Responsible corporate governance
- In addition to the corporate strategy, the new Code of Conduct takes increasing customer and business partner requirements into account
- The topic of human rights has been reinforced in the Code of Conduct as well as with additional measures such as risk analyses
Bestandteil des GNFK StartGood corporate governance is an expression of responsible corporate management. In principle, business dealings and relationships are only entered into if they are in line with the corporate values Sustainable, Innovative, Excellent, and Passionate. The Schaeffler Group’s governance structure supports this approach, creates the necessary transparency within the organization and with regards to responsibilities, and thus ensures coordinated collaboration.
Chaired by the Group Chief Compliance Officer, the Group Compliance & Risk Committee (GCRC) is an important component of the Schaeffler Group’s governance. The committee is made up of each of the heads of the relevant governance functions – including compliance, risk management, internal control system, and internal audit – and is responsible for supporting the Schaeffler AG Executive Board in its organizational duties with regard to compliance and risk management. One of the main tasks of the GCRC is to define and delineate areas of responsibility and interfaces and thus avoid redundancies. In addition, it is expected to create a consistent and complete view of the risk situation in all divisions, functions, and regions based on a uniform measurement and prioritization methodology. A further objective of the GCRC is to develop and to monitor risk mitigation activities.
The Compliance & Risk Working Group, consisting of staff members from the functions represented on the GCRC, provides operational support to the GCRC.Bestandteil des GNFK Ende
More information on the individual subsystems of the governance structure and the Schaeffler Group’s compliance management system is available on page 76 et seq. of the Annual Report 2021.
Reporting risks transparently
Bestandteil des GNFK StartThe Schaeffler Group deliberately takes calculated business risks in order to achieve its corporate objectives and thus implement its corporate strategy and exploit the associated opportunities. The risk management system aims to identify these risks at an early stage and to manage them in accordance with the risk strategy.
The Schaeffler Group’s opportunity and risk reporting in the group management report provides comprehensive information about the company’s risk management system as well as significant risks that have a medium or high negative impact on assets, financial positions, or earnings. It also includes risks related to the Schaeffler Group’s business operations, business relationships, or products and services. Furthermore, climate risks were integrated into the financial risk management system.
With the integration of the non-financial risk assessment into the Schaeffler Group’s risk management system, the assessment of the non-financial risk impact of the five reportable aspects – in addition to the evaluation of their financial risk impact – is carried out using a similar assessment logic. The risk survey showed that there were no reportable risks in 2021 in accordance with CSR-RUG (Section 289c, paragraph 3, HGB).
As proactive risk management, the Energy, Environment, Health and Safety (EnEHS) management system serves to identify and avoid systematic risks and potential negative impacts from the Schaeffler Group on the environment and occupational health and safety at an early stage. The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) provide guidance and represent a further development in the analysis of climate-related risks.Bestandteil des GNFK Ende
More information on the Schaeffler Group’s reporting on opportunities and risks is available on page 44 et seq. of the Annual Report 2021.
More information on the risks associated with human rights
More information on the risks associated with TCFD and the consequences of climate change
Bestandteil des GNFK StartIntegrity and compliance are significant cornerstones of the Schaeffler Group’s manner of conducting business. Therefore, the company pursues stringent standards, particularly when it comes to preventing corruption, lobbying, money laundering and economic crime, observing antitrust and competition law, and protecting human rights. Additional areas of focus include data protection as well as information, cyber, and IT security. To uphold its values and standards, the company maintains a compliance management system (CMS) within the framework of the overarching corporate governance structure, as well as a compliance organization that incorporates the entire Schaeffler Group. The head of this organization is the Group Chief Compliance Officer, who regularly reports to the Chief Executive Officer, the Chairman of the Supervisory Board, and the Chairman of the Audit Committee.
The Schaeffler Group’s CMS is responsible for protecting the company and its workforce. The aim is to prevent and detect any compliance or legal violations in the areas of corruption, money laundering, competition and antitrust law, as well as economic crime at an early stage. It also serves as a form of active risk control. The CMS is based on national and international standards. In 2018, an independent auditing company confirmed the appropriateness of the CMS in accordance with the IDW AsS 980 standard for auditing compliance management systems. An effectiveness audit is planned for 2022.
In an effort to systematically avoid legal and reputational risks, the company was primarily concerned with further developing existing measures in the year under review. The Code of Conduct was revised and adopted by the Executive Board, which took into account the corporate strategy – Roadmap 2025 – and increasing demand for responsible corporate governance among customers and business partners. In addition to the established compliance topics, the new Code of Conduct also focuses on integrity and value-based compliance. All employees should actively promote a compliance culture, internalize Schaeffler rules and values that apply to their areas, and act accordingly. All employees, managers, and Executive Board members are to comply with the applicable local, national, and international laws and guidelines down to the letter.
The Schaeffler Group Code of Conduct is available at:Code of Conduct Schaeffler Group
To support employees, the Schaeffler Group has introduced a variety of procedures and processes. This includes the Group procedure for compliance with antitrust and competition law, which among other things regulates interaction with competitors (horizontal) and suppliers, customers, and distributors (vertical). Core restrictions prohibit price fixing, agreements on conditions and quantities, and sales area and customer splits, particularly among competitors. A digital Competitor Contacts and Associations Register1) promotes internal transparency and thus supports the pre-approval process for competitor contacts. The antitrust law procedure also defines unacceptable, coordinated behavior in various scenarios, including the exchange of information and misuse of a dominant market position. There are also additional antitrust and competition law guidelines that explain the background of antitrust rules and communicate an in-depth understanding of the materials regulated by antitrust and competition law.
To effectively manage risks associated with corruption, the anti-corruption guidelines apply to all employees in the Schaeffler Group and, most importantly, cover gifts, invitations, and donations. Gifts, invitations, and other perks are therefore only permitted if appropriate and transparent. The granting and acceptance of benefits of any kind for the purpose of influencing someone in the public or private sector is prohibited. In the same vein, no donations may be made to political parties, their representatives, politicians, elected officials, candidates for political office, or individual persons. Each donation must comply with applicable laws and the Schaeffler Group’s internal rules and requires special permission from the Compliance department. In addition, the IT-supported business partner assessment – “Know Your Business Partner” – is integrated into existing business processes and addresses risks associated with corruption and export control. Those business partners who, due to the type of business relationship, represent an increased risk for the Schaeffler Group – e.g., distributors, sales agents, and consultants – must also undergo an in-depth business partner assessment.Bestandteil des GNFK Ende
Due diligence and reporting systems
Bestandteil des GNFK StartThe Compliance and Mergers & Acquisition (M&A) departments have been working more closely together since 2021. Compliance is included in upcoming M&A projects at an early stage. In addition to being a permanent member of the M&A Transaction Committee and the M&A Integration Committee, the department also defines compliance-relevant issues for M&A due diligence, conducts integrity checks on company transaction partners, and votes in M&A draft resolutions.
As a part of the central competence team for Compliance, the Forensics & Investigations department is responsible for the independent investigation of alleged violations. Business processes and locations are routinely audited to identify and uncover such violations. The Internal Audit department also conducts process-specific checks at the Schaeffler companies on an annual basis as part of its governance audits, most notably for the approval process for competitor contacts and donations as well as for compliance training courses.
To address inappropriate behavior, employees can contact someone in their direct work environment such as managers, regional compliance officers, the HR, Legal, and Audit departments, and employee representatives. Any potential violations – most notably, illegal business practices – can also be reported using the globally accessible whistleblowing system. The system is available in several languages and enables anonymous, confidential, and secure communication with the investigation team of the Compliance department.
Potential compliance violations are resolved independently and in full. In the event of violations, all appropriate and legally permissible measures up to the extraordinary termination of employment relationships are taken. Retaliation against employees or external persons who, in good faith, express concerns about misconduct at the company is prohibited and itself represents a serious violation of the Schaeffler Group Code of Conduct.Bestandteil des GNFK Ende
The Schaeffler Group’s whistleblowing system is available at: Whistleblowing system
More information on material compliance
Bestandteil des GNFK StartTo ensure the necessary understanding of compliance among its full- and part-time employees and executives, the company employs face-to-face and online learning.
Compliance training courses are usually offered face-to-face but were primarily conducted as video conferences in 2021 due to the ongoing coronavirus pandemic. In accordance with the risk-based approach, the topics covered in the training courses included integrity, the new Schaeffler Group Code of Conduct, competition and antitrust law, and anti-corruption.
With a global rollout to establish value-based compliance within the organization, the “Horizon Next” integrity workshop aims to promote awareness of integrity by encouraging participants to reflect on their internal value system with the aid of interactive case studies. In a representative survey conducted in the year under review, more than 85 % of the approximately 5,100 employees questioned confirmed that they are familiar with the compliance rules and report potential misconduct. The survey also revealed that employees have a great deal of trust in the management and the compliance organization. Online training courses ensure a consistent level of knowledge on the topic of compliance across all company levels and are continuously developed and tailored to the workforce’s profile. Building on the basic training course developed the year prior – Integrity & Security@Schaeffler – advanced courses on the topics of anti-corruption and compliance with antitrust and competition law were revised and rolled out globally in 2021. These mandatory online training courses were developed for all executives as well as employees who have been allocated a compliance-related activity profile such as purchasing or sales. The portfolio will be expanded in 2022 to include a refresher course on Integrity & Security@Schaeffler.
Participants in compliance training
19,980 people2) (prior year: 34,879) took part in online compliance training within the reporting period. Approximately 95 %2) 3), (prior year: 94.6 %) of the invitations to compulsory online compliance training courses were accepted in 2021. The compliance rate in the reporting period therefore exceeded the targeted level of 95 %. Furthermore, 3,033 employees (prior year: 3,2334)) were trained in face-to-face training and workshops. The drop is primarily the result of increased use of digital formats due to the coronavirus pandemic.Bestandteil des GNFK Ende
Data protection, information security, and cybersecurity
Bestandteil des GNFK Start Protecting personal rights is a high priority for the Schaeffler Group and is therefore part of the Code of Conduct. It handles the processing of data belonging to business partners and employees with the greatest care and sensitivity. The corresponding processes comply with legal data protection requirements. The Data Protection Officer at Schaeffler AG plays a central managing role. He is assigned to the Compliance & Corporate Security department and thus to the Chief Executive Officer’s function.
There is an IT Security by Design process within the Schaeffler Group that is based on national and international standards. This process takes IT security into account even during the early phase of system and application development. Protective measures are integrated and monitored on the basis of the protection requirements associated with the process.
The Schaeffler Group’s information security and cybersecurity measures are designed to protect the intellectual property and business secrets of business partners from theft, loss, unauthorized disclosure, unlawful access, and misuse. Protective measures were introduced to prevent, detect, and correct and are continuously optimized. The measures are based on the ISO/IEC 27001 standard and take national and industry-specific regulations and compliance with the VDA-ISA standard within the framework of Trusted Information Security Assessment Exchange (TISAX) into account where necessary.
Below are some examples of topics that have been reinforced within the Information & Cyber Security program in the year under review:
- Internal communication and training courses on security awareness
- Operation technology (OT) security at the production facilities
- Information security management systems (ISMS) and further development of information security on a regional basis
- IT security for increased cyber resilience
- TISAX certification completed at the four pilot locations, with more to comeBestandteil des GNFK Ende
Alongside sustainability, digitalization is one of the two key topics of the Schaeffler Roadmap 2025. The Schaeffler Group uses digital technologies across the board in an effort to optimize existing products, internal processes, and the way in which employees work, as well as to enable brand-new products, business models, and processes. A digitalization roadmap that applies to the entire Group has been developed to facilitate systematic transformation and encompasses a digitalization strategy, extensive digitalization initiatives for strategy implementation, and for monitoring status, progress, and the financial effects of digitalization.
Group-wide synchronization and management of digitalization activities are the responsibility of the Digital Transformation Committee at Executive Board level as well as the Digital Coordination Committee with mandated digitalization responsibles for each division, function, and region.
All four pillars of the digitalization roadmap focus on strengthening sustainability through digitalization:
- Digital workplaces enable effective and virtual collaboration among the teams and improve the employees’ work–life balance with flexible, hybrid work models. The use of augmented reality solutions for remote maintenance and for commissioning machines and systems reduces the need for travel.
- More and more buildings, machines, and production facilities are now equipped with sensors, actuators, and software algorithms, as a basis for transparency and optimization.
- Process automation and digital integration across the entire value chain enable the targeted collection of real-time data such as energy data for sustainability projects, with the aim of managing consumption more effectively and achieving a more sustainable energy mix. The continuous data exchange also enables more precise calculation and management of the carbon footprint as well as concrete digital sustainability solutions such as the sustainable site performance tracker for the collection and assessment of information on plant sustainability.
- Smart products allow Schaeffler Group customers to intelligently manage energy consumption in their production – for example, with the autinity software solution. Services such as OPTIME can also be used to predictively service products and thus conserve resources.
Moreover, one of the core elements of the digitalization roadmap is continuously training employees and strengthening their digital competence, with a key focus on topics such as data protection and information security, or ethical issues associated with the use of artificial intelligence.
Establishing human rights due diligence
Bestandteil des GNFK StartAs part of Human Resources (HR), the Sustainability department is responsible for coordinating human rights issues in the Schaeffler Group and works closely with a variety of functions across all regions to implement Human Rights Due Diligence.
Human rights due diligence
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1) Accepting responsibility
As a global family business with a strong foundation in its values, respect for human rights is an indispensable part of corporate responsibility. The company management therefore commits, e.g., to the UN Guiding Principles for Business and Human Rights, the ten principles of the UN Global Compact, the general human rights declaration, and the core labor standards of the International Labour Organization (ILO).
This claim was firmly established during revision of the Code of Conduct in the year under review, with a focus on minimum and appropriate wages, maximum working hours, the right to freedom of association and to negotiate collective bargaining agreements, the promotion of equal treatment, and the rejection of any form of child or forced labor, human trafficking, and modern-day slavery. This applies to all of the approximately 200 Schaeffler locations as well as to all business partners and goes beyond compliance with local legal provisions.
For the benefit of all employees and contractors, a newly published policy outlines the company’s expectations as well as rules and measures dedicated to preventing human trafficking, focusing explicitly on topics such as the hiring process, employment contracts, and whistleblowing.
Both the Code of Conduct and the Schaeffler Group Human Trafficking Policy refer to all people, activities, and business relationships associated with the Schaeffler Group.
2) Identifying risks
The Schaeffler Group conducted a human rights risk assessment with a focus on its own company in the year under review. To start with, country- and sector-specific human rights risks were identified at the Schaeffler locations. Further, a detailed risk assessment was conducted at all of the locations with increased country- and sector-specific risks as well as at all locations with more than 250 employees, with a clear focus on discrimination, human trafficking, and forced labor. The results of the risk assessment were then summarized at Group level and analyzed during an expert workshop. On this basis measures for further risk prevention were developed and include providing target group-specific training courses on human and employee rights as well as adjusting internal procedures to further establish protection of human and employee rights in company processes.
The human rights risk assessment will be conducted annually in the future, and the effectiveness of the measures adopted the previous year will be monitored. In 2022, the human rights risk assessment will be expanded to include additional human rights issues in accordance with the ISO 26000 standard.
3) Introducing effective measures
In an effort to increase the analysis of human rights risks, the company is also systematically implementing measures to prevent or mitigate potential or actual human rights violations in the future. This includes both, activities of the Schaeffler Group and of business partners. The existing Energy, Environment, Occupational Health & Safety processes in the EnEHS management system will be expanded to include measures to promote human rights due diligence in accordance with ISO 26000. Additional steps were taken in the year under review to incorporate employee and human rights into the existing EnEHS management system, considering the results of the human rights risk assessment. In 2022, additional stakeholder consultations will be carried out to regularly assess the effectiveness of the measures derived from the human rights risk assessment and those defined in the management system as well as to make any necessary adjustments.
4) Informing and reporting
The Schaeffler Group routinely reports on the status of the human rights compliance system and current topics related to human rights. An extensive range of communication measures were implemented in the year under review to further educate employees on the issue of human rights and inform them of the expansion of the human rights management system. The sustainability report updates stakeholders on a regular basis. The Modern Slavery Act passed in the United Kingdom also calls for companies to demonstrate their commitment to protecting human rights along their value chain on an annual basis. The Schaeffler Group maintains business relations with the UK and is therefore affected by this disclosure requirement. A corresponding statement is published for Schaeffler (UK) Ltd.
5) Facilitating grievances
Both employees and external persons can report any human rights concerns using the Schaeffler Group’s global compliance whistleblowing system, which is available in six languages and provides whistleblowers with a confidential, encrypted, and secure form of communication. Incoming reports are assessed by a team consisting of employees of the Compliance and Sustainability department, incorporating the whistleblower in the process if possible. When a case of violation is confirmed, corrective measures are introduced. As part of the human rights risk assessment, the Schaeffler Group also assesses whether human rights incidents have occurred within its own division. In four5 cases, measures were introduced to correct human rights violations in the reporting year 2021, including employee dismissal.
The Schaeffler Group Human Trafficking Policy is available at: Schaeffler Group Human Trafficking Policy
The Schaeffler Group Code of Conduct is available at: Code of Conduct Schaeffler Group
More information on human rights in the supply chain
The Schaeffler Group’s whistleblowing system is available at: Whistleblowing system Schaeffler Group
Responsible tax strategy
Bestandteil des GNFK StartCompliance with all national and international tax laws is part of Sustainable Corporate Leadership for the Schaeffler Group. The tax strategy therefore pursues the lawful, tax-optimized handling of all issues both domestically and abroad, including prevention of double taxation. The company promotes an open and honest dialogue.
The Schaeffler Group does not pursue any inappropriate tax planning strategies such as shifting profits from one country to another or to tax havens to minimize tax payments. It pays taxes wherever it generates value. The Schaeffler AG Executive Board is aware of the company’s social responsibility and the necessity of appropriate government funding. The Schaeffler Group contributes to tax revenue on the basis of its performance both domestically and abroad, and promotes open and respectful collaboration with the tax authorities.
The Corporate Directive Tax defines the tasks and tax responsibilities of the people who interact with tax authorities on behalf of the Schaeffler Group, tax-related processes, the integration of the Group tax department into Schaeffler Group processes, and reporting and documentation obligations.
The Schaeffler Group’s risk management system is an integral part of the management structure and covers tax opportunities and risks. The Schaeffler AG Executive Board is in charge of the risk management system. It regularly reports to the Audit Committee and ensures that the necessary risk control measures are adopted.
The Schaeffler AG Executive Board has also introduced a Tax Compliance Management System (Tax CMS) based on loss prevention and risk control, which is designed to ensure compliance with tax requirements throughout the company and conforms with the Schaeffler Group’s governance model. In 2020, an independent auditing company confirmed the appropriateness and implementation of the Tax CMS of Schaeffler AG and its domestic companies, the majority of whose interests are held indirectly or directly by Schaeffler AG. The audit was carried out in accordance with the IDW AsS 980 standard for auditing compliance management systems as well as the IDW Practice Statement 1/2016: “Design of and Assurance Engagements Relating to Tax Compliance Management Systems in Accordance with IDW AsS 980”.
A globally accessible whistleblowing system for identifying potential misconduct enables anonymous reporting of alleged violations.
In the 2021, EUR 348 m was paid in income taxes, which can be allocated among the four regions as follows:
Overview of income taxes paid in 2021 by region in EUR millions
The country-by-country reporting (CbCR) data as required by GRI 207-4 does not correspond to the CbCR data that the Schaeffler Group prepares in accordance with the structure defined by the BEPS6) ruling and the legal obligations and subsequently submits to the German Federal Central Tax Office. Consolidated data per country or tax jurisdiction is not available at the Schaeffler Group.Bestandteil des GNFK Ende
Business continuity and crisis management
The Schaeffler Group bundles and coordinates activities designed to ensure business continuity at the Group level. Elements such as effective emergency and crisis management have been established.
In 2021, protecting employees from the coronavirus during the third and fourth wave took top priority. Protecting the workforce was a central concern for business continuity, as production, business operations, and customer supply at the locations can only be maintained if a safe work environment is ensured.
The company also expanded the set of measures established in 2020 and summarized in the coronavirus contingency plan, with a focus on further developing the testing strategy as well as planning and conducting a vaccination campaign. When the vaccine became available in June, vaccination centers opened their doors at various larger locations. At other locations, there were partnerships with service providers, organizations, and doctors with private practices. The Schaeffler Group has vaccinated approximately 22,000 employees in Europe against the coronavirus since June 2021. Appointments could be made using the Schaeffler Health Coach app. A dedicated software was developed to simplify vaccine management, issue certificates, and document vaccination, making it possible to report the latest number of vaccines administered by the company to the Robert Koch Institute, especially in Germany. Where national laws made this impossible, the Schaeffler Group followed the 3G coronavirus measures beginning in October, which means that employees and guests who had proof of vaccination, recovery, or test results could benefit from loosened restrictions on mask requirements, business travel, and use of the office.
Natural disasters – protection, recognition, and management
The physical consequences of climate change – such as long periods of drought and localized heavy rain – increasingly pose a challenge for companies, as demonstrated, e.g., by the flood disaster in western Germany in summer 2021. Schaeffler Group locations have not been affected directly so far. Risks like these need to be assessed on a regular basis, which is why the following measures took center stage in the year under review and will be further promoted in the years to come by the Sustainability & EHS and Compliance & Corporate Security departments:
- Assessment of risks associated with force majeure, including development of a database for the assessment of geo risks
- Early warning system using applications such as NINA and KATWARN
- Competence center/task force, with a particular focus on flood prevention
Further development of supply chain risk management
Events and situations with the potential to interrupt the Schaeffler supply chain – such as the accident in and subsequent obstruction of the Suez Canal in March 2021 – must be identified early on to ensure they can be managed effectively and efficiently. The Supply Chain Management & Logistics department therefore introduced the Everstream tool, which has been gradually rolled out since the end of 2021. The tool supports established and proven processes and structures in transport and supplier risk management.
1) The Competitor Contacts and Associations Register (CARe) is a database containing information about trade associations and their potential competition law risks.
2) Employees, including temporary office staff, apprentices, interns, and people working on a thesis.
3) Does not include those employees who were absent over a longer period of time during the year or for whom the deadline to complete the compulsory training courses had not yet passed by the end of the year.
4) The 2020 value has been adjusted.
5) Violations of the prohibition on forced labor, child labor, and cases of discrimination by racial/ethnic origin, color, or gender. The cases confirmed in the reporting period were all related to discrimination and harassment.
6) Base erosion and profit shifting (BEPS) refers to the shifting of profits from one country to another country.