CORPORATE GOVERNANCE

STATUTORY REPORT ON CORPORATE GOVERNANCE, SEE SECTION 107B OF THE DANISH FINANCIAL STATEMENTS ACT 
SBS Group has prepared a statutory report on corporate governance, see section 107b of the Danish Financial Statements Act, for the financial year 2018. An update thereof is published on the Company’s webpage, http://www.sbs-group.dk/da-dk/investor/corporate-gov

The report includes an overview of how the SBS Group complies with recommendations on corporate governance together with a description of the main elements of the SBS Group's internal control and risk management systems, and the composition of the SBS Group's management tasks.

SBS Group management continuously assesses and updates the strategy plan for the SBS Group and the individual business areas.

Organisational focus areas
The SBS Group's entities operate internationally on areas that place great demands as to the organisation's efficiency and the employees' qualifications. 

In 2018, changes were made to the German company to strengthen the company in terms of management, just as a large generational change was made due to the fact that several high seniority employees now have reached the retirement age. Those employees have been replaced by new employees who have industry qualification and experience.

The R&D function in SBS Friction has been strengthened, which is to be seen in the light of the increased focus on the OEM market.

The entire SBS Group focuses on digitalisation, including implementation of a new IT platform for which full implementation is planned for 2020. In that connection, additional qualifications have been allocated to the IT area.

The fight about qualified future professionals has intensified during the past years’ boom. Therefore, it is important that SBS Group appears as an attractive working place that attracts new well qualified employees. In that connection, the Company works together with universities and other educational institutions, i.a. in connection with final theses and trainee periods. Moreover, the SBS Group’s entities educate apprentices within e.g. inventory/logistics, purchasing and administration.

Knowledge resources and R&D activities
The SBS Group has specialised entities that each makes high specific demands as to knowledge and R&D resources. These areas are described under the divisions.

Environmental performance
The SBS Group does not engage in any business that causes environmental impact beyond what is expected from a production and logistics company.

Environmental considerations are parameters that are taken into account in line with braking ability, lasting quality and comfort when developing new brake lining. SBS Friction has thus launched particularly environment-friendly products within brake lining, and at present, the company participates in a product development work aimed at developing the markets’ most environment-friendly sintered brake lining without metals that have a negative environmental impact.


STATUTORY REPORT ON CORPORATE SOCIAL RESPONSIBILITY, SEE SECTION 99A OF THE DANISH FINANCIAL STATEMENTS ACT

Business model
The Company’s business activities include R&D, manufacturing, sourcing, distribution and sale of parts within brake technology and related areas. The business activities are placed in the divisions SBS Automotive A/S and SBS Friction A/S.

The SBS Group function as a logistics business and manufacturer has a considerable social impact throughout the entire value chain. Among others in relation to the purchase of components, spare parts, etc. with focus on working conditions with the suppliers and environmental considerations in relation to the extraction and processing of raw materials. In addition to purchasing, the Company also has a social impact through transportation from suppliers to the SBS Group and on to the customer. In that relation, it is particularly relevant to focus on CO2 emission and working conditions with transportation and logistics operators. 

In the SBS Group’s own direct business, its 253 employees’ occupational safety and general working conditions are the Group’s top priority. Furthermore, the Company focuses on its energy consumption and its environmental and climate impact in relation to waste and recycling. Finally, the Company’s ongoing work with product development implies that the end-products’ climate and environmental impact are continuously improved.

Social conditions and employee relations

Policy:
The SBS Group emphasises a safe and secure working place, free of discrimination and where employee satisfaction is highly prioritised.

Risks, actions and results:
The SBS Group's most significant risks within employee relations relate to the Company's own employees and their general satisfaction and safety. In particular the Company’s production and logistics activities are subject to risks as work-related accidents may occur if safety is compromised.  

In order to promote a safe working environment, the SBS Group has implemented several procedures in order to increase production safety. In 2018, the Company continued its efforts to maintain procedures, which have implied that the safety level remained high and no work-related accidents resulting in death or personal injury have been reported.

In order to ensure that the employees develop professionally and are well-prepared for their tasks, training and further education are highly prioritised in the SBS Group. Moreover, yearly staff development meetings are held between manager and employee as basis for individual training plans. Such meetings were also held in 2018. 

The SBS Group is continuously working on improving job satisfaction among its employees and every second year, most recently in 2017, the Group makes a survey of the mental working environment (including employee satisfaction) based on which it was concluded that the level of job satisfaction was generally satisfactory. The next survey is planned for 2019.

As regarding social responsibility, the SBS Group regularly participates in projects and activities that aim at giving people a second chance, who under normal circumstances have had difficulties in gaining foothold on the labour market. The efforts have resulted in several flex and re-entry jobs, which in many cases have subsequently led to lasting employments on normal conditions. The SBS Group cooperates with municipalities, job centers, unions and other organisations i.a. on flex jobs and integration. In 2018, the Company continued its social work, which gave more vulnerable persons a new chance on the labour market. 

Climate and environment

Policy:
The SBS Group aims at minimising its impact on the external environment and climate through responsible operations, resource optimisation and product innovation.

Risks, actions and results:
The most significant risks to the environment and climate relate to CO2 emissions from transportation in the value chain, waste, recycling of materials and energy consumption as well as the end-products’ climate and environmental impact. 

In order to reduce the negative impact on climate and environment from transportation in the value chain, the SBS Group’s entities cooperate with transportation and logistics operators that comply with current requirements and legislation relating to transport-related environmental and climate impact.

In terms of product development, the SBS Group continuously works through the SBS Friction division on new lining types where the reduction of resources and environmental impact are considered just as are the demands on braking ability and lasting quality. In 2017, the Group introduced environment-friendly brake lining and is presently working on sintering lining that do not contain metals that have a documented negative environmental impact. The development of the new sintering lining is expected to be completed in 2021.

The SBS Group has also worked on reducing its resource consumption, including the consumption of materials, energy and water and on improving its waste separation. In 2018, the Company focused on minimising the energy consumption and reducing and separating waste from its own production, which has had a positive impact on the external environment and the climate.

Responsible supplier management – human rights and anti-corruption

Policy:
The SBS Group wants to demonstrate responsible supplier management across the supplier chain.

Risks, actions and results:
In relation to the Company's suppliers there is a risk of violating human rights and of corruption and unethical behaviour.

Through its choice of and demands made on suppliers and cooperative partners, the Company is deliberately working against corruption, unethical behaviour or violation of human rights. Following the work, no unacceptable conditions have been noted.


GOALS AND POLICIES FOR THE GENDER QUOTATION ON THE MANAGMEENT BOARD OF SCANDINAVIAN BRAKE SYSTEMS A/S, SEE SECTION 99B OF THE DANISH FINANCIAL STATEMENTS ACT
The Board of Directors in Scandinavian Brake Systems A/S has laid down the Company’s target figures and policies for diversity, including the underrepresented gender on the Company’s Board of Directors and other management levels of the SBS Group. They also apply to the subsidiaries SBS Automotive A/S and SBS Friction A/S, in which the members of the Board of Directors are the same as in Scandinavian Brake Systems A/S, the only difference being that this entity is under no obligation to have employee representatives.

The Board of Directors of Scandinavian Brake Systems A/S include four members appointed by the annual general meeting and three members appointed by the employees. One of the members appointed by the annual general meeting is female as is one of the members appointed by the employees. Thereby, the female representation appointed by the annual general meeting is 25% and one third of all members of the Board of Directors, which reflects the Board of Directors' goal.

It is company policy that managers at executive board and top functional levels are employed based on their general skills and qualifications. At the same time, the Company’s management considers diversity among its managers a strength and will make an effort to promote that. It is a company goal that the number of female members at executive board and functional management levels is to account for 40%. At 31 December 2018, the percentage was 44%.

The Board of Directors follows management’s gender composition regularly and evaluates on a yearly basis the development in relation to the goals and policies laid down. Measures to fulfil the goals will be taken, if required.