Four key issues

Stakeholder perceptions of Electrolux as a trusted company and a valued brand are shaped to a considerable degree by how well Electrolux manages the environmental and social issues most relevant to its business and markets.

Identifying focus areas

Four areas are particularly important to Electrolux:

• Ethical business practices and safe working conditions;
• Climate change;
• Responsible sourcing; and
• Managing the Group’s restructuring process.

The issues were defined by gauging the opinions of stakeholders, including employees, governments, opinion leaders, business partners, investors and consumers. The outcome was combined with market intelligence, media reviews, and an analysis of significant impacts of products throughout their life cycle.

Emerging priorities were then mapped against their impact on the business and reputation. This process underpins the Group’s reinforced and updated sustainability strategy, and guides its annual performance reporting.

1. An ethical business and safe workplaces

Building a responsible company starts with safe workplaces, mutual respect and common values. To reflect this, Electrolux is founded on the guiding principles of ethics, integrity, respect, diversity, safety and sustainability. These are embedded in the governance structure through the Code of Conduct, related policies and management practices.

Training, measuring and monitoring

Target-setting, data collection, training, employee appraisals and surveys help ensure that Electrolux lives up to its guiding principles. Moreover, the company monitors compliance to codes and policies. Of 20 plants located in risk-defined regions, 11 (10) were audited by third parties for compliance.

In 2010, Our Electrolux, the Group’s vison and values program was reinforced across the company through integration into leadership programs and through 700 workshops with 8,000 employees taking part. A revised employee engagement survey, which gauges how the corporate culture reflects the Group’s values, was also introduced. It will be conducted on a regular basis.

An ethics program was developed to enhance employee understanding of Group expectations for personal and corporate ethical accountability. The program includes an ethics helpline operated by a third party where employees can anonymously and confidentially register incidents of non-compliance to codes and policies.

Safety net

With the objective to operate 25% of Group manufacturing facilities at best practice levels by 2016, a global health and safety management system has been developed and short-term targets set for OHS. The program encompasses monthly safety statistics from every manufacturing facility, employee surveys to gauge perception of performance, as well as defined minimum standards

for high-risk activities and emergency response programs. The global total case incident rate decreased by 21%, while the workdays lost due to injuries decreased with 9%.

A global company built on diversity

Electrolux aims to attract people that reflect the Group’s global market and consumer base. This will be an area that requires continued improvement, particularly in finding gender balance. Female representation among senior management teams is 14% (15).

Stakeholder insights

The International Framework Agreement, signed in 2010 with the IF Metal, Unionen as well as IMF and based on the Electrolux Code of Conduct, underlines that the company is serious about maintaining the same high standards for human rights, health and safety and environment globally. To gain better insights into expectations on the business, in 2011, Electrolux aims to further develop its process for stakeholder dialog that is better integrated into business strategies.

For a breakdown of 2010 achievements and future objectives in regards to this priority area, click on the link to Performance review: An ethical business and safe workplaces, available at the left-hand menu.

2. Climate challenge

Climate change is an issue of key importance to Electrolux and the biggest carbon impact occurs during use of appliances. Making energy-smart products and raising consumer awareness of the role these can play in tackling climate change is therefore essential. It makes good business sense, too, as products with outstanding environmental performance generatemhigher profits. In 2010, sales of the Group’s green ranges, consisting of the most energy and water-efficient appliances, accounted for 22% of sold units and 35% of gross profit.

Three-part climate strategy

Electrolux has a three-part strategy to help tackle climate change: climate-smart products; raising consumer awareness and improving operational efficiency. In terms of direct carbon footprint, Electrolux has a target to cut energy in operations, with an absolute reduction of 28% by 2012 compared to 2005. As of 2010, 173,000 tons less carbon were emitted than in 2005, and an accumulated 25% reduction was achieved. Reducing energy also cuts costs. When fully achieving the target, Electrolux will save approximately SEK 200m a year compared to 2005 energy costs.

Meeting the Group’s climate ambitions also requires long-term alliances. An example that illustrates the Group’s partnership approach is Sweden’s Royal Seaport urban development project. Together with the City of Stockholm, ABB , Ericsson, and energy company Fortum, Electrolux is pioneering a smart-grid system—a precondition for zero carbon living—that will support 10,000 residences and 30,000 workplaces. Electrolux is taking part in other smart grid initiatives in Italy, Denmark and the Netherlands.

For a breakdown of 2010 achievements and future objectives in regards to this priority area, click on the link to Performance review: Climate challenge, available at the left-hand menu.

 3. Responsible sourcing

The proportion of procurement from low-cost countries increased from 30% in 2004 to approximately 56% in 2010 and is expected to reach approximately 70% in a couple of years. In line with this shift, Group Purchasing is placing growing emphasis on ensuring the same high environmental and labor practices along the value chain. Compliance to the Electrolux Code of Conduct and Environmental Policy are mandatory and non-negotiable criteria for evaluating potential and existing suppliers.

Along the value chain

Using audits, training and reporting, the aim of the Responsible Sourcing program is to improve conditions by building transparent and supportive relationships with suppliers on their environmental and labor practices. This leading-edge approach helps reduce the Group’s reputational risks and the risk of serious noncompliance that could disrupt product deliveries. In the program, Electrolux prioritizes suppliers classified as high- or medium-risk. In total, 328 audits were performed among suppliers this year, 271 by Group sustainability auditors and 57 by third-party assurers. Auditors are in place in Asia/Pacific, Eastern Europe and Latin America.

In 2009, Electrolux required suppliers to measure their energy use through the introduction of the Workplace Standard. In 2010, the Group piloted the Energy Efficiency Partnership Program among selected suppliers in China to help them reduce their energy consumption. Learnings from the program will be rolled out among suppliers during 2011.

For a breakdown of 2010 achievements and future objectives in regards to this priority area, click on the link to Performance review: Responsible sourcing available at the left-hand menu.

4. Restructuring

As a global employer, Group decisions affect individuals and local communities. Whether Electrolux is setting up new operations, leapfrogging to new technologies or managing organizational changes, the Group aims to do so responsibly, in dialog with those affected. The Group’s restructuring program, to be completed in 2011, relocates over half of production to low-cost areas. Among the benefits are jobs, opportunities for local suppliers, technology and knowledge transfer, and improved social and environmental standards. Closing operations, however, is a difficult process for all involved.

As part of its restructuring program, Electrolux reduced its staff by approximately 900 employees during 2010, particularly affecting operations in Russia, Spain and Sweden. Electrolux aims to meet the needs of those affected by striving to be transparent and inclusive.

When a factory restructuring is under evaluation, a procedure is followed adapted to local needs and priorities. After the decision to close or downsize has been made, employees are offered assistance such as pre-retirement schemes, training programs and career coaching.

In the Electrolux experience, where feasible, supporting the search for investors to take over plants and their employees has the greatest long-term benefits for all involved. This approach was most recently applied in Motala, Sweden, and Alcala, Spain. Success lies with constructive dialog with interest groups such as unions, municipal authorities and potential investors and that the long-term interests of employees remain in sharp focus.

For a 2010 breakdown of restructuring activities, click at the link to Performance review: Restructuring, available on the left-hand menu.