Disclosure 103-1: Explanation of the material topic and its Boundary

Corruption is a phenomenon with worldwide presence causing economic damage and contributing to an unfavorable business environment by distorting market mechanisms and increasing the cost of doing business. The World Bank estimated that 0.5% of GDP is lost through corruption each year, impeding in particular the economic development of developing countries.

The broad presence of corruption has led to an increase in regulation such as the most recent introduction of a new French Anti-corruption law (Sapin II) which entered into force on June 1, 2017.  Sika has formally appointed the local legal in-house counsel as Compliance Responsible for France, who will support and enhance the implementation of the Sika’s compliance program at local level, according to the new local law requirements.  A similar initiative has been launched in Brazil, with the support of the local legal in-house counsel and external experts to ensure Sika Brasil’s compliance with the local anticorruption “Clean Act” requirements.

The subject is of considerable importance to Sika, as the company operates and is growing more and more in countries with elevated levels of corruption and is active in the construction industry, known for its exposure to corruption.

For the same reasons, corruption is also an important issue in Sika’s supplier relationships.

Disclosure 103-2: The management approach and its components

Sika’s management approach for anti-corruption is intended to avoid negative impacts.

In order to provide a clear message to all employees, Sika’s Code of Conduct strictly prohibits any form of active or passive bribery and provides guidance on gift, entertainment, and donations:

No Bribery, no Corruption

  • Avoid any form of either active or passive bribery or corruption.
  • Do not offer or accept any favor of any kind (cash, trip, gifts, etc.) for any improper advantage (offer, permit, order, project award, etc.).

Bribery and corruption can take many forms: It may be cash, but also any other favor, like trips or  gifts of any kind, which is intended to influence the receiving person’s decision to obtain an improper advantage for the person or entity offering the favor. Except for ordinary gifts and entertainment which do not aim at an improper advantage, it does not matter how big or small the favor or the advantage is, it still is bribery or corruption and is strictly forbidden.

Gifts, Entertainment and Donations Policy

  • Only give or accept gifts and entertainment which are lawful, reasonable, and in compliance with the local Sika company’s written rules.
  • Sponsoring and charitable contributions are permitted in compliance with the local Sika company’s written rules.
  • Sika does not contribute to any political party or for a political cause unless approved by Group Management.

In almost all countries reasonable gifts and entertainment (meals, sports, or cultural events, etc.) are an inherent part of business. They become bribery and corruption when they are intended to influence the receiving person’s decision. Trips or multiple day events as well as gifts and entertainment for public officials are especially critical. All Sika companies have implemented written rules based on the corporate model rules to further specify which gifts and entertainment as well as which sponsoring and charitable contributions are permissible in the framework of the Code of Conduct. The rules must also provide for authorization from management depending on the amount involved. Contributions to political parties or a political cause are subject to the approval of Group Management.

The adoption in all Sika’s companies of a localized Gift & Entertainment Policy has been fully accomplished. This policy, which integrates and reinforces the Code of Conduct principles, provides employees with a clear and detailed framework on how to give and accept gifts and entertainment in their daily business and defines - for each company/country - different levels of authorization depending on the gift value. Training for employees on practical cases has become more important in 2017, also through the Regional Compliance Officers. Role modelling by management, integrity, and continuous reminders of Sika’s principles are important. Training initiatives will continue to multiply and will include additional “Train the Trainer” sessions with class-room training and webinars addressed to Compliance, HR, Procurement, Controlling and the Legal team members across the various Regions.

The management approach for anti-corruption within Sika includes the following components:

 

COMMITMENT

Sika has a zero-tolerance approach concerning bribery and corruption within its own operations and with its suppliers.

 

GOALS AND TARGETS

Sika does not tolerate any incident of corruption.

 

RESPONSIBILITIES

Compliance will continue to be a line management responsibility at Sika and the General Manager of the country organization is responsible for compliance with Sika’s Code of Conduct, the local Gift & Entertainment Policy, the Supplier Code of Conduct implementation, the Procurement Manual, and setting of local rules and training. Corporate Functions, including the Compliance Team, provide tools and methods – at different levels of the organization – to support management and monitor the effectiveness of the compliance system, proposing corrective actions where needed.

 

POLICIES

 

SPECIFIC ACTIONS

Compliance Confirmation: As part of their duties and responsibilities, General Managers at Sika ensure that their companies operate in compliance with applicable laws and Sika’s internal regulations. All General managers renewed also in 2017 their commitment to lead with Integrity by signing a "Compliance Commitment/pledge", which explains and details what this implies in their daily business.

The Compliance Confirmation provides a brief definition of Corruption as “the abuse of entrusted power for private gain. Corruption includes practices such as bribery, facilitation payments, fraud, extortion, collusion, and money laundering. It also includes an offer or receipt of any gift, loan, fee, reward, or other advantage to or from any person as an inducement to do something that is dishonest, illegal, or a breach of trust in the conduct of the enterprise’s business or provides an improper advantage or that may result in moral pressure to receive such an advantage”. No corruption cases have been reported in any of the more than 100 Confirmations submitted which comprise all of Sika’s legal entities.

  • Compliance Commitment 2018-2019: To take it a step forward, also all Sika Senior Managers - who are not GMs - have signed the Compliance Commitment 2018-2019. Furthermore, the General Managers have been asked to propose the Compliance Commitment also to their local management team members to cascade a consistent message and awareness throughout the organization.
  • Compliance Checklist 2018: Sika has reviewed and released a new Compliance Checklist (2018) to support General managers to accomplish their compliance duties and guide them on Sika’s minimum requirements and best practices they should be aware of and implement - in different areas - to minimize compliance risks (i.e. Procurement, Controlling, HR, etc.).  The new list incorporates certain new requirements/improvements as corrective actions and responses to certain risks, which have been identified as a result of case investigations or audits (i.e. cyber-maturity). This tool allows General Managers  to measure his/her Company’s compliance with Sika’s Code of Conduct, to monitor identified risks and plan corrective actions.
  • Group Audits: Compliance with Sika’s Code of Conduct and other Corporate Policies and Manuals is monitored through regular Group audits (117 in 2017) and legal supervision of the local companies and General Managers.
  • Supplier Management: Sika’s Supplier Code of Conduct requests suppliers to respect Sika’s zero-tolerance policy concerning bribery and corruption and avoid any active or passive corruption. Suppliers are required to have systems in place to ensure the proper instruction, training, and auditing of its personnel and sub-contractors to ensure compliance with these principles. Sika performs supplier audits and evaluations to monitor and assess their compliance with Sika’s requirements and the Code of Conduct. Suppliers are obliged to immediately inform Sika of any known violation of the Code of Conduct.
  • Training/new e-learning: Anti-corruption is part of the Code of Conduct training for all employees and General Manager briefings. Employees are regularly reminded, at least once a year, of these rules. Corporate functions regularly conduct training sessions and audits. To preserve Sika’s strong compliance culture and to ensure that the Code of Conduct’s principles are understood and adhered to by all employees, Sika has developed an animated e-learning program in addition to regular class training events. The program includes a specific section on Gifts & Entertainment and bribery risk. It is rolled-out in 10 languages throughout the organization as part of the Awareness Raising Campaign on Compliance.
  • Internal Reporting Tool: To preserve and foster Sika’s strong culture of trust, integrity and transparency, Sika has developed a new web-based reporting platform, the Sika TrustLine (available in more than 20 languages). It  has been rolled-out throughout the organization as part of an Awareness Raising Campaign on Compliance together with the new e-learning program. The Sika TrustLine is an externally hosted reporting channel where Sika’s employees may raise legitimate complaints regarding serious misconduct, such as corruption incidents, and/or breaches of Sika’s Code of Conduct, in a safe and confidential environment, whenever reporting to other most immediate existing resources, like line management or other superiors, is not feasible or adequate. As part of the roll-out of the Sika TrustLine, an ad hoc policy (“Sika Trust Policy”) will be made available to Sika’s employees in order to provide clear rules and appropriate training on rights and obligations with regard to internal misconduct reporting.
  • Anti-fraud: Thanks to the cross-functional Fraud Awareness Initiative launched in 2017 by the Controlling function, Sika was able to mitigate cases of attempted external fraud, such as Social Engineering (CEO-fraud or “President”Fraud) and the receipt of Fraudulent Invoices. Though the overall risk is growing due to an improved level of sophistication and an increased number of external cyber-attacks, Sika’s employees have been trained with ad hocsessions and provided with material to help them identify and report at Regional and Corporate level fraud attempts at an early stage.
    With regard to internal fraud, the above training initiative has introduced prevention techniques to avoid potential key fraud risk events and detection techniquesto uncover fraud events when preventive measures fail or unmitigated risks are realized, through checklists, which list typical red flags to support the monitoring and auditing activities in identifying fraud schemes.  In 2017, the Regional Controller/Compliance Officers have cascaded within the organization to all Area and Local Controllers their first training.
  • Awareness Campaign on Compliance: Sika progressed in the joint roll-out of (i) the new digital module on the Code of Conduct and (ii) the new internal web-based reporting system for serious misconducts (the Sika Trust Line), covering additional 25 countries and training more than 5,000 employees in the different Regions. The response and engagement of employees was very positive and the campaign has been perceived as engaging, easy to understand/follow and tailored to Sika’s business.
    So far, only 2 alleged cases for minor misconduct (1 HR and 1 Conflict of Interest) have been submitted through the Sika Trust Line and no case of abuse or misuse of the new reporting platform. This proves that the tool has been properly placed in the communication/roll out of the campaign, along simple messages and principles, as set forth in the materials distributed to all employees.
    Moreover, Sika has regularly monitored since the pilot launch the number of accesses to the platform (Sika Trust Line) by its employees, to measure the interest of the trained employees to explore the new reporting tool. The number of accesses increased regularly with peaks along the launch of the campaign in the various countries. As of the end of January 2018, we have registered more than 2,400 accesses (page visits), which represent more than 1/3 of the total trained employees (6,000) and almost 480 clicks on the “Make a Report button. This result highlights the successful communication campaign and the engagement/interest of the local organization on transparency and ethical conduct.
    Based on the available languages (English, Spanish, German and French) of the digital module on the Code of Conduct and the additional 4 translations in progress (Chinese, Portuguese, Arabic and Italian), the next wave countries for 2018 will cover, at least, additional 5,000 employees and will include several major countries, like Germany (with almost 2,000 employees), Brazil (700), Australia (300), Italy (350) and the UAE (90), as a pilot country for the Middle East Area.
  • A defined procedure on reporting and an aligned communication campaign throughout the organization about the Sika TrustLine support a speak-up culture and deter misconduct.
  • Support of Transparency International: Sika financially supports Transparency International in its global fight against corruption.

Disclosure 103-3: Evaluation of the management approach

Sika evaluates its management approach through:

  • Monitoring: Sika investigates reported cases of corruption and any corrective action to be taken according to a defined incident response process (see below). Confirmed cases and actions taken are followed up by the Compliance function and reported annually to the Audit Committee of the Board of Directors. Management approaches are adapted accordingly.
  • Evaluation of results from audits: Group Audit results are implemented in the management system, and regular follow-up reports are presented to monitor improvements.
  • Investigations: Internal Audit conducts audits on a regular basis and in case of suspected corruption or fraud. All reports of potential corruption cases within Sika are investigated and properly followed up according to applicable laws. A standard incident reporting and response process has been developed to provide guidance to Sika’s management on the procedures to be followed in case a criminal act or a material misconduct is suspected or detected. Highly sensitive incidents and criminal acts, such as corruption cases, must be reported and escalated to the Group Compliance Officer irrespective of the source. Corruption reports generated via the Sika TrustLine are automatically forwarded to the Group Compliance Officer who shall conduct and/or supervise the investigation process.
  • Overview of compliance cases: Sika’s Group Compliance Officer regularly reports to the Audit Committee of the Board of Directors about known compliance cases and corrective action taken.
  • General Managers’ briefings: General Managers are regularly instructed and briefed about anti-corruption requirements in the companies.

 

Sika monitors and evaluates the effectiveness of its management approach according to target achievement. The management approach has been reviewed and adapted accordingly.