Sustainability And Business Ethics

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Sustainability and business ethics- ABB’s experiences UN Global Compact Learning ForumBerlin, December 2002

Björn EdlundSenior Vice President

ABB Ltd

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General observations – checks and balancesGlobalization debate highlights downsides

Will unregulated competition lead to wide social unrest?Will exploitation worsen of countries dependent on natural resources or commodities?Will “unfettered capitalism” create greater divide and tensions?

Global market forces alone cannot and will not improve social conditionsFree flow of trade, capital, technology and information raise living standards and create greater expectationsNew demands on business behavior – in both developed and developing worldGreater transparency needed to promote “virtuous circles”Sorely missing - agreed covenants beyond existing legal frameworks

Global businesses recognize their role is changingMarket forces/large corporations have big impactGreater influence of companies is creating wider corporate responsibilitiesGreater public scrutiny of businesses everywhere – transparency starts here

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Facts about ABB

Two core divisions: Automation Technologies, Power TechnologiesOil Gas and Petrochemicals and Building Systems to be divested in 2003About 146,000 employees in more than 100 countries (Q3, 2002)Headquarters: Zurich, Switzerland

Orders in 2001: US$ 23.8 billionOrders 9 Months 2002: US$ 16.2 billion

Revenues in 2001: US$ 23.7 billionRevenues 9 Months 2002: US$ 16 billion

ABB supplies power and automation technologiesthat enable utility and industry customers to improve

performance while lowering impact

ABB supplies power and automation technologiesthat enable utility and industry customers to improve

performance while lowering impact

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ABB’s social policyIntroductio

Stakeholder dialogueHuman rightsEmployeesOccupational health and safety SuppliersCommunity involvementBusiness ethics

ABB is committed to corporate socialresponsibility

Social performance is as important as our environmental performance

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ABB Business Ethics

Business Ethics is part of ABB‘s way of doing business – part of our approach to sustainability

For ABB, sustainability involves working on threelevels – environmental, economic and social

The right balance will improve our customers’ performanceensure ABB’s prosperity raise quality of life where we operatesafeguard our “license to operate“

Being ethical is doing the right thing when no one is watching

Being ethical is doing the right thing when no one is watching

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Sustainability is sound business strategy

Enlightened self interest - from compliance to involvement

Economic performance depends on access to markets and technologies

Environmental performance means competitiveness through lower costs and improved quality

Demonstrable social performance creates space for the businessmakes it easier to hire talentmakes it easier obtain good financingmakes it easier to gain regulatory consent and support from authorities

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In an open world, we all win or lose together

Practical, local corporate responsibility projects are key – and underway

But … wide gap between international behavior norms and reality

Companies can bolster the UN’s integrating and normative role in global governance by working within the UN Global Compact framework

Participation in UNGC helps define civic role for global corporationsHuman rightsLabor rightsThe environment

Transparency and business ethics norms integral to success of UNGC’s principles

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We tell our managers ... time won‘t cure the ills

3 years later

The action will be realized„bomb explodes“

Public prosecutorstarts investigation

4 years later2 years later

They can take YOU in custody

The court decidesYOUR sentence

They bring YOU to court

It can take 12 yearsfrom a misdirected action

until court sentence

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ABB Business EthicsWe subscribe to

ICC Rules of Conduct, 1999OECD Convention, 1997US Foreign Corrupt Practices Act, 1977

Strict business ethics - an important part of “our license to operate”

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Our way? Definitely not! 1990-2002

Hydro electric power station, Lesotho

Volkswagen, Germany

Political party payments, Italy

MEA water projects, Egypt

Incinerating plants, Germany

District heating, Denmark

Elsag Bailey, The Netherlands

CEOs’ pension payments2002

1990 Political Contrib.

Intermediary

Bribery

Bribery

Antitrust

Antitrust

Insider Trading

Corp. Governance

Just a few examples

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Waste water system project...(WSJ) Apr 27 ’01

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ABB Business Ethics Guidelines

Business ethics guidelines

Apply “zero tolerance” in assuring strict adherence to local and international laws / regulations as well as ABB Group standards on Business Ethics

ABB business transactions fully / fairly recorded

Continuous employee training and awareness

Regularly monitor ethical conduct and ensure simple, effective systems are in place for reporting violations

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ABB Business Ethics Standards

Business Ethics standards

Conflict of InterestConfidentiality and Protection of AssetsInsider TradingBribery and CorruptionIntermediariesPolitical Contributions

Antitrust ComplianceDisclosure and RecordsLender’s and Export Credit ComplianceViolations of Corporate PoliciesResponsibility and Implementation

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ABB Business Ethics

Education and training

On-going process in all countries driven by

Executive endorsement

Local / regional compliance counselors

Internal training is a top-down process! Internal training is a top-down process!

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ABB compliance set-up HQ ABB

Group FunctionLegal & Compliance

ChiefCompliance

Officer

Compliance Network

Export Credit Agency

ComplianceOfficers *in 63 Countries

Country Staff Legal & Compliance

Business Division

Division Compliance

Coordinators

RegionComplianceCounselors

Selected BA/BUCompliance

Coordinators

Major CountriesComplianceCounselors*

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Compliance accomplished up to 2000

ABB compliance program developed and promoted yearly

Established ABB Business Ethics standards covering Bribery and Corruption, Intermediaries and Facilitation Payments

Nominated and established compliance counselor network

Implemented Priority I : major ABB countries and “high risk” groups

Implemented Priority II: all ABB countries and all ABB employeesworld-wide

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Compliance 2001 follow-upProgressing Complete

Basic ProgramBribery & Corruption ☯Antitrust ☯Pro-active “high risk” ☯

management programCompliance reports and audits ☯Special projects ☯

SupplementDivisional compliance coordinators ☯Education / certification on-line ☯

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Compliance programs in 2002On-going

“High risk” agendaBribery & CorruptionAntitrust

“Control” agendaIntermediaries

Under developmentLender’s and export credit compliance policyDivisional support programCounselor network activitiesOn-line information / education / certification

AppointmentsExport credit agency compliance officers

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ABB Business ethics Intranet

Our Profile

Strategy

Business Ethics

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Business ethics – a practical checklist

Long-term perspective of our own business set in our social contextA culture that encourages dissent and non-financial thinkingWe act as “whole persons” - using our emotional, social and moral intelligence as well as our business intelligenceWe remain open to the world - respecting other viewsWe keep a sound balance in our business commitments - no single outcome is more important than the wholeSenior management shows the way - corporate social responsibility cannot be delegated to external institutions or company individualsImplementation - methodologies, metrics and reward systemsIndustry-wide standards to create corruption-free zones