production. By the end of 2017, six tunnel kilns for ceramic production had already been equipped with state-of-the-art burner technology, with the equipping of a further five planned. Each kiln can bring about energy savings of over 20%.
As far as corporate risks are concerned, the Audit Committee of the Board of Directors introduced a comprehensive system for the monitoring and management of the risks associated with the company’s business activities, including the risk category CO2 emissions, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 4.
G4-EC3 Scope of the organisation’s defined benefit plan obligations
The Geberit Group sponsors defined benefit plans for its employees in Switzerland, Germany, Austria and the USA. For further details on pension and benefit plans, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 3 > Retirement benefit plans and Financial Report > Consolidated financial statements Geberit Group > Notes > Note 17.
G4-EC4 Significant financial assistance received from government
Assistance received from the public sector includes:
- Income taxes, see Financial Report > Consolidated financial statements Geberit Group > Notes > Note 25.
- Investment subsidies to promote the respective business location and secure jobs: CHF 0.08 million.
- Contributions received to support training and part-time employment prior to retirement: CHF 0.38 million.
- Various other subsidies: CHF 0.1 million.
The public sector is not represented on the Board of Directors of the Geberit Group.
8.2 Market Presence (EC)
Management Approach – Market Presence
Geberit has grown from a family-run firm into a listed global company that has proven its ability to adapt to a rapidly changing environment. Within its core strategy, see Management approach economic performance, Geberit’s aim is to ensure that sales companies, production plants, logistics and management companies function well as units which enjoy a high degree of autonomy. A high level of acceptance among the local workforce is a fundamental part of this, thanks in part to an attractive pay structure and the involvement of local know-how at the management level.
G4-EC5 Ratio of standard entry-level wage compared to local minimum wage
Geberit pays market-rate wages, taking into account local circumstances and laws. When selecting employees and determining their assignment in the company, Geberit attaches great importance to qualifications appropriate to the task description. In accordance with their qualifications, the majority of Geberit employees at the 30 production sites and at the sales companies are paid well above the minimum wage range. Stability and a high level of motivation among employees are important to Geberit.
G4-EC6 Procedures for local hiring
Geberit has no personnel policy or employment practices providing for the preferential treatment of persons from local vicinities in connection with the hiring of members of management boards for the respective country organisations. However, Geberit would like to establish organisations at its production and sales sites that function on a local basis, which is why it often integrates locally appointed managers. For example, the sales companies in India and China are both headed by managing directors who have been recruited locally.
8.3 Indirect Economic Impacts (EC)
Management Approach – Indirect Economic Impacts
Indirect economic impacts arise primarily due to positive side effects from direct economic action. With its innovative solutions for sanitary products, Geberit aims to achieve sustained improvement in the quality and standard of people’s lives. The economy benefits from this in several respects: through the contribution to better sanitary standards, a durable, resource-efficient sanitary infrastructure, through know-how transfer in the sanitary industry, via impetus for the economy in regional economic areas, and through orders with suppliers. There is no management approach to indirect economic impacts in the narrower sense. Instead, the company works with the stakeholders concerned to identify the best solutions in each case.
Geberit pursues a clear strategy as part of its social responsibility, and therefore supports social projects each year that exhibit a relationship to the topic of water and sanitary facilities, as well as to Geberit’s core competencies and corporate culture. Equally important is the aspect of personal and professional education. By getting actively involved in the social projects in developing regions, apprentices become familiar with other cultures and also acquire new social, linguistic and professional competencies. Furthermore, these social projects make a tangible contribution to the Sustainable Development Goals (SDGs) of the United Nations, which include giving all humans access to clean drinking water and basic sanitation by 2030.
G4-EC7 Investments in infrastructure and services primarily for public benefit
Donations and financial contributions, including product donations, totalling CHF 3.3 million (previous year: CHF 3.7 million) were made during the reporting year. In addition, Geberit employees contributed 2,280 hours of charitable work (previous year: 2,336 hours). Geberit also supports facilities for disabled persons and long-term unemployed, where simple assembly and packaging work in the amount of around CHF 6.9 million was carried out in 2017 (previous year: CHF 6.3 million), see also Key figures sustainability > Employees and society.
The focus was on the following projects and partnerships in 2017:
- Execution of a social project in Odessa (UA) with apprentices: renovation and expansion of the sanitary facilities of a Ukrainian vocational school for more than 500 students largely from disadvantaged backgrounds. Here, a team of nine apprentices from Geberit was supported by plumber apprentices from this vocational school.
- The partnership with Helvetas on projects relating to clean drinking water and sanitary facilities, plus supporting the new Helvetas campaign for clean drinking water and latrines with a substantial contribution.
- Participation in the charitable organisation Swiss Water Partnership to promote international dialogue on the topic of water.
- Implementation of the project Change of Perspective, in which two Swiss plumbers travelled to Nepal and worked together with two Nepalese colleagues for one week. This project is set to continue in 2018.
- Volunteer work of 16 Geberit employees for two weeks in November 2017 helping a village community in western Nepal to construct a water pipeline. Geberit also made a major donation to support Helvetas-run water projects in Nepal.
- Support for six vocational schools for plumbers in Ukraine with the goal of providing professional, contemporary training in plumbing.
- Various local initiatives and collection campaigns in Poland, the UK, France, Germany and Switzerland to round off the Geberit Group’s social engagement at the local level.
G4-EC8 Indirect economic impacts
Geberit forms part of the value chain in the construction industry. It has significant indirect economic impacts downstream on the customer side at sanitary engineers, plumbers and end users, as well as upstream at suppliers and transport companies. Continuous investment in 30 production plants in Europe, China, India and the USA, as well as the logistics centre in Germany, will strengthen these individual economic areas.
Geberit know-how and products significantly reduce the burden on water and waste water systems. According to one model calculation, all dual-flush and flush-stop cisterns installed since 1998 have so far saved around 25,300 million cubic metres of water in comparison with traditional flushing systems. In 2017 alone, the water saved amounted to 2,650 million cubic metres. This is more than half of the annual consumption of all German households.
Geberit is committed to sustainable sanitary systems which, as elements in construction, help to shape the infrastructure as a whole. For example, Geberit actively worked on adapting the applicable standard for the dimensioning of waste water piping to smaller diameters. This is important so that the full functionality of the piping system is ensured even with lower quantities of waste water. Similar to its work in the field of waste water hydraulics, Geberit also played a major part in ensuring that topics such as sound insulation and fire protection, as well as hygiene in drinking water and sanitary facilities, have been developed to the benefit of the end user and laid down in standards and recommendations. In 2017, Geberit played a major role in the foundation of a new platform for the European sanitary industry – the European Bathroom Forum (EBF).
Geberit lends impetus to the sanitary industry with innovation and new products that are sold and implemented worldwide by wholesalers, plumbers and sanitary engineers. In 2017 alone, around 30,000 customers were provided with education and further training on Geberit products and software tools at the 29 Geberit Information Centres in Europe and overseas, see Business Report > Business and financial review > Financial Year 2017 > Customers.
Geberit employed 235 apprentices at the end of 2017 (previous year 233). The transfer rate to a permanent employment relationship was 83%. All apprentices are essentially required to work at several sites during their training. Experience abroad and the transfer of know-how are beneficial, especially for young employees.
The indirect economic impact on suppliers and transport companies is also significant. The Group’s cost of materials in 2017 amounted to CHF 847.1 million (previous year: CHF 789.3 million) and has business relations with around 1,850 suppliers here. Geberit does not have its own transport fleet and commissions external transport companies.