Corporate Social Responsibility

This report covers topics related to Corporate Social Responsibility that are of importance to Kitron and Kitron stakeholders. The Kitron documents that are the foundation for Kitron’s work within Corporate Social responsibility are the Kitron Ethical Code of Conduct, Kitron Suppliers Code of Conduct and Kitron Anti-Corruption Policy.

The Kitron Group report on Corporate Social Responsibility has been reviewed and approved by the Board.

Kitron

The company has manufacturing facilities in Norway, Sweden, Lithuania, China and the US and has about 1377 employees. The operations outside of Norway are growing and at the end of 2016, 78 (66) per cent of our employees worked outside Norway, and 70 (63) per cent of the Group’s sales took place outside the country’s borders.

Kitron production inputs can be divided into three parts: passive electronic components, mechanical drawing parts and PCB (Printed Circuit Boards), and the inputs are with few exceptions sourced and produced outside of Norway.

System for governance
Kitron’s general system of governance is linked to the Norwegian Code of Practice for Corporate Governance.

Annual General Meeting (AGM)
The Annual General Meeting (AGM) is the Kitron Group’s supreme governing body and where the shareholders can influence how corporate social responsibility is practiced.

The Board of Directors
The Group Board of Directors bears the ultimate responsibility for Kitron’s Corporate Social Responsibility and the report on Corporate Social Responsibility is discussed and approved by the Board.

Corporate Executive Management
Corporate Executive Management bears the responsibility for the Group’s strategy, development and day-to-day work. This means Corporate Executive Management is responsible for compliance with legislation and regulations and our Ethical code, as well as for the implementation of appropriate and effective initiatives to ensure that we reach our goals.

The Sites
The business areas are responsible for follow up and compliance with policy, strategy, targets and governance documents related to corporate social responsibility. The day-to-day work with corporate social and environmental responsibility is usually handled by the sites with support from the Corporate Executive Management.

Ethical Advisory Committee
Kitron ethical advisory committees mandate is to review and suggest updates of guidelines, decide and/or advise in ethical dilemmas, conduct risk analysis and implement relevant actions and make periodical reviews. The Ethical Advisory committee is made up of members of the corporate Executive management and Corporate Staff.

Financial value creation

Kitron creates value in countries in which we operate, directly through the payment of direct and indirect taxes, the payment of dividends to owners and wages to employees, and indirectly by buying goods and services from suppliers.

Kitron impacts a large number of stakeholders, many of them directly or indirectly involved in Kitron’s value creation. Below is an overview of the values Kitron creates and the main stakeholders.

Payroll and social security expenses
In 2016, labour costs amounted to NOK 450.7 million (NOK 443.7 million). Payroll and social security expenses accounted for 21.5 (22.7) per cent of sales revenue.

Procurement of goods and services
Kitron purchased goods and services valued at roughly NOK 1 479 million (NOK 1 364) million in 2016. The Group has registered more than 1400 suppliers that provide inputs.

Tax
The Group’s tax expenses for 2016 came to NOK 24.3 million (NOK 30.1 million).

Tax expense by country

(Amounts in NOK 1000)

2016

2015

Norway

3 631

11 916

Sweden

 5 704

5 587

Lithuania

 7 042

3 599

Other

 7 884

8 992

Total 24 261 30 094

Dividends
The Board of Directors will propose a dividend for 2016 of NOK 0.25 (0.21) per share to the AGM. If the proposal is adopted at the AGM on 25 April 2017, dividends will be paid as follows, based on the Shareholder structure as at 15 February:          

(Amounts in NOK 1000)

2016

2015

Organizations/Enterprises 

6 840

9 732

Insurance/pension funds

 9 637

2 732

Private Individuals  

 7 165

6 550

Foreign Owners

 20 406

17 308

Total 44 048

36 322

Financial risk relative to compliance
Kitron has operations in industries and countries that are particularly susceptible to the risk of corruption. Kitron also does business in countries known for having problems associated with human rights, child labour, environmental pollution, etc.

We are aware that this presents challenges in regard to our corporate social responsibility, and that it can subject us to substantial financial risk. To deal with our corporate social responsibility and minimize our financial risk, we work systematically on CSR.

Ethics

Kitron Ethical Code of Conduct presents Kitron’s obligation and commitment to ethical business practices and describes the standards and requirements that Kitron employees must adhere to in their work. The Code was last revised and approved by the Board of Directors on 27 August 2014.

The Code applies to all Kitron board members, elected officers, permanent and temporary employees, hired staff, consultants and agents acting in or on behalf of Kitron. The Code also applies to all contractors, sub-contractors, suppliers and sub-suppliers. It includes all companies in the Kitron group.

Kitron also has a separate Suppliers Code of Conduct, which applies to all suppliers.

Training
All Kitron personnel are required to attend periodic training in the Kitron Ethical Code of Conduct to ensure that Kitron’s ethical values are understood and implemented at all levels.

Ethical Advisory Committee
Kitron has an Ethical Advisory Committee whose objective is to ensure that Kitron maintains a high-level focus on issues related to ethics and anti-corruption and a common understanding and practice regarding how best to address and follow up on these issues.

Firstly, it is in charge of the policy document itself and reviews or updates of the Kitron Ethical Code of Conduct. Secondly, the committee is an advisory board related to ethical dilemmas or questions from managers and employees in the group on difficult borderline issues. When in doubt, Kitron employees should consult immediate superior or the Kitron group Ethical Advisory Committee. It is also in the main scope of the committee to perform regular ethical audits mainly related to anti- corruption.

The Ethical Advisory Committee meets as needed but at least three times a year. Members of the Ethical Advisory Committee include: COO, CFO, HR Director, Sales and Marketing Director.  The head of the Ethical Advisory Committee reports to CMT (the Kitron Corporate Management Team) who in turn reports to the board of Kitron ASA.

Reporting irregularities
All conditions that give raise to ethical issues or matters that could involve a breach of prevailing regulations and provisions or circumstances that may cause loss of value or reputation for Kitron should be raised with the staff member’s immediate superior. Kitron staff who believe they have been offered bribes or been subject to inappropriate pressure or attempts to exert such pressure or who wish to report or advise on any legal and ethical non-compliance incidents, dilemmas or concerns should immediately do so to their immediate superior.

Environmental matters or issues relating to work place safety can be reported to the relevant representative, HSE-Manager and/or the company health service. Financial matters may be reported to the Finance Manager. It is the duty of all staff to report any criminal acts and circumstances where life or health might be in danger.

Reporting may be anonymous, but open reporting will normally facilitate expedient resolution of the matter. The name of a reporting person shall remain confidential to all but the recipient.

In 2016, the Ethical Advisory Committee did not handle any cases, which was the same situation in 2015.

Anti-Corruption

Kitron opposes any form for corruption and strives to prevent corruption in and as a result of Kitron’s business activities. Kitron Ethical Code of Conduct clearly expresses Kitron’s obligation and commitment to ethical business practices authorities.

Risk assessment
Kitron operates in countries and in lines of business that are susceptible to corruption. To reduce risk, Kitron does not use agents or market representatives, as it constitutes a high risk for corruption.

Kitron work on anti-corruption
Kitron Ethical Code of Conduct describes several areas of importance for preventing corruption. In 2014 Kitron implemented an Anti-Corruption Policy. The policy clearly describes Kitron’s work on anti-corruption, including risk analysis, monitoring, responsibilities, follow-up and training.

Kitron is aware that suppliers, customers and other relevant business partners, such as acquisition targets or agents might expose Kitron to corruption risks. To reduce the risks, Kitron has introduced routines for a risk-based evaluation before entering into new such relationships. The Kitron Suppliers Code of Conduct also defines Kitron’s expectations regarding the suppliers’ anti-corruption activities. Kitron also has in- house rules for gifts and representation as well as sponsorships.

Our Employees

Human Rights
All units of Kitron will comply with UN’s Universal Declaration on Human Rights, The UN’s Convention on Rights of the Child and International Labour Organization Conventions (ILO conventions).

Kitron shall not engage in or support any kind of child labour. If a young worker is employed, this needs to be controlled and arranged according to legal requirements in terms of safety, work hours and guidance and is not allowed to interfere with applicable compulsory schooling.

Kitron opposes discrimination in any form, e.g. due to race, nationality, gender, sexual orientation or religion. Kitron also opposes any form of trafficking and purchase of sexual services.

Employees, the working environment and employment
Fair employment practices following local norms, laws or collective bargaining agreements is the basic standard in all Kitron entities. No form of discrimination, harassment or bullying is tolerated.

Kitron values the competences employees are in possession of, and sharing of knowledge and information is an area of priority, as is on- the-job development. Kitron offers a working environment where it is possible to combine work, career, family life and spare time.

Health and safety in the working environment is very important to Kitron and is to be ensured to provide a safe, healthy and satisfactory work place. Kitron follows local and international norms and relevant legislation to provide such an environment.

Kitron opposes discrimination in any form, e.g. due to race, nationality, gender, sexual orientation or religion. Kitron also opposes any form of trafficking and purchase of sexual services.

Absence due to illness
Absence due to illness (as a percentage of total hours worked) was 3.7 (3.8) per cent for the group in 2016. This is a continuation of a favourable trend in the recent years. A good working environment and the possibility to develop are important factor to keep the absence due to illness at a low level.

Injuries
Injuries and work related accidents are registered at site level. The Kitron work environment proposes risks to the employees foremost in the manual mounting and in the processes where chemical liquids, nitrogen or lead is involved. There was no serious work-related accident in 2016.

Environment

Kitron internal value chain does not pollute the external environment to any material extent. Kitron Suppliers Code of Conduct describes the requirements Kitron imposes on the Suppliers to minimize the adverse effects to community, environment and natural resources while safeguarding the health and safety of the public. They should have obtained all required environmental permits.

Also, Kitron’s suppliers shall have policies to reasonably assure that the tantalum, tin, tungsten and gold in the products they manufacture do not directly or indirectly finance or benefit armed groups that are perpetrators of serious human rights in the Democratic republic of Congo or an adjoining country. Suppliers shall exercise due diligence on the source and chain of custody of these minerals.

Several of the Kitron group’s manufacturing units are certified in accordance with the NS ISO 14000 series of environmental management standards. Kitron AS in Norway is a UN climate partner.