At the very core of how we operate in GKN is a culture of continuous improvement in all that we do.
The GKN Code is designed to ensure that our business in all its aspects continues to be run in an ethical, socially responsible and sustainable manner by:
- Complying with all relevant laws and regulations wherever we operate and conducting our business with integrity and in such a manner as to reinforce our reputation;
- Maximising shareholder value whilst safeguarding shareholders’ investment by combining high standards of business performance with high standards of corporate governance and risk management;
- Providing excellent products and services to our customers and seeking to win new business through fair competition;
- Dealing honestly and fairly with our suppliers and subcontractors;
- Treating our employees justly and with respect, recognising their abilities and differences, rewarding them for their achievements and providing them with a healthy and safe working environment;
- Playing our part in the protection of the environment both in the operation of our facilities and the design of our products; and
- Contributing positively to the communities in which we operate.
Living the Values
GKN is a group of over 42,000 people from many different locations around the world, with diverse backgrounds and differing experience. The GKN Way brings them all together with a common global approach to the way we sustain and develop our business. It encompasses a culture of continuous improvement, development of all our people to raise their capability, a focus on technology, the use of common measures and, at its heart, the GKN Values.
The Values govern our relationships with all our stakeholders whether they are shareholders, employees, customers, suppliers or the communities in which we operate. They are underpinned by the GKN Code which, together with a series of underlying policies, provides a framework for the behaviour of all our employees whatever their job and wherever they are located.
Conducting our business with integrity
A fundamental tenet of the Code is that all business must be conducted with respect for human dignity and rights and in accordance with all applicable legal requirements. Our ethical standards policy requires all employees to maintain the highest standards of integrity, honesty and fair dealing. We support the Universal Declaration of Human Rights and do not tolerate the use of child labour or forced labour in our own operations and, through our supplier management policy, we require equivalent standards through our supply chain. We will continue to reinforce our reputation through high standards of conduct in order to underpin shareholder value.
Safeguarding shareholders’ interests
We describe in the corporate governance statement, the governance and control procedures we have adopted to ensure that strong stewardship of the Group contributes to the sustainability of our business. The Governance and Risk Sub-Committee of the Board plays a central role in this with responsibility for developing strategy and for providing oversight and direction on all matters relating to governance, risk management and corporate social responsibility. As part of our internal control procedures, Group companies are required to confirm compliance with the GKN Code and policies.
A summary of those risks which could have a material impact on the future performance of the Group is detailed in the Financing and risk section. All Group companies must have a business continuity plan so that, should a risk materialise which threatens GKN assets, employees, production or the environment in which we operate, we are in a position to minimise disruption of our business with the least inconvenience to our customers. Each plan must conform to Group guidelines and be prepared following consultation with all key internal and external stakeholders.
A continuous improvement culture
At the very core of how we operate in GKN is a culture of continuous improvement in all that we do. In our business and production processes we are applying on a global basis the techniques of Lean Enterprise to identify the value stream for each product and process and ensure that it flows without interruption. The use of common measures across the Group enables us to benchmark performance against defined goals and against world class standards.
GKN’s Enterprise Excellence team, newly formed in 2007, has responsibility for driving the focus on Lean Enterprise. To date, we have trained 250 continuous improvement leaders from our global operations to coach and facilitate employees on how to improve their daily working processes on the shop floor and in the offices. During 2007, over 1,000 leaders from around the world took part in a programme on the leadership skills required to encourage the further application of the principles of Lean. In 2008 a further training programme is being launched to provide managers with the necessary skills to drive further improvement into the businesses and deliver more value through improved productivity and cash generation.
Going forward, all sites are required to develop an annual continuous improvement plan which will engage every employee in driving more value through increased process efficiency and the elimination of all forms of waste including unnecessary cost and time. Each plan will be aligned to a site’s business objectives and set out its continuous improvement actions.
Central to the whole philosophy of Lean are GKN’s people, without whose engagement such progress would not be possible.
Our objective is to create an environment in which highly skilled and motivated people can achieve the exacting standards demanded in our business, can develop their careers and provide GKN with a sustainable competitive advantage.
Raising the capability of our people
Within GKN we have high expectations of our people. GKN’s leaders are tasked with growing the global businesses in an environment which is highly competitive and typified by complex supply chains and continually developing technologies. This requires us to harness the talents of all our employees and enable everyone to contribute to their full potential. Our objective is to create an environment in which highly skilled and motivated people can achieve the exacting standards demanded in our business, can develop their careers and provide GKN with a sustainable competitive advantage.
GKN’s Enterprise Excellence team is focused on raising the capability of our people. Three global centres of excellence have been created covering reward, HR business processes and organisational capability, and a further one is planned with the specific remit to further improve employee engagement. These centres of excellence provide a heightened focus for the identification of areas for improvement and the implementation of actions globally to address them.
Central to our learning and development activities is the performance development process (PDP) through which individual objectives are aligned with business objectives, responsibilities are clarified and competencies are assessed. Individual development plans focus on enabling employees to realise their full potential in their current role whilst at the same time preparing them for the next step in their career plan. In relation to production staff there is a parallel process based upon the identification of development needs by reference to appropriate skills matrices.
Considerable work has been undertaken to enhance our senior leadership development programmes with the result that, over the first four months of 2008, the 60 most senior executives within the Group will attend a programme focused around the next stage of the Group’s development. The principal theme of the programme is how we will grow and sustain the business by creating, capturing and delivering value.
Our Organisation and Management Development Review (OMDR) process was also improved during 2007 with a more extensive analysis of resource and capability to determine the extent to which the organisation is equipped to deliver its strategic objectives. The results, including those relating to career progression and succession coverage, are reviewed annually by the Board and improvement targets are agreed.
GKN has a strong track record of recruiting high calibre graduate engineers with the aim of developing their skills as international managers of the future. Recently we developed separate graduate programmes in China and India, key growth markets for GKN. The Group also continues to operate apprenticeship schemes across the Group and a programme of employee international assignments.
Engaging more fully with our employees
The extent to which our employees are engaged in the business is an important indicator of our ability to deliver on our business strategy. Whilst all divisions are required to carry out employee surveys every two years, during 2008 a standard form of employee survey will be launched across the Group which will focus on measuring levels of employee engagement.
Effective two-way communication is at the heart of employee engagement and within GKN we have a variety of mechanisms at all levels of the organisation to support this, including daily team meetings, presentations, intranets and newsletters. Consultation mechanisms exist worldwide across the Group to provide open communication between management and employees whether or not unionised. The European Works Council, which covers all European businesses, has operated since 1995.
Under our employment policy all Group businesses must adopt practices which ensure that employees are treated justly and with respect and that their abilities, differences and achievements are recognised, thereby ensuring a positive, inclusive working environment. Employment decisions must be based on qualifications and merit and all businesses must ensure a working environment free from all forms of discrimination and from any form of conduct which could be considered to be harassing, coercive or disruptive, together with working conditions which are safe and healthy.
Employee-related policies are designed to encourage individuals to report and discuss problems on a confidential basis and provide expeditious and confidential grievance procedures. GKN operates international whistleblowing hotlines which are run by external and independent third parties and are available 24 hours a day. The hotlines ensure that employees can make (on an anonymous basis if preferred) confidential disclosures about suspected impropriety and wrongdoing. The policy requires that employees are able to make such disclosures without fear of recrimination. Any matters reported are investigated and escalated to the Audit Committee as appropriate.
Recognising excellence
Our Group Excellence Awards are designed to encourage individuals and teams to excel in all of the key areas which are recognised as essential to the strategic and sustainable development of the business. Annual awards are made for customer service, production and business process excellence, people excellence and best practice sharing, technology innovation, safety, environment, and society and community. The awards nurture the principle of continuous improvement in everything we do and recognise truly outstanding performance across our business.
Delivering advanced technology
Delivering advanced technology and first class engineering capability to our customers is a key strategic objective. During the year we strengthened our technology focus through the newly created Enterprise Excellence team which has assumed responsibility for developing the Group’s technology strategy. At the start of 2008 a new position of Group Technology Officer was created with responsibility for executing the Group technology plan to secure the appropriate technology for GKN’s long term development in line with our strategic objectives. The Group Technology Officer works closely with the Technology Sub-Committee, which comprises senior divisional engineering executives, to identify those technologies, beyond the individual divisional technology plans, that are necessary for growth and to focus resource on developing GKN’s position in these areas.
Working with our suppliers
Our suppliers play an integral part in the sustainability of our business and it is essential that they conduct their business in a manner that supports our commitment to world class performance. Our supplier management policy encourages Group companies to develop and maintain value adding relationships with our supply base. It prohibits companies from engaging suppliers that offer inadequate health and safety standards for employees, infringe internationally accepted standards of workers’ rights, use child or forced labour, adopt unsound environmental practices, have poor standards of social responsibility or that fail to comply with relevant laws and regulations.
Providing a safe place to work
Ensuring that our employees have a safe and healthy place in which to work will always be a priority for GKN. In pursuit of our ultimate goal of zero preventable accidents we focus on strong, visible and supportive leadership accompanied by a commitment from employees to take ownership of their own health and safety and that of their immediate colleagues. To strengthen our safety culture, during 2007 we deployed an assessment tool containing 12 characteristics of safety excellence which is now being used across the Group to guide sustainable improvements. We also developed and piloted ‘RADAR’ (Risk Awareness, Detection, Action and Review), a safety tool which operates at work team level so that employees can play a more active role in accident prevention. This is being launched Group-wide in 2008.
Our commitment to safeguarding employees’ health extends to work related ill health and we continue to develop our occupational health monitoring capabilities.
Accident frequency rate (AFR) and accident severity rate (ASR) are key performance indicators for the Group and our performance against these in 2007 is reported on the Key performance indicators section of the Business review and is shown in the charts above. 2007 is the tenth consecutive year of performance improvement. Over that period our AFR and ASR performance has improved by 91% and 82% respectively and our serious injury rate (SIR) has improved by 87%. Each business is required to target aggressive annual performance improvements. Targets are set primarily at plant level where they can best reflect the particular needs, risks, and priorities of each site. In 2007, 73% of plants maintained or improved their excellent AFR performance and 67% met their AFR targets. For ASR, performance was maintained or improved by 70% of plants, and 60% met their targets.
During 2007, five health and safety enforcement actions (none of which carried a penalty) occurred in plants in Canada and the UK. There were no fatalities of employees or contractors on GKN sites.
Group businesses are required to confirm and certify the accuracy of the data that they report. A programme of safety review visits by senior executives and the Group Safety Adviser also assists with data verification and enables continuous improvement of safety systems and performance. Many GKN businesses now incorporate in their operational procedures features from the Health and Safety Management System OHSAS 18001 and 30 Group companies have achieved certification to this standard.
Minimising our impact on the environment
Our commitment to protecting the environment is focused both on minimising the impact of our operations and on making a contribution towards a sustainable future through the design of our products.
GKN’s environmental management system (EMS), originally introduced in 1994, and to which all Group businesses must adhere, is broadly based on the international standard ISO 14001. At its core is a requirement for continuous improvement driven by regular measurement and evaluation of performance, identification and implementation of action plans, and measurement of results.
We measure the impact of our operations on the environment against the key performance indicators of energy consumption and associated carbon dioxide (CO2) emissions, water usage, waste generation and recycled waste. Operating sites are required to set targets, particularly on energy consumption, water use and waste generation, in line with our commitment to continuous improvement.
† see explanatory note
Our performance against these measures in 2007 is reported in the Key performance indicators section and is shown in the charts above. Most businesses either improved or maintained their performance with certain exceptions. The sharp increase in waste generation at Hoeganaes is accounted for by the removal of a slag stockpile at its Gallatin plant in the US (classified as waste), the ferrous content of which was separated for on-site recycling with the non-ferrous content being recycled for off-site construction purposes. The relatively high water consumption at OffHighway is due to the use of water from a borehole at our major manufacturing site in Lohmar, West Germany. This is used in a once through cooling process and is discharged without contamination into surface water. The performance of Other Automotive includes the first full year of production at the cylinder liner operation in China.
During the year there were six environmental enforcement actions against GKN companies, all of which were in the US. The majority of these actions were due to minor breaches of permit requirements which did not result in any significant environmental damage. Fines totalling $33,000 have been issued by the relevant authorities although the penalty with regard to one of the actions remains under negotiation.
We are committed to achieving accreditation to ISO 14001 at all our manufacturing sites worldwide. Over 100 of our sites employing some 85% of our global workforce are now certified to ISO 14001. A number of recently acquired sites will be working towards accreditation.
As a founder member of the UK Emissions Trading Scheme, GKN committed to reducing carbon emissions by 10,000 tonnes by 2007 from a 1998 to 2000 average baseline. Not only did we meet our obligations under the Scheme for each of the five years but we achieved a reduction of over 50,000 tonnes in total. The incentive payments were used to support energy saving projects in the UK.
A common theme across our businesses is the drive through technology developments to produce lighter weight products, offering opportunities for manufacturers of cars and light vehicles and of aircraft to improve fuel economy and thereby reduce CO2 emissions. GKN Driveline’s countertrack™ technology for sideshafts is estimated to reduce fuel consumption by 1% on a typical four wheel drive V6 vehicle, saving 1g/km of CO2 emissions. If applied to every vehicle on which GKN sideshafts are fitted this would save 0.5 million tonnes of CO2 per annum. The increasing use of composite and lightweight complex metallics on airframe structures offers similar potential benefits. GKN Aerospace’s recently designed blended winglet made from composite material is estimated to provide up to 6% fuel savings on a high utilisation global aircraft such as the B767-300 ER. Aviation Partners Boeing, our customer for the product, estimates that by 2010 blended winglets will have saved the world’s airlines over two billion US gallons of fuel which equates to 20 million tons of CO2 emissions.
Reporting on performance
Our performance against the key health and safety and environmental indicators is measured on a regular basis and reports are made quarterly to the Sub-Committee on Governance and Risk and to the Executive Committee. A half yearly report is also made to the Board. Significant health and safety and environmental incidents are reported to Executive Committee members within 24 hours and reviewed at the Committee’s next meeting.
In early 2008 a new web-based reporting tool was launched Group-wide to facilitate both the collection of data and, more importantly, its analysis and use by management at all levels to help drive improved performance.
A specialists forum, comprising divisional and corporate centre representatives, meets as required to discuss best practice as well as specific issues in relation to the management of accidental risk that either its members or the Sub-Committee on Governance and Risk believe require attention.
Contributing to our communities
2007 has been a very significant year for GKN with regard to our commitment to make a positive contribution to the communities in which we operate. Our achievements are described within the GKN Mission Everest section. We are immensely proud of our employees who not only rose to the challenge of raising an additional $0.5 million in their local communities but far exceeded this target, raising in total (in cash and time donations) an additional $1.7 million. We look forward to another successful year in 2008.
GKN Mission Everest has drawn employees closer together and it has set a record for human achievement. But above all else it has transformed the lives of some of the world’s poorest children.