Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Supply chain problems caused by manufacturing relocation, Medex acquisition integration, and ERP system implementation.
• Weak performance in Smiths Medical's Critical Care segment due to supplier problems and currency translation.
• Uncertainty in the US residential construction market affecting Flex-Tek.
• Increased working capital requirements in Smiths Detection due to contract size and nature.

Mitigation Strategies

• 24-month performance improvement program initiated in Smiths Medical.
• Global operations team recruited in Smiths Medical to address supply chain issues.
• Global ERP system implementation restarted in Smiths Medical.
• Manufacturing rationalisation programme in Smiths Medical increased the proportion of employees in low-cost countries.
• Reorganisation of Flex-Tek's tubular systems business to cut costs and improve customer service.
• Investment in information systems, such as Enterprise Resource Planning (ERP).
• Review of the organisation structure to deliver efficiencies.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Ethics
• Environment
• Health and Safety
• People
• Communities

Environmental Achievements

• 14% reduction in energy usage over the past five years, normalized to revenue
• 25% reduction in GHG emissions over the past five years, normalized to revenue
• 23% reduction in water usage over the past five years, normalized to revenue
• 26% reduction in non-recycled waste over the past five years, normalized to revenue
• 4% reduction in greenhouse gas emissions compared to 2013 baseline
• 17% reduction in total non-recycled waste compared to 2013 baseline
• 6% reduction in water consumption compared to 2013 baseline

Social Achievements

• Maintained lost time incidents at record low levels
• Improved employee engagement through MyVoice surveys (85% participation rate)
• Launched a new Supplier Code of Business Ethics
• Held a global ethics forum in Berlin focusing on individual responsibility
• Increased investment in R&D across several divisions
• Launched several new products across divisions (e.g., Smiths Medical's Medfusion interoperability platform, Smiths Detection's IONSCAN 600)

Governance Achievements

• Continued compliance with the UK Corporate Governance Code (with minor exceptions noted)
• Implemented a rigorous process for the selection and appointment of new directors
• Conducted an external Board evaluation process
• Strengthened the capabilities of the Internal Audit department

Climate Goals & Targets

Environmental Challenges

• Challenging global economic conditions
• Lower oil prices impacting John Crane
• Difficult end markets in several divisions
• Government budget constraints affecting Smiths Detection
• Price pressures in healthcare and other sectors
• Programme slowdowns and delays at Smiths Interconnect
• Legacy liabilities such as defined benefit pension schemes and product liability litigation

Mitigation Strategies

• Diversified portfolio of businesses
• Focus on aftermarket services (John Crane)
• Operational improvements and efficiencies
• Investment in high-growth markets and new product development
• Cost-saving initiatives and restructuring programmes (Fuel for Growth)
• Hedging strategies to mitigate foreign exchange risk
• Active portfolio management (acquisitions and disposals)
• Plans to reduce the mismatch between pension assets and liabilities

Supply Chain Management

Responsible Procurement

• Supplier Code of Business Ethics

Climate-Related Risks & Opportunities

Sustainable Products & Innovation

• John Crane's AURA 220 gas seal
• Smiths Detection's IONSCAN 600 explosives trace detector

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Exposure to cyclical end markets
• Changes of this type could significantly affect the Group’s liquidity and could have a material adverse effect on its business, financial condition and results of operations.
• The Group may be adversely affected by the withdrawal of the United Kingdom from the European Union.
• The Group is subject to a broad range of laws, regulations and standards in the jurisdictions in which it operates.
• The Group may be adversely affected by environmental laws, regulations and liabilities.
• The Group operates in diverse locations which exposes it to a broad range of operational and other external risks.
• The Group depends heavily on supplies of raw materials and purchased components and any disruption in supply or volatility in price could have a material adverse effect on the Group’s performance.
• The Group is subject to litigation including, but not limited to, asbestos and other product liability litigation.
• A failure by the Group to deliver products and services could adversely affect the Group.
• Defects or failures associated with the Group’s products could lead to recalls or safety alerts and negative publicity.
• Fluctuation in currency exchange and interest rates could have an adverse effect on the Group’s results of operations.
• The Group is exposed to credit risk from its credit counterparties, including customers, banks and insurers.
• The Group relies on insurance to manage many of the risks to which it is subject in the course of its business.
• The Group’s ability to refinance its borrowings in the bank or capital markets may be materially and adversely affected by a financial crisis in a particular geographic region, industry or economic sector.
• The key markets of the Group are highly competitive and in order to remain competitive in such key markets, the Group must make frequent investments in new technologies, product improvements and other projects.
• Failure to meet targeted cost savings and operational efficiencies may reduce profitability.
• The Group’s current restructuring and rationalisation programme may not deliver the cost savings anticipated.
• The Group may not be able to expand or enhance its portfolio through successful mergers or acquisitions and may become liable for claims arising from completed mergers, acquisitions or disposals.
• The Group is subject to internal control, compliance, security, ethical and technology risks.

Mitigation Strategies

• The Group manages interest rate risk through fixed rate borrowings and interest rate swaps
• The Group seeks to insure against business risks and protect many of its assets and associated profits by purchasing insurance.
• The Group aims to transfer certain legal liability risks such as product liability and employer’s liability to insurers
• The Group aims to improve profitab ility over time and secure resources for investment in future growth through increased productivity and efficiency by reducing costs throughout the supply chain.
• The Group’s growth strategy includes a combination of organic growth, mergers and acquisitions and selected disposals.
• The Group is committed to doing business in accordance with all applicable laws and its code of business ethics.
• It is the Group’s policy, and procedures are in place, to identify, protect (by patent and trademark registration, and maintenance of proprietary information), defend and manage its intellectual property.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Ethics
• Health, Safety and Environment
• People
• Products
• Communities

Environmental Achievements

• Lowest recordable incident rate in 2017
• Good progress in reducing GHG and non-recycled waste (exceeding five-year goal)
• Water consumption on target for five-year goal
• Secured clean renewable energy to reduce environmental impact of energy use

Social Achievements

• Launched a new online training tool and web-based/mobile risk assessment platform for Smiths Detection to improve off-site worker safety
• Lowest recordable incident rate in 2017 (0.36 per 100 employees per year)
• Lowest lost time incident rate in 2017 (0.16 per 100 employees per year)

Governance Achievements

• Embedded Code of Business Ethics through communication, training, and awareness programs
• Continually review approach to compliance as risks evolve

Climate Goals & Targets

Environmental Challenges

• Service teams working in external environments outside direct control, increasing safety risks
• Low and volatile commodity prices limiting capital expenditure in oil and gas sector

Mitigation Strategies

• New online training tool and web-based/mobile risk assessment platform for Smiths Detection to improve off-site worker safety
• Focus on growth areas such as LNG and pipelines, plus aftermarket services in oil and gas sector

Supply Chain Management

Responsible Procurement

• Expect suppliers to meet high ethical standards

Climate-Related Risks & Opportunities

Sustainable Products & Innovation

• Fuel manifolds making airliners more fuel-efficient and environmentally friendly