As a Group, Bodycote is committed to acting responsibly as a good corporate citizen, to reducing the environmental impact of the Group's activities and to providing our employees with a safe working environment.
Bodycote's stakeholder model shows how its interactions on various levels contribute towards socioeconomic growth and development. These exchanges, based on mutually beneficial relationships, provide the basis for the Group's growth and sustainability, which in return provides benefits to employees, investors, suppliers, customers, the public sector and wider society.
Bodycote's objective is to create superior shareholder returns through the provision of selected thermal processing services that are highly valued by our customers and to achieve this in a safe working environment, while continually seeking to minimise the impact on the environment.
Bodycote is dedicated to improving the management of corporate responsibility issues and is implementing policies and initiatives to achieve this goal. The future success and growth of the Group is intrinsically linked to our ability to ensure the Group's operations are sustainable and that we can nurture and develop our talent.
The strength of the Group primarily rests in its people and one of the key challenges for management is to ensure availability of appropriately qualified people to support its continued growth. Bodycote is fortunate to have a competent and committed international team that is well-respected in technical and business circles.
Bodycote invests in the training and development of its people both at local and Group level. At a local level the Group is committed to providing the appropriate skills and technical training which will allow its employees to operate effectively and safely in their roles and deliver excellent customer service. At Group level a number of initiatives are currently being rolled out to drive excellence in management.
A tool to develop further understanding and skill in the area of performance management is in place and is being used globally through the management population. Through communication of clear messages coupled with skills development, the organisation aims to raise the capability of its management population in driving performance. This initiative is backed by a performance management information system which supports the process.
Bodycote's employment policies are non-discriminatory, complying with all current legislation to engender equal opportunity irrespective of age, race, gender, ethnic origin, nationality, religion, health, disability, marital status, sexual preference, political or philosophical opinions or trade union membership. Harassment is not tolerated.
Female representation on our Board is currently 14% (2013: 17%) and at manager level it is 27% (2013: 23%). Female representation on the Board has decreased due to the appointment of Ian Duncan in November 2014, and will increase to 17% when John Biles steps down at the 2015 AGM in April 2015. Females represent 17% (2013: 17%) of our total workforce. We will increase female representation on the Board if appropriate candidates are available when Board vacancies arise.
It is not just important what we do, but how we do it and how we behave in our company. How we operate as a Group and the behaviours that we expect from all our employees are expressed in our Core Values. Our values represent Bodycote and its people and our commitment to the company and the business.
Our Core Values are straightforward and are summarised as follows:
Honesty and Transparency
We are honest and act with integrity. This is not something we take for granted. Bodycote lives by a culture of honest and transparent behaviour, which is at the core of all our business relationships.
Respect and Responsibility
We manage our business with respect, applying an ethical approach to our dealings with those with whom we interact. We believe in taking ownership for, and being mindful of the impact of, our actions.
Creating value is the very essence of our business and needs to be the focus of our endeavours. We create value for our customers, our employees and our shareholders.
Bodycote's human rights policy is consistent with the Universal Declaration of Human Rights and the UN Global Compact's ten principles.
We prohibit forced, compulsory and underage labour and any form of discrimination based on age, race, gender, ethnic origin, nationality, religion, health, disability, marital status, sexual preference, political or philosophical opinions or trade union membership. Appropriate mechanisms are in place to minimise the potential for any contravention of these rules.
By publicly posting our human rights policy on www.bodycote.com, stakeholders worldwide can alert us to potential breaches of the policy. Our internal systems also support compliance with our policy and we have a robust Open Door Line for employees to report alleged violations of law and/or our policies on a confidential basis and in their own language. In the jurisdictions in which we employ a majority of our employees, there are laws applicable to many of the areas dealt with in our human rights policy.
Customers and suppliers
Bodycote has no significant suppliers who are wholly dependent upon the Group's business. Suppliers are paid in line with contractual and legal obligations.
We endeavour to respond quickly to changing customer demand, to identify emerging needs and to improve service availability and quality. We stay close to our current and potential customers, building long-term relationships.
Bodycote seeks to play a positive role in the local communities in which it operates by providing employment opportunities, and building goodwill and a reputation as a good neighbour and employer.
Responsible business ethics
All Bodycote personnel are expected to apply a high ethical standard, consistent with an international UK-listed company. Directors and employees are expected to ensure that their personal interests do not at any time conflict with those of Bodycote. Shareholder employees are advised of and comply with share dealing codes.
Bodycote has systems in place that are designed to ensure compliance with all applicable laws and regulations, and conformity with all relevant codes of business practice. Furthermore, Bodycote does not make political donations.
With regard to competition, Bodycote aims to win business in a differentiated high-value manner. The Group does not employ unfair trading methods and it competes vigorously but fairly within the requirements of the applicable laws. Employees are prohibited from either giving or receiving any inducements.
Our Open Door Policy has been translated into all languages used throughout the Group. The policy allows employees to report their concern verbally or in writing and in confidence to an independent third party provider, ensuring anonymity. Reports are transcribed and sent to the Group Head of Risk, who then passes the matter to the appropriate individual in the business to be addressed.
Online training courses in respect of Bribery and Competition Law have been designed and translated into the major languages used throughout the Group. All relevant employees have completed the interactive courses.
Operational SHE performance
Bodycote is committed to continual improvement in our safety, health and environmental performance (SHE). We are committed to complying with all local legislative requirements and additionally establishing consistent and robust best practices at all of our sites to deliver consistently high performance across all aspects of SHE management.
Safety and health
The nature of the Group's operations is such that employees are inevitably exposed to hazards in the workplace. Bodycote aims to manage these hazards and thereby minimise risks to employees through the deployment of robust safety control systems and procedures, and seeks to establish these at all sites.
Bodycote introduced a new online incident reporting and management tool in 2013, which enabled more consistent and thorough reporting of workplace injuries, near misses and unsafe conditions. Following this there was an increase in the lost time injury rate frequency (LTI rate) in 2013 as sites were better able to record and report incidents. In 2014, the LTI rate fell to 1.7, re-establishing the previous trend of annual improvements in LTI rates in recent years. Although regrettable and not acceptable, accidents represent learning opportunities and so accurate reporting is an essential part of building a robust safety management system.
Accident frequency (lost time injury rate)
Accident frequency is defined as the number of lost time accidents ×200,000 hours (approximately 100 man years), divided by the total number of employee hours worked.
In addition to encouraging the reporting of work related injuries, Bodycote has sought to encourage the reporting of near misses and unsafe conditions. This has worked very well since the introduction of the new global incident reporting system and a common near miss/unsafe condition reporting system at every operational site. The much improved reporting of incidents permits us to address hazards before injury occurs. As our database continues to develop we will be able to analyse and prioritise our safety action programmes more effectively.
All reportable incidents and lost time injuries are reviewed during executive management meetings. In addition, the executive management team reviews incidents which did not result in injury but were considered to have been serious or to have had a high potential impact. All serious incidents and high potential incidents are also reviewed by the Group SHE Committee and are cascaded within the business as appropriate to ensure that preventive actions are taken.
A proactive approach to improving energy efficiency means that Bodycote has implemented a variety of systems to reduce water and gas consumption, and to re-use heat energy. The ongoing effort to lessen the impact on the environment has resulted in Bodycote seeking ISO 14001 accreditation at all of its facilities.
At every stage where Bodycote is involved in the manufacturing cycle, our operational aim is to reduce the overall impact on the environment, not just in our own operations, but also those of our customers. Bodycote operates modern, efficient equipment, which is operated around the clock so as to optimise thermal processing cycles. Without Bodycote, many companies would be using older in-house technology and running their equipment at reduced capacity, both of which drain energy resources. Working with Bodycote enables our customers to commit more easily to carbon reduction initiatives.
Bodycote also reduces the carbon footprint of our customers' activities by increasing the lifespan of their products, by improving metallurgical properties and by enhancing corrosion resistance. For example, surface treatment technology is widely used in the reclamation of damaged and worn components, offering a cost-effective and energy-efficient alternative to the need to manufacture new replacement parts, and treated parts often last up to twenty times longer than the original.
So, whilst thermal processing is an energy-intensive business, it is a vital part of the manufacturing chain and its use saves the energy it consumes many times over.
Stacking up the benefits
Modern thermal processing techniques have allowed designers and manufacturers to use much lighter materials, such as aluminium and titanium, and have significantly prolonged component lifetimes. Through the effective use of thermal processing, parts can now be lighter and overall component weight reduced, leading to improved efficiency and reduced fuel consumption of products in service.
Greenhouse gas emissions
* Statutory carbon reporting disclosures required by Companies Act 2006.
† Normalised statistics restate prior year emissions using current year national carbon conversion factors and current year average exchange rates.
† † Emissions per £m of turnover.
Scope 1 emissions are direct emissions resulting from fuel usage and the operation of facilities. Scope 2 emissions are indirect energy emissions resulting from purchased electricity, heat, steam or cooling for own use.
The financial control consolidation approach has been used to report the above data. This method aligns with the reporting scope in the financial statements. The Group collects electricity and natural gas usage information from each facility on a monthly basis. The Group then applies the UK Government's Department for Environment, Food and Rural Affairs (DEFRA) published national carbon conversion factors to calculate the total tonnage of CO2e produced. Group operational management actively monitors their monthly CO2e emissions reported and the Group's Executive Committee reviews the level of CO2e emissions on a monthly basis.
All entities and facilities under financial control are included within the disclosure. Emissions less than 1% of the Group's total CO2e relating to fugitive emissions and owned vehicles are not significant and are excluded. As such there are no significant omissions from this disclosure.
ISO 14001 accredited facilities
Reducing the environmental impact of the Group's activities is taken very seriously. Compliance with the requirements of ISO 14001 helps to minimise the risk of adverse environmental effects at Bodycote's locations. At the end of 2014, 87% of our operating facilities had achieved ISO 14001 accreditation (2013: 85%). Operational plants which have not yet received accreditation to the standard are working towards it, including several of the facilities acquired and constructed during 2012–2014. Some older sites, which were accredited, have been closed. This explains why the increase has been relatively modest.
The fall in percentage in 2012 was due to the facilities acquired in that year which had not obtained accreditation.
Carbon footprint and water consumption
The absolute energy usage increased by 0.8%, despite normalised sales increasing by 4.0%.
The total CO2e emissions per £m sales in 2014 were 610.2 Te (2013: as previously reported 603.6 Te; normalised† 632.1 Te).
The Group's total CO2e emission data is based on Scope 1 and Scope 2 emissions, as defined by the UK Government's DEFRA, and data relating to this has been calculated to include country-specific electricity conversion factors.
Water usage per £m sales decreased by 8.0%. On a normalised† basis, water usage per £m sales decreased by 12.8%.
Chlorinated solvent use
The use of chlorinated solvents in Bodycote's thermal processing activities has been reduced in recent years as aqueous degreasing facilities have been introduced. In 2014, the normalised† solvent use decreased by 20.7% compared with the previous year.
(tonne CO2e/£m sales normalised3)
(thousand m3/£m sales normalised3)
(kg/£m sales normalised3)
ISO 14001 accredited facilities
- Accident frequency is defined as the number of lost time accidents ×200,000 hours, divided by the total number of employee hours worked.
- CO2e is carbon dioxide equivalent, which represents the CO2 release due to our energy usage.
- Normalised statistics restate prior year figures using current year national carbon conversion factors and current year average exchange rates.
The Strategic report has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.
The Strategic report contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
The Group Strategic report of Bodycote plc was approved by the Board of Directors and signed on its behalf by:
S.C. HarrisGroup Chief Executive
26 February 2015