TABLE OF CONTENTS 1. MANAGING DIRECTOR'S SUMMARY 2 2. ABOUT TEKNIKUM GROUP 2 3. RESPONSIBLE LEADERSHIP AT TEKNIKUM

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1 TABLE OF CONTENTS PAGE 1. MANAGING DIRECTOR'S SUMMARY 2 2. ABOUT TEKNIKUM GROUP 2 3. RESPONSIBLE LEADERSHIP AT TEKNIKUM 3.1. Strategy in brief Values Mission Vision Leadership principles Quality policy Environmental policy Procurement policy Safety policy Risk management policy Learning policy Equal opportunity plan, organization Certificates Stakeholders SUSTAINABILITY MEASURES AND OUTCOMES 4.1. Financial responsibility Social responsibility Ensuring a sustainable delivery chain Personnel Prevention of incidents Non-smoking policy Improvement suggestions Development discussions Training plan Feedback channels Absentee rate Marketing accountability Environmental accountability Energy consumption Water consumption Responsibility in relation to the products 15 1

2 1. MANAGING DIRECTOR'S SUMMARY 2017 was the 29th financial year of Teknikum Group Ltd. The economic trend in our main segment, the mining industry, slightly improved in 2017 with growing investments particularly in the latter part of the year. Mining industry covers around 50% of our sales so their status is of great importance to our business. Other markets also were seeing growth on the second half so, that the group revenue increased by 12.6%. In 2017 we restructured our organisation in investing particularly in the sales team and customer service. We developed our processes in Finland and in China where we also made extensive investments in new technologies on the second half of the year. This was preparation to growing order numbers for 2018 based on existing customer relationships. Based on increased sales and improved operations the group s yield was significantly higher. In the following chapters there are further details of the sustainability focus points in our operations. 2. ABOUT TEKNIKUM GROUP Teknikum Group is a leading polymer-based technology group in the Nordic countries, our solutions help clients around the world. The Group has operated under its current name since Prior to that, the company operated as part of the Nokia Group. At the end of 2017 the group employed 348 people and turned over 44 million euros. Teknikum-Yhtiöt Oy is the parent company in a corporation which includes Teknikum Oy (Sastamala, Finland), Teknikum-Sekoitukset Oy (Kerava, Finland), Teknikum-Kiinteistöt Oy, T.O.Y.TEK GmbH (Germany), Teknikum (Suzhou) Technology Co. (China), Ltd and a subsidiary T-Plasztik Kft in Hungary. Teknikum products include industrial hoses, moulded products of rubber and plastic, rubber coatings and surfaces, polyurethane and liquid silicone rubber products, and rubber compounds, sheets, and mats. Our areas of know-how comprise product and service solutions for wear and corrosion protection, industrial hoses and hose assemblies for handling liquids and other materials, and customer-specifically tailored and manufactured polymer products. Our own mould design, compound development, and product and technique design guarantee product solutions that meet customer requirements today - as well as excellent opportunities for further development in the future. 2

3 3. RESPONSIBLE LEADERSHIP AT TEKNIKUM 3.1. Strategy in brief Creating solutions together Globally, Teknikum offers sustainable and eco-friendly polymer products and related services created together with customers and partners in cooperative product development projects. We value long-term customer relationships and the systematic expansion of our customer base Values Sustainability Appreciation Modernization Satisfied customer 3.3. Mission Our polymer-based products and services greatly increase the service life of customers' products and processes and thereby ensure their eco-friendliness Vision Teknikum is recognized as a serious global business partner providing sustainable polymer components and solutions. 3

4 3.5. Leadership principles We have defined the governance principles at Teknikum Group. We follow these principles on the board level and in our leadership team. The main principles: Define the rights and responsibilities in relationships between shareholders, the board, the CEO and his direct subordinates. Describe the structure of the organization and the methods used to achieve the goals of the company/group. Ensure shareholder interests are respected in company and group operations. The principles cover the decision-making process, practices and structures that help to achieve the set goals. The principles also describe the frameworks where rights and responsibilities are used. In practice, implementing the principles requires everyone working for the group being informed about their area of responsibility and the extent of their decision-making authority and acting accordingly. The goal of the principles is to stress individual responsibility alongside the importance of acting in concert and quality leadership for a supportive working environment. The group has convergent quality, environmental, procurement and safety policies as described in the following pages Quality policy The basis of our operations is a satisfied customer. Working together with the clients we develop solutions to their needs. We keep our promise whether it is regards the product quality, delivery times or other agreed upon items. We also comply with any applicable specifications from the authorities. We deliver products to the client within the agreed quality parameters. Quality is considered at all stages of the process so that we can ensure the agreed level of quality. We monitor how we succeed on a regular basis. We follow a documented and certified operating system. Our capable and flexible staff is committed to continuously develop and improve Teknikum Group s efficiency, working environment and profitability to ensure continuity. By improving staff know-how, we strive to increase our flexibility and innovative atmosphere to succeed on the international market place. We aim to minimise the amount of errors by predictive and preventative actions. We want to ensure understanding and implementation of our quality policy by communicating openly and frequently. 4

5 3.7. Environmental policy In all our operations we aim to consider the environmental effects. We follow environmental and security legislation changes and development. We also conduct our business according to the current laws and licenses. We encourage, educate and guide our employees to operate so that environment, related issues are always considered. We communicate environmental issues and their development internally. We monitor and improve our operations continuously and we aim to preserve natural resources. We aspire to develop more environmentally friendly products and source more recycling opportunities for our waste products Procurement policy Procurement policy defines the procedure for purchasing materials, machinery and services. Teknikum seeks trustworthy and honest suppliers who conduct themselves according to the Teknikum s sustainability principles with their employees and with their suppliers. Procurement aims to ensure that the purchased materials, machinery and services arrive at the correct moment, correct quality and correct amount so that they do not excessively strain the warehouse resources. Teknikum wants to primarily use suppliers who have quality and environment certifications and who pass all evaluation criteria. The main suppliers are appraised regularly. Critical raw material should have an alternative supplier already tried and tested. Machinery and equipment purchases are always made with a written order, based on a quotation and ensuring that all legal and authority requirements are met Safety policy Prevention Our safety approach is to invest in preventative measures. Risks are insured according to their probability. Safety is based on risk evaluations, risk governance and reliable 5

6 communications. Safety includes looking after our own operations and ensuring that our partners abide by the current legislation and fulfil our own and our client s occupational health and safety criteria. We also comply with international work, quality and human rights agreements. We always follow changes in legislation and act according to the laws. Senior management liability is visible in our operations. Each person is responsible for maintaining their own work safety and occupational health care. Secure products and environment We guarantee safe products. The safety of our products is based on researched information, our own development and continuous monitoring. This is ensured by a competent staff who adhere to the current instructions. We aim to minimise the impact on the environment. Safe working environment We offer our employees a safe working environment and develop it together with the staff. Our goal is to prevent accidents before they happen. Business continuity We look to operate without disruption. We strive to avoid accidents and minimize any damages. Staff safety is always a priority. We use indicators to monitor how business continuity is actualised. Data security We maintain and develop our data security and aim to guarantee data safety Risk management policy Goals of risk management The goal of risk management is to ensure the safety of employees, operations and products, compliance of business activities with laws and regulations, as well as operational continuity. Another goal of risk management is to optimize risk-related costs. The goal of opportunity management is to identify opportunities with the highest potential to improve the safety of employees, operations and products, compliance of business activities with laws and regulations, as well as operational continuity. 6

7 Risks are only under control if they are identified proactively and action plans are prepared to control them. Planning and guidance are based on correct and reliable information about finances and other activities, as well as up-to-date and reliable reporting. Principles of risk management Risk management is part of the general management system. Its purpose is to ensure that the strategy and goals of the Group and its companies are fulfilled. Responsibilities The Group s Board of Directors makes decisions and issues guidelines for strategic activities. If necessary, the Board of Directors reviews risks based on the company s risk heat maps and assesses them in relation to the company s strategy and risk-bearing capacity. The Group's CEO coordinates and guides risk management and business monitoring processes. Process owners prepare action plans. Internal audit assesses risk management, monitoring, management and administration systems and facilitates their development. Definition of a risk Risk refers to the probability and severity of a harmful incident. A risk can threaten the fulfilment of goals set, such as net sales and profitability. The probability of an opportunity being realized, and the magnitude of consequences are assessed using the same principles that apply to risk assessments. Risk reporting The quality manager coordinates the identification of risks and opportunities. As a result, persons responsible for each area assess both risks and opportunities and define them as internal or external. Risks and opportunities are assessed in terms of their value and probability. Based on these, risks are rated. Action plans, responsible persons and deadlines are defined for risks. Any changes required are determined by a steering group. Management process for risks and opportunities Key components of the risk management process are: 1. Identification and assessment 2. Risk management activities 7

8 3. Reporting and monitoring risks and opportunities 4. Assessment and continuous improvement Learning policy Purpose Learning is a central part of the company's strategy and its goals. It is connected to change, adaptation and innovation. Personnel competence not only encompasses an individual's skills and abilities, but also the learning of several individuals and their combined competence. The organisation is to create, obtain and transfer information. It must strive to continuously adapt to changes in the operating environment and to meet the challenges brought about by these changes. The most important resource however is an individual who learns in a target-oriented manner and who is encouraged to try things out, brainstorm, reform and take responsibility. Direction The aim is to improve the level of competence for each person such that tasks required for work are completed as efficiently as possible. As the range of tasks becomes more diverse, the role of multicompetence increases. In addition, reserve personnel systems also require multicompetence in addition to its own standard work. A process-like operating method means that personnel must at least be aware of the other operations in their processes in addition to being competent in their own task. Removal of obstructions When developing personnel competence, attempts should be made to move away from routinized operating models. Personnel must be able to seek methods to separate the essential from the inessential. A significant perspective is to see one's own work as a learning environment and to make use of the functions it provides. Methods The primary point of departure for the development of competence is to carry out a competence analysis, which is based on a thorough analysis of one's own work and the self-comparison of the individual with the requirements set by the work. Various educational organizations and their training programme services are used in the development of competence. Basic competence: Should an employee not have the necessary basic competence in the rubber industry, an orientation and training programme shall be drawn up for the employee for him or her to learn the necessary basic skills for his or her tasks. If necessary, recruitment training shall be organized together with TE-services. Those who are carrying out upper secondary education in the rubber industry are given the opportunity to complete periods of learning in the workplace under the direction of supervisors and instructors. Additional professional training: Attempts will be made to provide employees at work with the opportunity to carry out a professional qualification in the rubber industry or other suitable qualification and to therefore improve professional competence. For clerical employees, additional professional training is based largely on the compilation of a personal learning plan in line with the strategy and because of discussions on 8

9 development. In addition, career development plans in line with the long-term plan will be drawn up for individuals as necessary. Mentoring In mentoring, a skilled and experienced Teknikum employee or individual from another company shares competence, experiences and perspectives on professional development with a young member of staff just starting out in working life who is eager to develop. The supervisor can also be a retired individual who has received work experience or training in the Teknikum Company. Support from the company The company assists the improvement and maintenance of its personnel's competence by providing support. The achievement of basic competence takes place primarily at the expense of the individual in question and at his or her own initiative through education and training. The company participates in the expenses of employees' training programmes in cooperation with TE-services. Should short-term additional professional training take place during working hours, the student will be paid a reimbursement in accordance with collective agreements. The company will fund expenses arising from teaching. The student and company share the costs arising from apprenticeship training. Long-term personal professional training programmes Reimbursement practices and working time arrangements concerning long-term courses shall be agreed on a case-by-case basis in further detail before the training in question begins. Assessment A skills register is used to assess competence levels. Work points and the employee's ability to carry out these work point tasks are marked on the register. A competence test system is used to gauge the level of competence Equal opportunity plan General Employers will promote gender equality in working life in a purposeful and systematic manner. To promote equality in working life, employers will, while taking account of the resources available and other matters affecting the issue: 1. Ensure that both women and men are recruited for open positions 2. Promote the equal placement of women and men in different positions and create equal opportunities for their career development 3. Promote equality between women and men in employment conditions, particularly when it comes to wages 4. Create a suitable working environment for both women and men 5. Facilitate the work-life balance of women and men by paying attention to how work is organized in particular 6. Act to prevent gender-based discrimination An annual separate review of equality issues is conducted in the leadership team. As a result, possible developmental measures are drawn up. 9

10 Personnel planning and personnel recruitment Personnel planning and recruitment are used to promote the development of greater equality in the organization. Personnel shall be guaranteed equal opportunities for career development regardless of gender. Personnel receive training to support them in developing their careers. Access to training is made equally available to male and female personnel. Responsibilities and job advertisements will consider how members of both sexes will be recruited for the position. Leading and developing personnel Equality is a natural part of leadership. Company leadership supports and encourages personnel equally to accept responsibility, to develop their career, to seek training, to use comprehensive knowledge and skills, and to achieve great results. Leadership promotes equal opportunities among personnel to participate in planning operations, production and decision-making. Training and development plans for personnel are designed to support the promotion of equality. When personnel return from family leave and from other long-term leaves, orientation and supplemental training are organized for them. Supervisors ensure that gender-based harassment or intimidation does not occur at the workplace. There are separate guidelines for what to do should harassment or intimidation occur. Pay and how work is organized When deemed necessary, pay and pay structures will be surveyed and possible factors for differences in pay between women and men for the same or equivalent work will be identified. The pay system has been developed to promote gender equality by setting pay based on job requirements, the professional success of employees and their results. When increasing work flexibility, attention must be paid to the effects of how work is organized on equality. Organizing working hours appropriately promotes performance and employee satisfaction. Taking personal needs into account when allocating working hours, improves opportunities for managing the work-life balance for both women and men. Personnel participation Equality is a joint effort and it must be a natural part of all common operations. Ensuring the equal participation of personnel is a prerequisite for promoting equality in working life. Women and men will have equal opportunities to participate in and influence production and decision-making at all levels. When possible, both women and men will be selected for planning and other similar working groups. Working conditions The working environment will be developed to ensure comprehensive equality. As personnel age, attention will be paid to the wellbeing of personnel, particularly for those doing mental and physical work. The working conditions of pregnant personnel receive attention. 10

11 Work and social spaces, equipment, jobs, uniforms and other provisions will not be barriers to achieving gender equality. Improving the atmosphere at work promotes the achievement of equality. Communication and monitoring The equality plan is published for personnel through internal newsletters. It is also available from payroll points. The implementation of the equality plan is monitored by the leadership team Certificates Our operations are based on different standards and guidelines for the operations system created on their basis. We monitor the effectiveness of our operations system with regular and scheduled internal audits. We have common ISO 9001 and ISO certificates at our Vammala, Kiikka and Kerava factories. The certificates were provided by DNV. In addition, the Vammala factory has an IATF16949 certificate, which takes account of the needs of the vehicle industry. In addition, both Vammala and Kiikka factories have environmental permits. In China we have ISO 9001 and ISO certificates Stakeholders Our most important stakeholders are customers, suppliers, personnel and shareholders. Our customers are principally composed of representatives of different industrial sectors. These days, our biggest customer groups are in the mineral technology, railway industry, mechanical engineering and transportation industries, plus resellers in Finland and the rest of the world. Teknikum Yhtiöt Oy is a privately-owned enterprise. Our other stakeholders include investors, insurance firms, universities, the local community and authorities, and other organizations. Collaboration with our stakeholders makes our operations possible. Teknikum Yhtiöt Oy is a member of relevant essential and supporting organizations and associations. 4. SUSTAINABILITY MEASURES AND OUTCOMES 11

12 4.1. Financial responsibility The Teknikum Group follows all relevant national and international laws and regulations, international agreements, and generally accepted governance practices. The ethical principles of the company forbid receiving or offering bribes or being involved in corruption. The company also requires the same from its suppliers, customers, and partners Social responsibility Social responsibility is based on close and constructive collaboration with all stakeholders. Social responsibility includes developing the wellbeing and expertise of personnel, respect for human rights, responsibility for products and sustainable operations in collaboration with stakeholders. Social responsibility also includes ensuring the wellbeing of personnel in our own production facilities and for our suppliers, including the absolute prohibition of child labor Ensuring a sustainable delivery chain In collaboration with our raw material suppliers, we perform risk analyses to, for example, find safe and environmentally-friendly chemicals. The rubber compounds and products produced by Teknikum Yhtiöt Oy do not contain heavy metals mentioned by the RoHS directive and are REACH compliant. The rubber compounds do not contain SVCH (Substances of Very High Concern) materials that are on the XIV candidate list of the REACH directive. We conduct audits of our suppliers. In addition, our basic principle is that we have two suppliers for every part. Suppliers must comply with labor legislation and ILO agreements. We pack our products in packaging mutually agreed with customers. We have a contract with The Environmental Register of Packaging PYR LTD with which we register the packaging we use annually. We have received the following statement from them: The Company handles the recovery of the packaging it brings onto the market in accordance with EU directives, the Waste Act and the decisions and regulations of the Council of State Personnel Prevention of incidents We monitor the number of incidents and perform the 5 whys- analysis on each event to determine its root causes. This allows us to improve our occupational safety. We have also deployed a computer program for registering near-miss events Non-smoking policy 12

13 Smoking is not permitted in our factories. There are designated smoking areas outside the facilities. We encourage personnel to quit smoking by supporting the provision of different nicotine replacement therapies in collaboration with the occupation health authorities Improvement suggestions We have launched an improvement suggestions program that is open to all to collect ideas for developing our operations. This allows us to clearly determine the number of improvement suggestions. When it is open to all, then good practices can be deployed throughout the group. Once a year, the board rewards individuals who have distinguished themselves while performing their duties Development discussions We conduct yearly development discussions with all employees Training plan We draw up a training plan every year. It contains the training needs of personnel stemming from either the company strategy or from feedback received in development discussions. Guidance on how participating in training is considered in, for example, an employee's career development, is available within the company Feedback channels Regular departmental meetings are held in every unit to provide different feedback channels. Some units also have workplace-specific meetings. Info sessions arranged by the managing director are held a couple of times a year to assist internal communications. Personnel may ask questions about operations in these sessions. We publish the community magazine Kumistin for our personnel quarterly. We want to emphasize open communications to safeguard working conditions and the flow of information Absentee rate We had a 3,6% absentee rate in We support the wellbeing of our personnel in different ways. For instance, we participate in the cost of leisure-time cultural and exercise opportunities. We have likewise negotiated discounts for personnel with, for example, our healthcare partners. We subsidies meals for our personnel in the factory canteens. In addition, we organize recreational events for all and personnel have a leisure-time summer cabin at their disposal Marketing accountability 13

14 We have adopted the PQP (Product Quality Planning) framework when making tenders. In this approach, the sales engineer assembles a group that together reviews the product being offered from many perspectives. The group consists of a representative of the production unit in question, a representative of the quality department, a representative of the product development department and a representative from procurement. They decide together whether we offer the product. This allows us to get the required information for manufacturing the product right from the very beginning or, for example, for different needs such as acquiring test equipment. Customers are informed about potential delays in delivery as soon as possible when issues arise. We have also begun to conduct the 5 whys-analyses of delays to allow us to avoid the same issues in the future Environmental accountability Environmental monitoring groups meet at our factories to create an environmental program every year. The environmental programs allow us to chart the different opportunities to improve on reaching our environmental goals. We minimize the production of waste in production and separate out industrial waste and energy waste at all our factories. We put materials that we cannot send to incinerators in the industrial waste stream. There are some grades of rubber that cannot be burned. We have also begun to collect non-vulcanized rubber waste for recycling. We are also continuously investigating other suitable methods for recycling rubber waste Energy consumption We pay attention to reducing energy consumption. We are, for example, switching our steam pipes and the lighting in our large hose hall has been improved with modern fixtures that use less electricity Water consumption We have been able to greatly reduce water consumption by building internal water circulation systems, for example, in our plastics unit at the Vammala factory. 14

15 4.7. Responsibility in relation to the products The rubber compounds used in our products come from our Kerava factory. Teknikum Sekoitukset Oy and Teknikum Oy have stressed the removal of harmful substances from rubber recipes in our product development. All SVCH substances on the XIV candidate list of the REACH directive have been removed from use. Most recently, the number of CMR substances at the Savio compound factory has dropped from 19 in 2009 to two. Neither of them is used in Teknikum Oy production. In addition, automobile industry customers, for example, have already created so-called black and gray lists with the names of banned and harmful substances for years. We monitor the quality level of our products with different tests and documented guidance of operations system. We regularly conduct product audits and random checks. Based on these results, we can plan corrective measures. We conduct a customer satisfaction survey, every two years. Based on these results, we create an action plan to allow us to better serve our customers in the future. We plan our products and the materials we use in a responsible manner, considering the life cycle desired by our customers. We are also mindful about conserving materials in the entire life cycle of a product when designing it. 15