Committed to ethical business conduct

The Business Principles apply to all companies in the Alfa Laval Group and apply to all employees, including temporary employees and consultants. They also guide the relationships with business partners, such as suppliers and customers.

There are internal guidelines available to help employees interpret the Business Principles, with concrete examples for how they should be implemented in everyday work life for everyone at Alfa Laval.

In 2023, a new Business Principles training was rolled out to improve employee awareness and increase knowledge on the Business Principles.

Alfa Laval’s Business Principles incorporate the ‘Protect, Respect and Remedy’ concept of the United Nations Guiding Principles on Business and Human Rights, the OECD Guidelines for multi-national enterprises and the concepts in the UK Modern Slavery Act. The Business Principles are approved by the Alfa Laval Board.

Ensuring compliance with laws, regulations and Alfa Laval Business Principles

Conducting business with honesty, integrity, and respect for others is fundamental for Alfa Laval. This means that we not only follow the applicable laws and regulations in the countries in which we operate, but we are also determined to follow the highest ethical standards of business conduct. Alfa Laval carefully monitors the development of international legislation, social standards, and voluntary initiatives, including those concerning anti-bribery, anti-corruption, and conflicts of interest.

The compliance and ethics program has been furthered developed in 2023, and a Three Lines of Defence model has been implemented to clarify roles and responsibilities in applying the Alfa Laval Business Principles and underlying governing documents. The governing documents are policies, directives, and procedures. Adherence to the governing documents is mandatory for all employees in the Alfa Laval Group.

Governance

The Three Lines of Defence concept is the cornerstone of good governance. This is a model to secure compliance and a good working environment, identify gaps and secure that remedial actions are taken on discovered deficiencies. The first line of defence includes managers at a global level and the second line is corporate functions with an oversight role. The third line of defence involves internal audits, external auditors, and external regulators.

At Alfa Laval, the three lines of defence are set up so that the second line creates compliance demands, checks and controls called Minimal Internal Control Requirements (MICR). These requirements are sent to the first line of defence, who shall explain how they intend to act to comply. This information is collected by the second line of defence and used as a tool for risk assessment. Based on this risk assessment, internal audit programmes are compiled. Internal audits challenge both the first and second line of defence by making sure that the first line of defence is compliant and that the second line of defence use controls that are effective. Securing compliance is thus made both by acting on deficiencies in the first line or by keeping ­governing documents created by the second line of defence updated.

The Risk and Compliance Board is the corporate oversight body. This board is appointed by Group Management to be responsible for reviewing the effectiveness of risk management and compliance processes within the company. The Board secures identification, assessment, mitigation, and monitoring of enterprise-wide risks. They also ensure implementation and administration of the company’s policies, directives, and ethical programmes, including the Business Principles.

All managers are responsible for ensuring compliance with Alfa Laval’s policies, including the Anti-Bribery and Anti-­Corruption (ABAC) Policy and the implementation of local guidelines. Line managers are continuously trained to keep up their awareness of the latest developments in Alfa Laval corporate policies and global compliance programmes.

Reporting breaches

Alfa Laval encourages its people to report any concern about actual or potential violation of the Business Principles or the law, and any unethical conduct. Reporting concerns to your manager is always the first step. If this is not an option, Alfa Laval has a company-wide whistleblowing system, which enables both internal and external stake­holders to report suspected breaches anonymously. Alfa Laval’s whistleblowing system is a secure and efficient tool that enables employees to combat fraud and uphold the good reputation of the company. The system complies with the EU data privacy regulation (GDPR) and EU Whistleblower Protection Directive.

Informing people about Alfa Laval’s whistleblowing system and encouraging people to report is an ongoing process . In some countries, Alfa Laval has established a hotline for whistleblower support, along with a web-based supporting system.

Anti-bribery and anti-corruption

Alfa Laval has zero-tolerance for any form of bribery and corruption. The international scope of Alfa Laval’s sales organization means that Alfa Laval is active in several countries where there is a high risk of corruption. One of many tools used by Alfa Laval in assessing risk is the Transparency International Corruption Perception Index.

In 2023, Alfa Laval launched an updated ABAC policy which outlines the expectations the company has on all employees. The new policy is aligned with the ISO 37001 on Anti-bribery management systems to prepare for possible future certification of Alfa Laval’s anti-bribery and anti-corruption program. The launch of the updated policy was accompanied by several ABAC webinars attended by more than 2,000 people. A new ABAC e-learning course was also launched during the year – it is available to all employees and the expectation is that every employee takes this training at least every second year to maintain awareness.

Training in focus

Proportion of employees trained in anti-corruption (as of July 2023) presented below. New courses were introduced during the year and will be reported in 2024.

Besides the ABAC e-learning, there are also class-room trainings held for certain groups of employees based on risk assessments and on demand from the organization. In these trainings the participants get the chance to get deeper knowledge and involve in discussions on the subject.

Biodiversity impacts and dependencies

Taking account of the recently released recommendations from the Taskforce on Nature-related Financial Disclosures (TNFD). Alfa Laval is taking steps to better understand our biodiversity impacts and dependencies on natural capital assets.

An initial evaluation using the publicly available ENCORE database shows that while Alfa Laval’s direct dependencies on ecosystem services are limited, our operations may have material impacts on biodiversity loss, for instance through water use, greenhouse gas emissions and waste from production. Impacts in the supply chain are even more significant, particularly beyond tier 1, for instance in mining operations.

Based on the initial analysis, Alfa Laval has developed a roadmap for addressing biodiversity impacts in the coming years. Starting with the direct impacts from operations, most of these are already addressed in our sustainability strategy with reduction targets to 2023 and beyond in place. We will continue to take action to reduce water use, increase recycling of waste, and limit greenhouse gas emissions.

In the value chain, many Alfa Laval products have a potential positive biodiversity impact downstream by helping customers improve energy and resource efficiency. In the upstream value chain, we are working closely with suppliers to source materials with lower environmental and biodiversity impacts, and in the longer term will consider more explicit supplier requirements for example on water use and waste management.