Value Creation at Metso
Value creation in Metso is assessed in both financial and non-financial terms. Increased stakeholder dialogue, identifying sales opportunities, and more effective and customer-centric operational processes support innovation, safety and a minimized environmental footprint, as well as build reputation and brand. In addition, value is created by improved internal processes, procurement efficiencies and decreased risk of misconduct.
The most important non-financial areas for the value creation for Metso’s shareholders and other stakeholders were concluded as follows. These take into consideration value chain impacts, risk management measures, applicable performance indicators and future opportunities
- Customer relationships
- Product responsibility
- Supply chain
Commitment to follow certain global initiatives forms the basis for Metso’s operations in these areas. Each of the areas is also managed through the policies, processes, guidelines and instructions.
Implementation of the policies is ensured through regular training. The Board oversees that enterprise risk management is appropriately governed. Internal control practices are aligned with Metso’s risk management process approved by the Board. An audit frame is in place to support risk management by ensuring compliance and continuous business development. Following audits were conducted in 2017:
- Metso Risk assessment evaluations, six in total
- Internal audits in 20 countries, with the addition of three Group function and global process audits, 11 specific case investigations
- Risk engineering audits, 10 in total
- Logistics audits, six in total
- Health, safety and environment audits, 20 in total
- Sustainability supplier audits, 58 in total
The Board also oversees the effectiveness and impact of Metso’s sustainability governance. The Metso Executive Team (MET) follows and ensures the implementation of the sustainability agenda regularly and makes decisions on the corporate-level targets.
The value in customer relationships is in increasing awareness of Metso and our offering and in the likelihood of a customer to repurchase and to recommend Metso to others.
Based on customer dialogue, Metso’s customers value safety, resource efficiency, productivity and supply chain responsibility. A comprehensive understanding of these customers enables solving their challenges through tailored solutions and providing them with the best performance and improved processes.
Metso is engaged in various projects that:
- Extend the life cycle of equipment and prolong maintenance cycles
- Maintain and improve product safety and a safe working environment
- Mitigate the environmental load through reduced emissions, waste and energy intensity
In recent years, a single Customer Relationship Management system has been implemented across the businesses to more effectively collate and manage customer data. By having access to more information, customer relationship management is more effective and better service delivered.
Metso has been developing a customer engagement survey that measures loyalty and satisfaction in key operational areas. This enables identification of the operational areas where a better customer experience can be delivered. By the end of 2017 the engagement survey covered all businesses except Recycling, which will be added in 2018.
The future focus in customer relationships is on continuing to invest in marketing automation, which can help keep customers better informed about what Metso is doing, and in developing even more effective customer satisfaction measurement tools.
Metso’s products and services design is focused on helping customers operate safely with higher productivity and profitability while reducing their resource intensity. The safety of Metso’s products is one of the key drivers in research and development work. The product safety principles consider all aspects relevant to:
- Safe installation and operation
- Servicing and maintaining products in all conditions
- Training customers on the safe use of our equipment
Metso’s services portfolio, which ranges from wear and spare parts to life cycle services, is an important part of the offering. Service hubs and distribution centers close to the customer ensure efficient and timely service. Well maintained equipment typically has a smaller environmental footprint.
Sustainability targets set for each new R&D project reinforce Metso’s product sustainability. 84% of R&D projects have set environmental efficiency and product safety innovation targets that are monitored.
The future focus in product responsibility is on increasing the competitiveness of the offering and building more around digitalization. In addition, developing better methods for understanding and calculating the environmental impacts of Metso’s products is important.
Metso’s Code of Conduct is a key corporate standard: Metso’s commitment to integrity including preventing corruption. This means respecting all applicable laws and regulations and aiming to share regulatory best practices as well as acting as a good corporate citizen throughout our global operations. At Metso, human rights are respected and supported: all people are entitled to be treated with respect, and discrimination, harassment, or illegal threats are not tolerated. Any form of compulsory, forced or child labor is not accepted or used and applicable national laws and regulations regarding working hours and employee compensation are respected. Metso’s Anti-Corruption Policy supports zero-tolerance for bribery and corruption, including facilitation payments. Metso demands in its third-party agreements that suppliers, business partners and other stakeholders also follow similar standards.
All Metso people have a responsibility for compliance. A range of internal controls are in place, and Metso people are strongly encouraged to report any suspected wrongdoing or misconduct to their supervisors, to other management or, if necessary, directly to Internal Audit, e.g. using the Whistleblower channel. All reports are treated as confidential and anonymous, and Metso commits to no negative repercussions for the reporting person.
Metso’s Code of Conduct was renewed in 2017 and 99.8% of the employees passed the mandatory training in the required time frame. The Code of Conduct training is also a compulsory part of the new employee onboarding process. To support the new Code of Conduct and to enforce better awareness of and compliance with Metso policies and guidelines, a development project that created a policy framework for the internal guidance was completed in 2017. During the year Metso also initiated a Data Privacy project to ensure compliance with the EU’s General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679).
Focus on updating the policy framework and implementing it efficiently throughout the organization will continue in 2018. In this respect, implementation with taking e-learning into better use is a priority. Several training programs in anti-bribery, corruption and trade sanctions are planned for 2018.
Due to the cyclical nature of Metso’s customer industries, a business model of outsourcing the product manufacturing plays an important role. 80 percent of the cost of goods sold derive from our suppliers and close relationships with them are critical. Processes are in place to continuously develop a shared understanding with the suppliers in the areas of innovation, cost efficiencies and quality to manage the risks related to outsourcing. Defined ways of working and regularly conducted risk assessments related to e.g. environmental load in the supply chain support the overall supply chain management.
Metso’s Code of Conduct and supplier sustainability criteria set the standards for Metso’s suppliers. Human rights and other sustainability topics are covered by third-party supplier audits, supplier self-assessments and Metso’s internal sustainability supplier audits. Key supplier requirements are also incorporated into contract obligations, and a contract breach can lead to consequences that include the termination of a supplier relationship. Metso has also conducted annual scope three carbon-dioxide emissions calculations since 2013 to better understand the environmental impacts of the supply chain.
Metso has defined sustainability criteria and evaluation processes for its suppliers in identifying critical suppliers and assessing them regularly. Suppliers’ environmental and safety practices, human and labor rights, compliance with laws and regulations, and anti-bribery are evaluated in the supplier self-assessments. Sustainability supplier audits are conducted in higher risk countries, and suppliers are required to implement corrective actions within a given timeframe. Corrective actions are followed up.
The systematic assessment and development work around the responsible supply chain will continue in the future with a special focus on the supplier cooperation to develop shared sustainability practices.
The performance and engagement of people is a key contributor to Metso’s success and value creation. Engagement is supported by responsible employment and the safety and wellbeing of Metso people. In addition, respecting human rights in our operations allows operating and improving the operational risk management through improved working conditions. Metso’s policy framework and the global initiatives create the foundation in respecting the rights of the people that are employed in Metso value chain and in the communities around Metso’s businesses.
At Metso, continuous development and learning in everyone’s daily work is emphasized. This is ensured by regular performance and development discussions, which are carried out using a global process and tool. Additionally, Metso aims for fair remuneration systems, which take into consideration the individual, team, business area and the Group’s performance, as well as the varying market practices globally.
In engaging and retaining employees, excelling in leadership makes the difference. Metso’s approach is based on defined Leadership Principles and our values. This means both investing in the development of managers through global leadership development programs as well as a leadership development portfolio. During 2017, Metso invested in its sales teams by running several sales excellence workshops, and these will continue in 2018. Employee engagement is measured via a bi-annual survey, PeoplePulse. The results of the survey are shared and discussed in all teams. Team-specific action plans and their implementation is a shared responsibility across the whole organization. For example, the 2016 survey results have initiated several improvement projects and their progress was followed during 2017. The next survey will take place in 2018.
Employee safety, risk observations, safety discussions and safety training hours are continuously measured. The lost-time incident frequency (LTIF) in 2017 was 2.6 (2.5 in 2016). Annually, sustainability reporting assurance audits are also conducted by an external partner. In 2017, sites in Sorocaba, Brazil, Shrewsbury, US, and Shanghai, China, were audited on their HR and HSE reporting processes. In 2017, a human rights assessment, originating in 2015, continued with various practices to understand all the salient human rights topics in the value chain.
People focus in 2018 is on implementation of the new organization model, effective as of January 1; this model aims to drive profitable growth and accountability through a leaner organization and ways of working.