SGS S.A. Annual Report 2019

FY2019 Annual Report · SGS S.A.

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OUR

VALUE

TO SOCIETY

2019 INTEGRATED ANNUAL REPORT

SGS IS THE
WORLD'S LEADING
TESTING, INSPECTION,
AND CERTIFICATION
(TIC) COMPANY

Wherever you are in the world, in whatever industry,
you can rely on our international teams of experts
to provide specialized solutions to make your business
faster, simpler and more efficient.

EMPLOYEES

OFFICES AND LABORATORIES

+94 000

+2 600

OUR INTEGRATED REPORTING APPROACH

LETTER TO SHAREHOLDERS

The Integrated Reporting Framework aims
to create a reporting cycle that leads to greater
financial stability and sustainability. For the fourth
consecutive year we have integrated our financial,
operational and sustainability information in a single
report – measuring our financial and non-financial
performance across the six capitals. In
addition to the information presented in this report,
more detailed sustainability information is provided
in our 2019 Sustainability Report
www.sgs.com/cs-report-2019

ONLINE REPORT

INTEGRATED REPORT

SUSTAINABILITY REPORT

HIGHLIGHTS

OUR BUSINESS

OUR VALUE TO SOCIETY

FINANCIAL CAPITAL

MANUFACTURED CAPITAL

INTELLECTUAL CAPITAL

HUMAN CAPITAL

SOCIAL AND RELATIONSHIP CAPITAL

NATURAL CAPITAL

CORPORATE GOVERNANCE

REMUNERATION REPORT

2019 RESULTS

SHAREHOLDER INFORMATION

104

130

201

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORTLETTER TO SHAREHOLDERS

—

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Dear Shareholders,

We are pleased to announce a year of good results
across the SGS Group. Our total revenue increased to
CHF 6.6 billion on a constant currency basis and our
adjusted operating margin improved to 16.1%. We achieved
solid organic growth of 2.6% across our business lines.
The investments we made in the strategic evolution of
the Group in 2019 put SGS in a strong position as we enter
the final year of our Mission 2020 and beyond. It will also
ensure our industry leadership position in the TIC Industry,
sustainably creating long-term value for employees,
customers, shareholders and for society at large.

The development of our digital trust services is supported
by a favorable regulatory environment. New cybersecurity
regulations were introduced in Europe and the USA, while
China brought in a regulation focused on cryptography,
an essential element in secure data systems.

The digitalization of the TIC industry will continue to
accelerate over the coming years, supported by technological
and regulatory evolution. As the industry leader, we will lead
this transformation. Together with investment in automation
and robotics and operational efficiency improvements,
we will continue to deliver profitable growth.

MISSION 2020 NEARING COMPLETION

SUSTAINABILITY LEADERSHIP

In 2019, we reached a number of strategic milestones.
We made 11 acquisitions, in line with our strategy
to accelerate our mergers and acquisitions activity
(see page 41). Notably, our purchase of Maine Pointe
brings greater diversification to our Certification and
Business Enhancement service. In addition, we refocused
our portfolio through the disposal of Petroleum Services
Corporation, which we acquired in 2004. Under SGS it
grew strongly and we expect it to remain a successful
business for its new owners.

These actions, combined with our continued organic
investment in, for example, electrical and electronics or
the expansion of our food network are helping to evolve our
portfolio. This will enable SGS to benefit from new growth
drivers, including connectivity, nutrition, health and wellness,
mobility, cybersecurity and sustainability and climate.

We also announced structural optimization measures
which have been undertaken in the second half to remove
duplication of overheads across our global network. This,
together with the adoption of an Economic Value Added
(EVA) framework to augment our business performance
management, has helped to achieve an improvement in
profitability and support our 2020 ambitions.

Our continuing investment in initiatives, such as, World Class
Services and Add Value with Lëss, as well as, automation,
digital and robotics will enable SGS to grow profitably in
the long term.

NEXT GENERATION SERVICES

As the leading TIC player, we are enhancing our traditional
services, as well as, developing the next generation of
services for our customers. For example, in 2019, our
TransitNet customs solution delivered 600 000 transactions
through a 100% digital solution, we carried out 30 000
remote inspections using smartphone-based technology
and we collected 4.3 million data points daily to measure air
quality. In Oil and Gas, we monitored 15 million data points
for consignment tracking.

We also opened a new cyber laboratory in Graz, Austria
as part of our strategy to develop a global cybersecurity
network. The laboratory in Austria is a unique partnership
with the Graz University of Technology and focuses on
three core areas: providing testing and certification services
for product and system security, training IT security
experts and analyzing IT system security for our customers.

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SGS is now a well-established global sustainability leader.
In 2019, we were named a leading company in the
Dow Jones Sustainability Indices for the sixth year in
a row, maintained our status in the FTSE4Good Index
and received the Platinum medal recognition from EcoVadis.
Additionally, we were included in the prestigious CDP
(formerly the Carbon Disclosure Project) A List for our
commitment to climate-change mitigation and our adoption
to the Task Force on Climate-Related Financial Disclosures.

Our purpose-driven leadership puts sustainability at the heart
of our company culture and policies, while together with
our services, we continue to add value to society, enabling
a better, safer and interconnected world.

DRIVING AHEAD IN 2020

We are very focused on delivering the 2020 objectives.
Looking ahead, a great deal of work has already gone into
planning the next stage of the SGS strategy, which our
management team looks forward to presenting later in
the year. We would like to thank our shareholders for their
support through this journey.

This continued investment in the strategic evolution will
ensure growth at an attractive level of returns. It will
also cement our leadership position in the TIC Industry,
which helps our customers to source responsibly, manage
their environmental impacts and adhere to operational
sustainability principles.

Our exceptional capability is due to our expert colleagues
across the world. We would like to thank them all for
their dedication and hard work. Only with their support
and determination can we continue to sustainably create
long-term value for our customers, shareholders and
for society.

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PETER KALANTZIS
Chairman of the Board

FRANKIE NG
Chief Executive Officer

SUBSEQUENT EVENTS

The following acquisition and disposal activity was
completed after 31 December 2019:

• The acquisition of Thomas J. Stephens & Associates,

Inc. (Stephens) in the USA, providing safety and efficacy
testing and contract research services.

• The disposal of Pest Management and Fumigation

During 2019, Carla de Geyseleer (formerly Chief Financial
Officer), Pauline Earl (formerly Chief Operating Officer
of Western Europe) and Francois Marti (formerly Chief
Operating Officer of North America) left the Group.
Thomas Klukas, Executive Vice President of Transportation,
left the Operations Council (see page 101). The Management
would like to thank them for their dedication and service.

services in Belgium and the Netherlands.

BOARD CHANGES

On 1 January 2020, all Transportation activities were
allocated and integrated across multiple business lines
to generate operational synergies and reinvigorate their
growth profiles.

On 4 February 2020, the von Finck family disposed of
a large portion of their holding, resulting in their participation
falling below the threshold of 3% of the share capital and
voting rights.

MANAGEMENT CHANGES

Dominik de Daniel joined SGS Group as Chief Financial
Officer. Fabrice Egloff, Chief Operating Officer of Africa,
has taken on an extended role to include Western Europe.
Christoph Heidler, Chief Information Officer, has been
appointed to the Operations Council (see page 99).

Luitpold von Finck, Calvin Grieder and Kory Sorenson
were appointed to the Board of Directors during the
Annual General Meeting held in March 2019. August von
Finck and Christopher Kirk did not stand for re-election.
SGS would like to thank both for their support and direction
(see page 92).

DISTRIBUTION TO SHAREHOLDERS

The SGS Board of Directors will recommend to the
Annual General Meeting (to be held on 24 March 2020)
the approval of a dividend of CHF 80 per share.

SIGNIFICANT SHAREHOLDERS

To the knowledge of the Company the shareholders owning
more than 3% of its share capital as at 31 December 2019,
or as the date of their last notification as per Article 20 of
the Swiss Stock Exchange Act were:

(% of detention)

Groupe Bruxelles Lambert (acting through Serena SARL and URDAC)1

Mr. August von Finck and members of his family (acting in concert)2

BlackRock, Inc.

MFS Investment Management

2019

16.73%

15.66%

4.00%

3.81%

2018

16.60%

15.52%

4.00%

3.02%

1. The ultimate beneficial owners of the Groupe Bruxelles Lambert are Stichting Administratekantoor Frère-Bourgeois, Paul Desmarais Junior

and André Desmarais.

2. The Company was informed on 4 February 2020, that the von Finck family has disposed of a large portion of their holding, resulting

in their participation falling below the threshold of 3% of the share capital and voting rights.

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OUTLOOK 2020

The Group remains committed to:

Delivering solid organic growth.

Ensuring strong cash conversion.

17%

Achieving an adjusted operating income
of above 17%.

Maintaining best-in-class return
on invested capital.

Targeting accelerating mergers
and acquisitions and remaining
disciplined on returns.

At least maintaining the dividend
or growing it in line with the improvement
in net earnings.

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FINANCIAL AND
SUSTAINABILITY
HIGHLIGHTS

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Financial Results

Revenue by Region

Group Achievements

Revenue by Business

Adjusted Operating Income by Business

Sustainability Achievements

Sustainability Ambitions 2020

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FINANCIAL RESULTS

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Group revenue growth in 2019 was 1.2%1, of which 2.6%1 was organic.
Our successful strategic positioning delivered solid organic growth
across the SGS business portfolio.

CHF 6.6bn

Revenue +1.2%1 (+2.6% organic)

6
.
6

5
.
6

2019

2018

6
1

6
.
5
1

CHF 1 063mio

Adjusted Operating Income2 +4.6%1

16.1%

Adjusted Operating Income Margin2

2019

2018

CHF 702mio

Profit for the Period +1.7%

5
4

7
8

4
5
.
4
8

3
6
0

6
1
0

2019

2018

2
0
7

0
9
6

2019

2018

0
8

8
7

CHF 87.45

Basic Earnings per Share +3.4%

CHF 80

2019

2018

Proposed Dividend per Share

2019

2018

0
7
8

6
9
7

5
.
5
2

2
.

4
2

CHF 870mio

Free Cash Flow3 +9.3%

25.5%

2019

2018

Return on Invested Capital4

2019

2018

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1. Constant currency (CCY).

2. Before amortization of acquired intangibles and non-recurring items.

3. Cash flow from operating activities, net of capital expenditure.

4. Profit for the period / (Non-current assets + Net working capital),

2019

2018

excluding IFRS 16 impact.

Acquisitions completed in 2019

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REVENUE BY REGION

24%

Americas

GROUP ACHIEVEMENTS

44%

Europe / Africa /
Middle East

32%

Asia Pacific

ACTIVE PORTFOLIO
MANAGEMENT

STRUCTURAL
OPTIMIZATION PLAN

11 acquisitions and 4 disposals were completed during
2019 as we pursued our strategy to accelerate our
mergers and acquisitions activity, making additions
that support our business goals and giving our portfolio
a stronger focus on higher-value-added-services.

Implemented at a cost of CHF 73 million.
On track to deliver annualized recurring savings
of at least CHF 90 million. CHF 15 million
already delivered in 2019.

ECONOMIC VALUE
ADDED APPROACH

DELIVERING PROCESS
IMPROVEMENT

Applied to internal performance management and active
portfolio management, which combined with continued
investment in our World Class Services initiative, automation
and digitalization, is enabling SGS to deploy capital
for growth at attractive levels of returns in the long term.

The investments in Maine Pointe and Leansis
expand our footprint in the Process Improvement field.

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REVENUE BY BUSINESS

(CHF million)

2019

CCY2
2018

Change
in CCY

% 2018

Change in
%

3.9%
GIS

7.6%
TRP

8.2%
EHS

14.1%
IND

6.7%
CBE

ADJUSTED OPERATING
INCOME1 BY BUSINESS

4.2%
GIS

6.2%
TRP

6.3%
EHS

10.5%
IND

8.6%
CBE

1. Before amortization of acquired intangibles

and non-recurring items.

2. Constant currency (CCY).

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AGRICULTURE, FOOD AND LIFE

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

1 074 1 034
167

172

16.0

16.2

3.9 1 063
171
3.0

1.0
0.6

16.0

MINERALS

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

753
128
17.0

726
117
16.1

3.7
9.4

750
121
16.1

0.4
5.8

OIL, GAS AND CHEMICALS

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

1 075
120
11.2

1 203 (10.6)
6.2

113
9.4

1 220
116
9.5

(11.9)
3.4

CONSUMER AND RETAIL

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

1 021
262
25.7

966
249
25.8

5.7
5.2

987
257
26.0

3.4
1.9

16.3%
AFL

11.4%
MIN

16.3%
OGC

15.5%
CRS

16.2%
AFL

CERTIFICATION AND BUSINESS ENHANCEMENT

12.0%
MIN

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

447
91
20.4

395
79
20.0

13.2
15.2

404
80
19.8

10.6
13.8

11.3%
OGC

INDUSTRIAL

REVENUE

ADJUSTED OPERATING INCOME¹

24.7%
CRS

MARGIN %¹

930
112
12.0

2.9
38.3

904
81
9.0

940
84
9.0

(1.1)
33.3

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ENVIRONMENT, HEALTH AND SAFETY

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

540
67
12.4

504
55
10.9

7.1
21.8

517
57
11.1

4.4
17.5

TRANSPORTATION

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

500
66
13.2

518
(3.5)
79 (16.5)

541

(7.6)
83 (20.5)

15.3

GOVERNMENTS AND INSTITUTIONS

REVENUE

ADJUSTED OPERATING INCOME¹

MARGIN %¹

260
45
17.3

272

(4.4)
76 (40.8)

284

(8.5)
81 (44.4)

27.9

28.7

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SUSTAINABILITY ACHIEVEMENTS

—

Find out more about our corporate sustainability achievements at SGS.com.

Industry Leader by the Dow
Jones Sustainability Index for
the sixth year

CDP A List member

CDP Supplier
Engagement Leader

Robecosam Gold Class Award
for excellent sustainability
performance

FTSE4Good Index member
for the third year

Platinum rating
from EcoVadis

CHF 1.41mio

Invested in communities and
17 197 hours of community
volunteering performed
by SGS employees

NET POSITIVE
COMPANY

For the third year running,
SGS is a net positive company

0.44

CARBON
NEUTRAL

Total Recordable Incident Rate
(calculated over 200 000 hours)
decreased by 60% since 2014

SGS maintained its status
as a carbon neutral company

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SUSTAINABILITY
AMBITIONS 2020

PROFESSIONAL EXCELLENCE

Link management incentive
plan to sustainability

Deliver measurable sustainable
value to society

PEOPLE

Maintain a natural turnover rate
of no more than 15%

30% of leadership positions will
be held by women

Reduce our TRIR and
LTIR by 50%*

ENVIRONMENT

Reduce our annual
CO2 emissions
(per FTE) by 20%*

Reduce our annual
CO2 emissions
(by revenue) by 20%*

COMMUNITY

Increase our investment
in communities around
the world by 30%,*
with a focus on volunteering

* Against 2014 baseline.

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MAXFIELD WEISS
Director, Corporate Engagement
of CDP Europe

CDP (formerly the Carbon
Disclosure Project) provides
the global disclosure system
that measures and scores
corporate and supply chain
environmental impacts.
Through this mechanism,
it aims to encourage investors,
companies and cities to take
the actions needed to build
a sustainable economy.

“This year we named SGS on our
prestigious A List for climate change,
a recognition that we only give to the
world’s leading companies in terms
of their environmental stewardship.

“SGS is one of just 179 high performing
companies to achieve A List status.
SGS has received this award based
on its comprehensive disclosure of
climate data, thorough awareness of
climate risks, demonstration of strong
governance and management of those
risks, and demonstration of market-
leading best practices.

“Working towards its 2020 science-
based emissions reduction targets,
approved by the Science Based Target
initiative, SGS is demonstrating its
strong commitment to mitigating
global climate change impacts. SGS’
response to environmental challenges
and market needs goes beyond both
awareness and management. It has
reached a level where tangible actions

to mitigate and manage climate
risks and to maximize associated
opportunities are being implemented
across its operations.

“SGS goes a step further than
assessing the impacts of its direct
operations by looking at its supply
chain as well. As a reflection
of this, we are also pleased
to recognize SGS with
a place on our Supplier
Engagement Leaderboard,
which is designed to
evaluate and spur action
on corporate supply
chain engagement on
climate issues. SGS is
contributing to driving
emissions reductions
through its global value
chain, by engaging with its
suppliers and customers.

“We would like to
congratulate SGS for the
level of transparency in its
climate disclosure and work
in the areas of both climate
change risk management and
supply chain engagement. It is
among a small group of global
leaders for their corporate
climate action.”

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OUR BUSINESS

—

The TIC industry is pivotal in bringing
value to society and as industry leaders,
we play a leading role. Our business model
and sound governance are built
on 141 years of heritage and insight,
while our 2020 objectives continue to guide
our short-term ambitions. Everything
we do is undertaken through the ethical
framework of our Business Principles.
This is the bedrock that enables our
business to offer unparalleled support
to the industries that we serve.

Mission 2020

Business Principles

Business Strategy and Governance

Purpose-driven Leadership

Megatrends

Our Industries

Our Business Model

Risk Intelligence

Business Material Topics

The Sustainable Development Goals

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MISSION 2020

BRAND
A brand not only differentiates a
company, it unites it. The SGS brand
offers our customers the peace of
mind that comes from knowing they
are working with the market leader.
It means our employees are rallying
behind the same cause and pulling
in the same direction. Finally, it
means that we are bound by a shared
commitment to provide the highest
quality services.

GROWTH
The continued growth of our global
network and its unrivaled physical
footprint is a key competitive
advantage, both to our business
and to our shareholders.

INNOVATION
SGS will continuously stretch the
boundaries of the TIC industry in
order to retain our position as
market leader.

EXPERTIZE
A business’ ability to attract and
retain the best talent is a
cornerstone of its success.
At SGS, we believe in our people,
and we are serious in supporting
their long-term development.

INVESTMENT
Investment in research, innovation,
talent and technology has to be at
the core of our business model.

OPERATIONAL EXCELLENCE
Applying continuous improvements
across our business operations,
improving performance and utilizing
the best possible sustainable
business practices provide our
competitive edge.

MISSION 2020

High customer
retention and
satisfaction

Leading position in
strategic markets
and geographies

Industry sustainability
leadership

Deliver measurable
sustainable value
to society

Increase visibility of
our value to society

MISSION 2020

Build scale

Buy capabilities

Fill geographic gaps

Enhance financial
metrics

MISSION 2020

Enhance business
through digital
services

Expand B2B2C
presence

MISSION 2020

Enhance our
reputation as an
employer of choice

Employ the
industry’s leading
experts

Maintain natural
staff turnover rate at
no more than 15%

MISSION 2020

Invest in cutting-
edge technology
and optimize
existing technology
performance
and usage

MISSION 2020

Maintain strategic
significance

Diversify portfolio
of services

Solid organic growth

Enhance presence
in key markets

Develop B2C presence

Strengthen and
invigorate the culture
of innovation at SGS

30% of senior
management
positions to be held
by women

Be the leading brand
for accuracy, quality
and professionalism

Maintain best-in-class
returns on invested
capital

Increase investment in
communities around
the world by 30%*

Ensure efficient use
of capital

Maximize internal
efficiencies

Reduce TRIR and
LTIR by 50%*

Reduce our annual CO2
emissions (per FTE)
by 20%*

Reduce our annual CO2
emissions (by revenue)
by 20%*

* Against a 2014 baseline.

SGS Business Principles are the cornerstone on which all of our
activity rests. They are held to be fundamental, overarching beliefs
and behaviors that guide our decisions and allow us to embody
the SGS brand in everything we do. www.sgs.com/principles

< BACK TO CONTENTS

BUSINESS
PRINCIPLES

INTEGRITY

Making sure we build trust. We act
with integrity and behave responsibly.
We abide by the rules, laws and
regulations of the countries we are
operating in. We speak up: we are
confident enough to raise concerns
and smart enough to consider any that
are brought to us.

HEALTH AND SAFETY

Making sure we establish safe
and healthy workplaces. We
fully protect all SGS employees,
contractors, visitors, stakeholders,
physical assets and the environment
from any work-related incident,
exposure and any kind of damage.

LEADERSHIP

Making sure we work together and
think ahead. We are passionate
entrepreneurial people with a
relentless desire to learn and innovate.
We work in an open culture where
smart work is recognized and
rewarded. We foster teamwork and
commitment.

RESPECT

Making sure we treat all people fairly.
We respect human rights. We all
take responsibility for creating a
working environment that is grounded
in dignity, equal opportunities and
mutual respect. We promote diversity
in our workforce and do not tolerate
discrimination of any kind.

SUSTAINABILITY

Making sure we add long-term
value to society. We use our scale
and expertize to enable a more
sustainable future. We ensure that
we minimize our impact on the
environment throughout the value
chain. We are good corporate citizens
and invest in the communities
in which we operate.

QUALITY AND
PROFESSIONALISM

Making sure we act and
communicate responsibly.
We embody the SGS brand and
its independence in our everyday
behavior and attitude. We are
customer-focused and committed
to excellence. We are always clear,
concise and accurate. We strive
to continually improve quality
and promote transparency.
We respect customer confidentiality
and individual privacy.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

BUSINESS STRATEGY AND GOVERNANCE

—

We are organized into lines of business and we operate across different geographic regions.
Each business is led by an Executive Vice President and each region is led by a Chief Operating Officer.
The Operations Council comprises the Executive Vice Presidents, Chief Operating Officers
and functional Senior Vice Presidents, as well as the Group’s Chief Executive Officer, Chief Financial Officer
and General Counsel. They meet regularly throughout the year to determine group-wide strategies
and priorities and review performance.

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FRANKIE
NG
(1966)

Swiss/Chinese

Chief Executive
Officer

DOMINIK
DE DANIEL
(1975)

German

OLIVIER
MERKT
(1962)

Swiss

TEYMUR
ABASOV
(1972)

Azerbaijani

HELMUT
CHIK
(1966)

Chinese

OLIVIER
COPPEY
(1972)

Swiss

Chief Financial
Officer

Chief Compliance
Officer

COO, Eastern Europe
and Middle East

COO, North East Asia

EVP, Agriculture,
Food and Life

FABRICE
EGLOFF
(1969)

French

LUIS FELIPE
ELIAS
(1959)

Peruvian

COO, Africa and
Western Europe

COO, South and
Central America

DERICK
GOVENDER
(1970)

South African

EVP, Minerals

CHRISTOPH
HEIDLER
(1969)

German

DIRK
HELLEMANS
(1958)

Belgian

Chief Information
Officer

COO, North and
Central Europe

JOSÉ MARÍA
HERNÁNDEZ-SAMPELAYO
(1961)

Spanish

SVP, Human
Resources

FRÉDÉRIC
HERREN
(1955)

Swiss

ROGER
KAMGAING
(1966)

Swiss

CHARLES
LY WA HOY
(1966)

French

JEFFREY
MCDONALD
(1964)

PETER
POSSEMIERS
(1962)

Australian/American

Australian/Belgian

TOBY
REEKS
(1976)

British

SVP, Digital
and Innovation

EVP, Governments
and Institutions

EVP, Consumer
and Retail

EVP, Certification
and Business
Enhancement

EVP, Environmental,
Health and Safety

SVP, Investor
Relations

MALCOLM
REID
(1963)

British

ALIM
SAIDOV
(1964)

Azerbaijani/Canadian

WIM
VAN LOON
(1966)

Belgian

COO, South East
Asia and Pacific

EVP, Oil, Gas
and Chemicals

EVP, Industrial

< BACK TO CONTENTS

The full biographies of the members
of the Operations Council can be found in
the Corporate Governance Report on page 99.

PURPOSE-DRIVEN LEADERSHIP

—

Our value to society is to enable a better, safer and interconnected world.

CAPITAL INPUTS

SUPPLY CHAIN

DIRECT OPERATIONS

SERVICES

We add value to society
by working with suppliers
to ensure high standards
of quality, integrity and
sustainability and building
partnerships to drive innovation.

We add value to society
by striving to optimize
our operational performance
while reducing negative impacts
from our day-to-day business.

We add value to society
by helping our customers
to be more efficient and
productive while improving
safety and achieving their
sustainability objectives.

CAPITAL OUTPUTS

We create value to society for and through our stakeholders

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EMPLOYEES AND SUPPLIERS

INVESTORS

CUSTOMERS

We add value to our employees by
offering them training, nurturing
their potential and encouraging
them to work across multiple
functions and geographies during
their careers. We offer our suppliers
financial strength that adds stability
to their businesses and brings
indirect benefits to society.

We create value for our investors
by being a robust, sustainable
business with a 140-year track
record. Our transparency, strong
leadership and commitment to
long-term sustainability make us a
sound investment.

We provide our customers with
leading services, which helps make
their businesses more efficient,
profitable and sustainable. This
value is passed on to society in the
form of job security for employees,
higher-quality products and better
environmental management.

GOVERNMENTS AND INDUSTRIES

CONSUMERS

COMMUNITIES AND THE PLANET

We add value to the industries
we operate in by driving supply
chain innovation. We provide
governments with tax revenues,
create employment and train local
people. We also provide services
that directly support governments
around the world.

We add value to consumers
through the services we provide
to our customers because
they are able to trust the products
and services they buy. From a
product’s quality and safety to
its authenticity, our services help
protect consumers.

We help nurture the communities
we operate in and strongly
support local volunteering, through
donations and disaster relief efforts.
Our sustainability endeavors are
recognized as being among the very
best – both regionally and in the TIC
industry. Through our services and
operations, we attempt to protect
our planet and its limited resources.

For more information on how SGS is continuously developing sustainability throughout our value chain, see the Sustainability Report 2019:
www.sgs.com/cs-report-2019.

< BACK TO CONTENTS

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

How we create value to
society through our leading
testing, inspection and
certification services

Our services add value to society by reducing risk, improving
efficiency, safety, quality, productivity and sustainability,
as well as advancing speed to market and creating trust.

V A L U E TO SOCIETY

S u p p or ting the switch
t o r e newable energy

I N DUSTRIES
A G R I C U LTURE AND FOOD

o l o
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SAFET Y

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B ENEFITS
R E D UCED RISK

S E RVICES
T R AINING
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PURPOSE-
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LEADERSHIP

R
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N
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A L Y TICS

F
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CER
RCING

KET

TRUS T

S T AIN ABILIT

ENERGY

LIFE SCIENCES

IND U S T R I A L M A N U F

R I N

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food security
Ensuring

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Promoting
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Tr a i n i n g
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e to society is enabling a better, s a f e r a n d

i n t e r

SGS has outlined five megatrends (see page 20-21) that are influencing the way we live and do business.

Climate
change

Rapid
urbanization

Population and
social trends

Economic
growth

Technological
disruption

< BACK TO CONTENTS

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The second market mechanism is
often simply pragmatic, with firms
finding that companies such as SGS
are able to offer more efficient and
effective services than they are
capable of reproducing in-house.
The independence of third-party
providers offers peace of mind on
a range of issues to companies and
government departments of all sizes.
That is why we frequently say that
our main product is 'trust.'

SGS is the TIC industry leader;
the leading provider of 'trust' in the
global market. Our customers benefit
from our global network, our deep
pool of expertize and the technological
capabilities we can draw upon. Our
services become a cornerstone of
innovation and operational excellence
for our customers, as well as giving
them far greater control over their risk.

Our services add value to society
by helping our customers to
simultaneously optimize their business
and sustainability performance
(see page 30). This is the value of
the TIC industry.

The Testing, Inspection and
Certification (TIC) industry is not
widely understood by the general
public, yet our activities as members
of this industry interweave with almost
everything that a consumer touches.

The breadth and reach of the industry
is perhaps unparalleled. Look around
you. The furniture that you are using,
the clothes that you are wearing, even
the paper you are holding or the screen
you are looking at, have most likely
all been touched at some stage by
the TIC industry.

From verifying that the olive oil in
your cupboards is unadulterated
extra virgin to ensuring that the paint
on a toy will not be harmful to your
child's health, the TIC industry is
involved in assuring safety, quality and
sustainability in a way most people
have never considered.

It is not just individuals that rely on
the TIC industry to provide assurance
services. Governments and businesses
need companies like SGS for support
with everything from precision farming
to mine decommissioning.

The market has two main driving
mechanisms. The first is the
constantly evolving regulatory and
legal environment. Businesses not
only need to conform to market
regulations but need to demonstrate
to their customers and investors that
they are managing their supply chains
ethically and sustainably.

SGS IS THE
WORLD'S LEADING
TESTING,INSPECTION,
AND CERTIFICATION
(TIC) COMPANY

< BACK TO CONTENTS

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MEGATRENDS

SGS has outlined five megatrends
that are influencing the way we
live and do business.

These trends are interconnected, and
while the pace and impact of changes
may vary, our responsibility is to
anticipate them. We design our strategy
using this long-term thinking, while
at the same time remaining agile and
adjusting our operations and services
in line with new developments.

CLIMATE
CHANGE

RAPID
URBANIZATION

Extreme weather conditions and climate
change can cause droughts and flooding
that affect natural resources, such as
water, energy, minerals, metals and
food. This is especially true for some
developing countries, where population
growth trends further accelerate
the demand for natural resources.
Governments are responding by
developing new regulations, meaning
businesses and communities will need to
develop actionable strategies that reduce
the impact on climate change while
supporting new demographic structures
and securing the supply of resources.

Currently, the majority of global GDP
is generated in cities, and more than
half of the world’s population lives
in metropolitan areas – a trend that
will intensify. Urbanization provides
opportunities to increase productivity
and attract talent, but the need for
resources and space impacts the
economy, environment and quality
of life. Governments and businesses
are using technologies and data to
build smart cities, towns and villages
as well as to deliver smart mobility,
advance economic growth and improve
infrastructure and community services.

OUR INDUSTRIES

SGS is active in virtually all sectors
of the economy. We provide a wide
range of inspection, verification,
testing and certification services
across all stages of the value chain.

ENERGY

Powering processes
in renewables and
conventional energy.

AGRICULTURE AND FOOD

Innovative safety, quality
and sustainability solutions
for supply chains.

OIL AND GAS

Innovative solutions
that add up along
the value chain.

MINING

CHEMICAL

Delivering expert services
to improve speed to market,
manage risks and maximize returns.

Innovation, optimization
and efficiency in everything
from feedstocks to
finished products.

INDUSTRIAL
MANUFACTURING

Making manufacturing
more productive
and profitable.

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< BACK TO CONTENTS

POPULATION AND
SOCIAL TRENDS

ECONOMIC
GROWTH

TECHNOLOGICAL
DISRUPTION

The world’s population is projected
to rise by more than 1 billion by 2030,
bringing the total to over 8 billion.
97% of this growth will come from
emerging or developing countries.
This pace of change poses significant
challenges for governments and
businesses. Empowering the next
generation of workers is critical to
meeting these social challenges.
Businesses and communities need
strategies that can support the new
demographic structure.

Over the last two centuries, the global
economy has become 20 times larger
and it is estimated to increase six-fold by
2050. The economy’s primary challenge
is to balance our desire for economic
growth and prosperity with finite natural
resources. On the consumer side, the
production and disposal of items with
a short lifespan can cause environmental
damage and impact people’s health,
while the progress of emerging
economies increasingly influences
the global consumption pattern. To
support economic growth, businesses
must invest in sustainability, human
capital and promote fair access to the
workplace, technology and markets.

The billions of devices that are connected
to the internet, interacting and sharing
data on an entirely new scale, have
huge potential to save time and money.
Moreover, advanced technology – such
as robotics, artificial intelligence and big
data – is revolutionizing our personal
and professional lives. As much as
these advances are improving societies
and economies, the security risks are
significant. Personal data has become
a valuable asset and attacks on security
gaps can cause considerable damage.
Adequate cybersecurity is one of the
basic requirements for a digital society:
people need to be able to trust that their
digital devices are secure and that their
data is private and safe. Any company
that works with data needs to provide the
infrastructure and security measurements
to avoid data breaches and maintain
uninterrupted business operations.

CONSUMER GOODS AND RETAIL

Generating trust throughout the supply chain.
Our services enable manufacturers, exporters,
importers and retailers to gain a competitive edge.

LIFE SCIENCES

Safeguarding the
quality and efficacy
of medicines.

CONSTRUCTION

Ensuring safety and performance in the environment
where we work and live. Safe, efficient and
trusted processes are essential when constructing
buildings or infrastructure.

TRANSPORTATION

Driving a safer,
cleaner and more
efficient industry.

PUBLIC SECTOR

Facilitating trade and sustainable
development, protecting society
against fraud and economic crime.

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OUR VALUE TO SOCIETY

MEGATRENDS INFLUENCING OUR
DECISION MAKING (SEE PAGE 20)

CLIMATE
CHANGE

RAPID
URBANIZATION

WE CREATE VALUE TO SOCIETY

OUR INPUTS

OUR BUSINESS MODEL

FINANCIAL

The pool of funds available to us (see page 32)

CHF 690mio

CHF 290mio

CHF 6 327mio

Profit (prior year)

CAPEX

Total assets

MANUFACTURED

Infrastructure, equipment and tools (see page 42)

+2 600

CHF 2.2bn

Offices and laboratories

Procurement spend

INTELLECTUAL

Organizational, knowledge-based intangibles (see page 50)

CHF 1 468mio

Innovation
projects

Goodwill and other
intangible assets

SGS
Campus

HUMAN

The skills and know-how of our employees (see page 56)

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ENABLING
A BETTER,
SAFER AND
INTERCONNECTED
WORLD

Testing, inspection and certification services
allow businesses around the world
to make informed decisions.
Our experts enable businesses to make
positive impacts on society.

+94 000

TESTING

INSPECTION

CERTIFICATION

Employees

SGS Recruiter Academy

SGS Rules for Life

SOCIAL AND RELATIONSHIP

Our relationships with our stakeholders (see page 66)

+800 000

SGS Community
Program

Customers

Global
Stakeholder Survey

NATURAL

The natural resources we need to operate (see page 74)

451GWh

1.9mio m3

483GWh

Electricity consumed

Water consumed

Fuel consumed

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BUSINESSES
SEE PAGE 11

INDUSTRIES
SEE PAGE 20

BUSINESS
PRINCIPLES
SEE PAGE 15

+140

COUNTRIES

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POPULATION AND
SOCIAL TRENDS

ECONOMIC
GROWTH

TECHNOLOGICAL
DISRUPTION

OUR OUTPUTS

OUR VALUE

FINANCIAL

Long-term shareholder value creation

CHF 6.6bn

CHF 870mio

16.1%

Revenue

Free
cash flow

Adjusted operating
income margin

MANUFACTURED

Efficient and sustainable services

1st

Laboratory moved
to automated AI

Laboratories using
World Class Services

INTELLECTUAL

Expertize and innovative solutions

4.6mio

Hours of training

SGS Cyberlab

SGS IoT Center

HUMAN

Diverse leaders in a safe working environment

26.7%

0.44

13.6%

Women in leadership

Total Recordable Incident Rate

Natural turnover

SOCIAL

Meaningful stakeholder engagement and strong brand and reputation

1.41mio

91%

Community
investment

Enriched Business
Materiality Matrix

Satisfaction score in our
Voice of the Customer surveys

NATURAL

Carbon neutrality, limited waste and wastewater

159 800

54 000

Metric tonnes of CO2e

Metric tonnes of total waste generated

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• CHF 306mio taxes paid to governments

• CHF 604 mio in dividends proposed

to our shareholders

• CHF 3 357mio paid in wages to our employees

• Enhancing infrastructure efficiency,

integrity and safety

• Emphasizing sustainable capital investment

• Facilitating safer and cleaner mobility

• Enhancing career opportunities,

through training

• Improving knowledge through innovation

• Empowering clients through training

and education

• Protecting the health of employees

through Operational Integrity excellence
and well-being programs

• Reducing social risks by reinforcing human

rights compliance

• Ensuring food, medicine and product safety

• Creating trust in society with our services

• Bringing peace of mind to our customers

• Offering local community support

• Helping governments combat fraud and

protect resources

• Having a carbon neutral strategy

• Minimizing resource depletion

• Protecting the environment

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

RISK INTELLIGENCE

—

EXTERNAL RISKS

These include economic, market, geopolitical, climate
change, legal and regulatory, natural disaster and public
relations risks.

External risks are mitigated in various ways including
but not limited to:

• Insurance policies

• Business Continuity planning

• Sustainable Supply Chain initiative

• Legal and Compliance team

• Economic and geopolitical risk analysis

INTERNAL RISKS

STRATEGIC RISKS

These include business model, intellectual property,
advertising, structural, product life cycle, resource
allocations and social responsibility risks.

Strategic risks are mitigated in various ways including
but not limited to:

• Business and development plans

• Mergers and Acquisitions Policy

• Legal and Compliance

• Investor Relations

• Communications and sustainability

PROCESS RISKS

These risks include business interruption, environmental,
compliance, health and safety, knowledge loss, contractual,
taxation, talent acquisition and retention, employee and
third-party fraud, and data integrity among others.

Process risks are mitigated in various ways including
but not limited to:

• Business Continuity planning

• Operational Integrity, policies and training

• Sustainability, internal communications and

community investment

• Legal and Compliance policies

• IT committee, policies, training and architecture

• Employee branding, global HR strategy

FINANCIAL RISKS

These risks include counterparty, credit, equity,
foreign exchange, interest rate, liquidity, commodities
and opportunity cost among others.

The specific process for financial-risk management
is described in detail in the 2019 Results section
(see pages 157–162).

< BACK TO CONTENTS

RISK GOVERNANCE

The SGS Board of Directors
and Operations Council
oversee risk management
in the organization. The
Operations Council is
ultimately responsible
for identifying company
risks and integrating the
management of these risks
into key business planning
processes. The Board of
Directors reviews these
risks and ensures that the
company has a solid strategic
approach to mitigating them
(see page 98).

To enable better decision
making in response to
risks, the Group employs
a comprehensive,
integrated approach to
identifying and articulating
risks to the business.
This is achieved through
our Risk Management
Framework that is overseen
by the Company’s Risk
Management Oversight
Committee. Chaired by
the CEO, the Committee
gathers executive members,
including the CFO, CCO
and CIO, together with
operational function
representatives from
departments such as Human
Resources, Operational
Integrity and Sustainability.
The Committee is expected
to meet twice a year and
on an ad-hoc basis as
necessary, and reports
directly to the Board.

Our Risk Management
Framework also places
responsibility and
accountability for managing
risk close to our operations,
with “Risk Champions”
owning risk in their
jurisdictions. In addition,
it integrates a broad array
of risk categories (see the
charts on the left) directly
into the management
process. This results in a
robust and comprehensive

approach to risk management
at SGS, which balances
value preservation with
value creation.

RISK OVERSIGHT

To support our Risk
Management Framework,
the Group has a customized
Governance Risk and
Compliance platform named
ANTARES. This tool enables
affiliates, local business
lines and operations to
assess, taking a bottom-up
approach, our potential risks
and the mitigation actions
we have in place should
these risks materialize at
a local level. Additionally,
at Group level, we also
take a top-down approach
with the objective of
identifying and assessing
future global risks to
the company that could
potentially be overlooked
in the bottom-up evaluation.

TASK FORCE ON CLIMATE-
RELATED FINANCIAL
DISCLOSURES

In 2019, we began to adopt
the recommendations
of the Task Force on
Climate-related Financial
Disclosures (TCFD) as part
of our corporate reporting
on climate change. We
introduced the four-pillar
framework proposed by the
TCFD: Governance, Strategy,
Risk and Opportunity
Management, and Metrics
and Targets. The TCFD is
a market-driven initiative
established to develop
guidance for voluntary and
consistent climate-related
financial risk disclosures
in mainstream filings. The
TCFD aim to increase the
measurement of climate-
related risks and in turn
the corporate responses
to these risks. We use
this guidance to evaluate
and price the risks and
opportunities associated

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with climate change, and make
this information available to
investors, credit institutions
and insurance companies.
We recognize that by having
an in-depth understanding of
these risks and opportunities, by
establishing effective mitigation
strategies and by implementing
these strategies throughout the
SGS Group, we are maximizing
our value to society.

2019 RISK ASSESSMENT RESULTS

Our risk assessment for 2019
demonstrated that the vast
majority of leading risks remain
the same and that they are being
adequately mitigated in SGS.

These risks include identifying,
acquiring and retaining the right
talent to achieve objectives,
which continues to be a
challenge; global competition,
with the evolution of customer
needs and pricing requiring
constant attention; the
accelerating pace of technology
and the ease of mass data
collection challenges; our
ability to manage risks related
to data as more sophisticated
cyber-attacks require constant
monitoring to avoid disruption
and harm to our reputation; and
finally, data privacy, data ethics
and data sustainability, which
continue to grow in relevance.

As part of our assessment
process, we also identify
emerging risks that are likely to
impact our business in the long
term (3–5 years). Examples of
these risks are cyber-attacks and
extreme weather events. Both
risks are already being mitigated
across the Group. To protect
SGS against cyber-attacks,
we have protection strategies
in place that we continuously
test and update, while our
Business Continuity plans ensure
that we are fully prepared for
any extreme weather eventuality.

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BUSINESS MATERIAL TOPICS

At SGS, we are committed to adding value to society through and for our stakeholders. As part of our
assessment process to identify material topics, we engage with our stakeholders on a regular basis to inform
our strategy and find out more about their expertize, expectations, feedback and priorities. We do this through
various communication channels that are explained in detail in our 2019 Sustainability Report.

MATERIALITY ASSESSMENT

In 2019, we carried out an in-depth
stakeholder engagement exercise to
gather inputs to update our Business
Materiality Matrix. The exercise involved
consultations with over 800 stakeholders
in 74 countries, including customers,
employees, suppliers, investors,
non-government organizations and
sustainability professionals. Alongside
the survey, we conducted a detailed
benchmark review of globally relevant
and sector-specific sustainability issues
and trends. As a result, we obtained a
list of relevant topics for our stakeholders
applicable to our organization.

The risks have been integrated into
the list of relevant topics for the
company, as determined by the
Risk Management and Oversight
Committee and Board of Directors,
and as assessed by the Operations
Council, in order to determine the
impact on the organization, considering
the effect each topic would have on the
business if not managed appropriately.

The outcome of this comprehensive
process was the development of our
revised 2019 Business Materiality Matrix.

BUSINESS MATERIALITY MATRIX

Our Materiality Matrix maps topics
against their importance to stakeholders
and their impact on SGS, providing
us with a powerful analytical tool.
The topics that are most important
to the organization are visible in the
darker section of the matrix. These
are considered key topics that shape
our strategy and reporting. All other
topics, although less material, remain
an essential part of our sustainability
management systems and are
systematically reevaluated to determine
if they have become more material
to the organization.

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Sustainable Supply Chain

Integrity & Ethical Behavior

Diversity & Inclusion

Health, Safety & Well-being

Talent Attraction & Retention

Training & Development

Corporate Governance

Risk & Business Continuity Management

Regulatory Compliance

Mitigation & Adaption to Climate Change

Information Security & Data Protection

Water & Effluent Management

Customer Relationship Management

Waste Reduction & Management

Community Investment

Service Innovation

Responsible Use of Materials

Tax Strategy

Freedom of Association

Preventing Air Pollution

Public Policy

Biodiversity

W
O
L

LOW

Indigenous Peoples' Rights

IMPACT ON SGS

HIGH

For further information on Material Topics please refer to our 2019 Sustainability Report: www.sgs.com/cs-report-2019.

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THE SUSTAINABLE DEVELOPMENT GOALS

Adopted in 2015, the United Nations Sustainable Development Goals (SDGs) aim to eliminate poverty,
protect the planet and ensure prosperity for all. Each of the 17 goals has specific targets that define
global priorities and aspirations for 2030. Our Sustainability Ambitions 2020 are closely linked
to the SDGs and all our services support them.

MOST COMMONLY SUPPORTED SDGs

BY SGS SERVICES

BY SGS OPERATIONS AND SUPPLY CHAIN

OUR SERVICES

AGRICULTURE, FOOD AND LIFE

MINERALS

OIL, GAS AND CHEMICALS

CONSUMER AND RETAIL

CERTIFICATION AND BUSINESS ENHANCEMENT

INDUSTRIAL

ENVIRONMENT, HEALTH AND SAFETY

TRANSPORTATION

GOVERNMENTS AND INSTITUTIONS

OPERATIONS AND SUPPLY CHAIN

COMPLIANCE AND INTEGRITY

HUMAN RIGHTS

SUSTAINABLE PROCUREMENT AND SUPPLY CHAIN

TALENT MANAGEMENT

DIVERSITY AND EQUAL OPPORTUNITIES

OPERATIONAL INTEGRITY

CLIMATE CHANGE

WATER AND WASTE MANAGEMENT

LOCAL COMMUNITY SUPPORT

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

OUR VALUE
TO SOCIETY

—

Organizations depend on various forms
of capital for their success. Financial,
manufactured, social and relationship,
human, natural and intellectual capital are
the six commonly recognized forms of
capital that are both the inputs and outputs
of business activities. Throughout the year,
the capitals undergo change, according to
levels of use and investment flows. Providing
an overview and analysis of these capitals
is fundamental to Integrated Reporting.

Operate in the Success Zone

Financial Capital

Manufactured Capital

Intellectual Capital

Human Capital

Social and Relationship Capital

Natural Capital

Measuring Our Value to Society

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FINANCIAL CAPITAL

The pool of funds available to us,
including debt and equity finance.

NATURAL CAPITAL

The natural resources we need
to operate, such as land, water, air
and the ecosystem.

MANUFACTURED CAPITAL

Infrastructure, equipment
and tools that contribute
towards our service provision.

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V A L U E TO SOCIETY
I N D USTRIES
B E NEFITS
S E RVICES

PURPOSE-
DRIVEN
LEADERSHIP

SOCIAL AND
RELATIONSHIP CAPITAL

The mutual benefit derived
from the relationships we have
with our stakeholders and
intangibles associated with
the brand and reputation.

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INTELLECTUAL CAPITAL

Organizational, knowledge-based
intangibles, including intellectual
property, systems, procedures
and protocols.

HUMAN CAPITAL

The skills and know-how of our
employees, including their commitment,
motivation and ability to perform.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

Adding value
through
our services

Our services can create
competitive advantage
for businesses while
simultaneously having a
positive impact on society.

OPERATE
IN THE
SUCCESS
ZONE

PETER POSSEMIERS
ENVIRONMENT, HEALTH AND SAFETY,
Executive Vice President

“Getting our clients into
the Success Zone is how
SGS adds value to society
through its services.”

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DOUBLE POSITIVE TRANSFORMATION

+ IMPACT ON SOCIETY
- IMPACT ON BUSINESS

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SUCCESS ZONE

IMPACT ON BUSINESS

- IMPACT ON SOCIETY
- IMPACT ON BUSINESS

- IMPACT ON SOCIETY
+ IMPACT ON BUSINESS

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USD
5.7 TN

Global health costs
from air pollution –
equivalent to
4.4% of global GDP
in 2016 – World Bank

224

Of the world's largest
companies have
committed to 100%
renewable energy
by 2050 at the
latest through the
RE100 Initiative

A failure to protect
your stakeholders
adequately could
jeopardize all future
operations

Identifying and
managing risk doesn’t
just help prevent
serious incidents –
the process often
positively enhances
your business
performance

CLOSURE

INCIDENT

RISK

COMPLIANCE

90%

Of bottled
water contains
microplastics – WHO

Mud sticks. A single
incident can damage
your reputation for the
long term – negatively
impacting recruitment,
sales and investment for
years to come

The minimum standards
have been achieved, and
you can focus on what
you do best – running
your business

We have recently launched a
campaign in our Environment Health
and Safety business called the
Success Zone. Yet, the concept
applies just as effectively to the rest
of the Group’s businesses.

Over the last couple of years,
sustainability has become even more
important to businesses. You can see it
through the key performance indicators
companies are adopting and through
the sustainability reports that are
being generated. Banks and investors
want to make sure they are investing
in sustainable companies and impact
investing is on the rise.

Businesses are increasingly looking to
move beyond the minimum regulatory
requirements and turning to the
TIC industry as a reputational and
operational enhancement mechanism.
Our services improve business
performance, allowing our customers
to deliver for their shareholders and to
be good corporate citizens and deliver
value for society. Getting our clients
into the Success Zone is how SGS adds
value to society through its services.

We call this “double positive
transformation”. When you are operating
in that space, you really are leading
the way. Whatever your starting point,
we can move you closer to this ideal
over the long term, helping you to add
value for customers, stakeholders

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SUCCESS ZONE

OUR ENVIRONMENT,
HEALTH AND SAFETY
SOLUTIONS HELP
EXTRAORDINARY
BUSINESSES BOOM
AND SOCIETY THRIVE
– CREATING A LEGACY
FOR YEARS TO COME

and society, and
making you a more
successful business
in the process.

No company
should fail
to see that in
the long term,
what’s positive
for your
stakeholders
is also positive
for business.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

FINANCIAL CAPITAL

—

We add value to society through paying
taxes to governments, dividends to investors
and wages to employees. By generating
profit we can reinvest in growth,
innovation and improving our services
to our customers.

Business Review

Organic Growth

Balanced Portfolio

Investor Relations

Strategic Transformation

2019 Acquisitions and Strategic Partnerships

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BUILDING
VALUE

“Decisions should

not just be
made based on
financial KPIs.”

DOMINIK DE DANIEL
Chief Financial Officer

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

A NEW
MINDSET

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In February 2019, SGS appointed
Dominik de Daniel as its new
Chief Financial Officer. With
close to 20 years of experience
as a CFO, he has hit the ground
running at SGS.

Q WHY DID YOU

JOIN SGS?

Firstly, I like to work for a leader
and I like working in business
services. SGS is the clear global
leader in the TIC industry.
Secondly, I was impressed
by (CEO) Frankie’s
vision and strategy
as well as the
structural growth
opportunities.
Finally, I felt
there was an
opportunity for me
to add value and
on a personal level
that interested me.

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Q WHAT ARE YOU HOPING

TO ACHIEVE AS CFO?

I want to see the whole Finance
organization becoming a very
strong business partner to the
business lines and regions.
I also want to implement an
Economic Value Added (EVA)-
driven performance mindset
and culture.

Q WHY THE FOCUS

ON EVA?

Firstly, I should say that SGS
is already generating very
healthy, industry-leading returns.
But I believe we can improve
them further by winding down
areas that are
‘destroying
value’ (to use
EVA parlance)
and deploying
more capital
towards higher
growth and
value-creating
opportunities.

The focus on value creation can
provide us with new opportunities
in terms of investments,
innovation and new products
and services we can bring to the
market. It can help with expanding
our market share in some areas
by driving more of our resources
into high-growth areas.

Q WHO BENEFITS

FROM THIS EFFORT?

Obviously, with EVA, shareholders
are the main beneficiaries. But I
always think that you need to look
beyond that. If you don’t achieve
adequate returns, none of the
other stakeholders can benefit
from your market presence. We
need adequate returns so that
we can invest in new ideas and
solutions for our customers for
example. Employees benefit from
increasing EVA from a financial
and development perspective.
Solid returns also benefit our
suppliers because we can
afford to pay for their services.
Society benefits because we pay
more back through taxes and
other investments.

“I felt there was an opportunity for me to add value and on a personal level that interested me.”

WHAT IS EVA?

EFFICIENCY AT SGS

Economic Value Added
(EVA) assesses company
performance by deducting
the cost of capital from net
operating profit after tax
(NOPAT). The measurement
shows whether a company
is creating value and how
high the value creation is.

This concept can be
decentralized to individual
business lines, regions or
services, to get a clearer
understanding of which
areas of a business are
‘creating or destroying’
value. This allows managers
to make more effective
strategic decisions.

Q WHY IS SGS STRATEGICALLY

MOVING TOWARDS MORE
HIGH-VALUE WORK AND
AWAY FROM LOW-MARGIN,
HIGH-VOLUME WORK?

Good question. If you look at
the data, a lot of the high-value
work has higher structural growth
potential. In the long term, that
is what we need to focus on
because that is where the value
creation is. That being said, in
several of our businesses with
lower single-digit growth potential,
we have a very strong market
position and create a lot of value.
There is no reason to walk away
from this business. We would
rather take the incremental cash
generated and re-invest it into
structural growth opportunities.

Q SGS WAS ONE OF THE FIRST

COMPANIES TO EVER PUT A
FINANCIAL VALUE ON THEIR
VALUE TO SOCIETY. THIS IS
A BOLD MOVE – WHAT ARE
YOUR THOUGHTS ON IT?

First of all, it’s obvious that
investment decisions should
not just be made based on
financial KPIs alone. There are
a lot of non-financial KPIs that
are extremely relevant. Take
attrition rates. How many people
are leaving your company is a
very important KPI and one that
probably does ultimately show
up in your financial KPIs. I would
argue that a strong employer
that retains a strong workforce is
likely to be more profitable than a
company with high staff turnover.

< BACK TO CONTENTS

SGS currently has three global efficiency programs.

Firstly, our global employee initiative ‘Add Value with
Lëss’ (see page 79) aims to remove inefficiencies
from our business. This includes reducing energy
consumption and expenditure. Secondly, at a
portfolio level, our structural optimization program
has created a lot of efficiency gains by reducing
duplications in the network. Thirdly, our World Class
Services program will create efficiencies through
process optimization in laboratories and offices.

WASTE-
REDUCTION
PROGRAM

STRUCTURAL
OPTIMIZATION
PROGRAM

WORLD CLASS
SERVICES
PROGRAM

So actually, the non-financial
KPIs are sometimes much more
interesting to analyze because
often improving these aspects can
feed through to the financial side
of things. Ultimately, of course,
companies need to look at both.
We are ahead of the curve in this
and I have to say – being new to
SGS – that what the company is
doing in terms of value to society
is very impressive. I think a lot of
people would like to do something
similar, but SGS is leading the way.

PRICING FOR VALUE

THE DASHBOARD REVIEW

In June 2019, we announced
the sale of Petroleum
Service Corporation (PSC)
to Aurora Capital Partners
for USD 335 million.
The disposal represented
a significant milestone
in the execution of our
dashboard review strategy.
PSC had an annual
turnover of approximately
USD 300 million and
employed 3 500 people.

In July, we acquired a
majority stake in US-based
Maine Pointe LLC, a supply
chain and operations
consulting firm. The
purchase adds another
layer of competence to the
Group and has significantly
accelerated the growth of our
Certification and Business
Enhancement service into
the advanced consultancy
services space.

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OSCAR BECKMAN
Global Product Manager,
EHS Laboratories

SGS offers a wide range of Environment Health and Safety services to customers
around the world to help them achieve sustainability objectives. They choose us for
our reputation, history, expertize, and value we provide.

We need to respond to ever-changing customer needs, regulatory requirements
or advances in technology and science through regular investment in our people
and infrastructure.

Strategically, SGS is focusing more than ever on enhancing our value to customers
while ensuring our pricing is reflective of it. For me, this all starts with our fundamental
customer promise: ‘when you need to be sure’. What we do is important and customers
come to SGS to ensure the quality of their products, assets, business operations and
activities are safe for their customers, employees and the environment.

This is reflected in our pricing excellence strategy where we consider the overall
service and value provided, while remaining competitive. For example, some tests,
such as that for E. coli, are low cost but require significant handling outside the
laboratory. From preparing and shipping sampling sets and receiving, processing and
testing to data reporting, a lot takes place for a single bacteria test, which is critical
for human safety.

After thorough analysis and customer engagement, in 2018, in Ontario, Canada, SGS
introduced a series of charges and price increases that in the time since have not only
partially off-set these costs but added CHF 330 000 of low-risk net revenue growth,
contributing to a 4% overall price increase in 2019. This model is now being replicated
throughout the global network.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

BUSINESS REVIEW

AGRICULTURE, FOOD AND LIFE

1 074

Revenue in CHF million

3.9%

Constant currency growth in 2019

MINERALS

753

Revenue in CHF million

3.7%

Constant currency growth in 2019

2019

2018

OVERVIEW

OUTLOOK

4
7
0

3
6
0

• Solid organic growth supported by

all business verticals

• Trade growth supported by

buyer-driven nominations and supply
chain contracts

2019

2018

• Strong demand for Food TIC services

• Sustained growth in Life across
Laboratory and Clinical activities

• Food and Life continue to lead growth
with strong market fundamentals and
recent investment in growth initiatives

• Continued competitive differentiation
achieved through technology-based
services in Agriculture

• Digital initiatives to drive growth

and efficiency

OVERVIEW

OUTLOOK

• Overall solid growth despite a softer

• Exploration spend flat or slightly lower

mining market

versus 2019

3
5
7

0
5
7

• Trade and Inspection delivered strong

• Solid pipeline for onsite laboratories

organic growth

• Geochemistry achieved double-digit
growth for outsourced laboratories

• Metallurgy and Plant Operations
declined due to project delays

• Increased demand for innovative,
technology-based field services

• Growth projected for all trade services

• Continuous improvement projects in

laboratories to yield improved margins

OVERVIEW

OUTLOOK

• Disposal of Plant and Terminal

• Trade to remain stable

0
2
2
1

5
7
0

Operations in the Netherlands and
the USA completed successfully

• Trade remained stable despite

competitive pressure

2019

2018

• Upstream delivered double-digit

organic growth across the
entire segment

• Upstream will continue to grow well

and optimize asset utilization

• Non-Inspection Related Testing

to remain broadly flat despite strong
insourcing trends

• Remaining business segments

expected to deliver profitable growth

OIL, GAS AND CHEMICALS

1 075

Revenue in CHF million

(10.6)%

Constant currency growth in 2019

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1 021

Revenue in CHF million

5.7%

Constant currency growth in 2019

1
2
0

7
8
9

2019

2018

OVERVIEW

OUTLOOK

• Strong organic growth across

• Continued market position

business units

• Electrical and Electronics driven

by gains in safety testing and solid
performance in restricted substance
testing, wireless and functional safety

• Solid growth in Softlines delivered by
new sourcing countries, sustainability
related solutions and a focus on
footwear and athleisure

• Continued successful development in
hardgoods and a strong performance
in toys testing

improvement for Electrical and
Electronics from focused investments

• Capabilities and capacity expansion
to continue in new sourcing countries

• Accelerate development in

new technologies

• Innovation and digitalization
to drive efficiencies and
performance improvement

CERTIFICATION AND BUSINESS ENHANCEMENT

447

Revenue in CHF million

13.2%

Constant currency growth in 2019

OVERVIEW

OUTLOOK

7
4
4

4
0
4

2019

2018

• Double-digit growth driven
by acquisitions in technical
consultancy field

• Good organic growth overall as

Management System Certification
recovers from the transition

• Stable revenue in Management

• Strong growth in other activities,

System Certification and Training
in challenging post-transition
market conditions

particularly in technical consultancy

• Further margin improvement driven
by structural cost saving measures

• Strong organic growth in Performance
Assessment driven by large contracts
in South America

• Improved margin due to optimization
measures and business mix change

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

INDUSTRIAL

930

Revenue in CHF million

2.9%

Constant currency growth in 2019

0
4
9

0
3
9

2019

2018

OVERVIEW

OUTLOOK

• Outstanding margin recovery

• Focus on Manufacturing and

combined with growth in most
markets served

• Slight decline in Oil and Gas from
proactive portfolio management
and focus on large projects

• Strong growth in laboratory

testing services in Manufacturing
and Infrastructure

• Power and Utilities benefited from

renewable opportunities

Infrastructure markets

• Opportunities in Power and Utilities

• Continuous development of the

Laboratory network and expertize

• Expand presence and diversify
activities in the USA market

• Selective approach to Oil and

Gas opportunities

ENVIRONMENT, HEALTH AND SAFETY

540

Revenue in CHF million

7.1%

Constant currency growth in 2019

OVERVIEW

OUTLOOK

• Momentum in all business units

and good margin progress

• Increased market demand in fire safety,
air sensors and ballast commissioning

0
4
5

7
1
5

• Recent acquisitions boosted growth

in Health and Safety sector

• Sustained growth in Laboratory

2019

2018

services with efficiency improvements

• Marine services benefited from

market penetration in Asia Pacific,
Europe and the USA

• Global rollout of new innovative
services: eDNA, robotics and
artificial intelligence

• Benefit from recent optimization
and dashboard actions undertaken

• Focus on acquiring companies
that enhance business offering

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TRANSPORTATION

500

Revenue in CHF million

(3.5)%

Constant currency growth in 2019

1
4
5

0
0
5

2019

2018

OVERVIEW

OUTLOOK

• Testing services delivered moderate

• Regulated services negatively

growth offset by declines in Regulated
and Field services

• Regulated services affected by contracts

impacted by the end of contracts in
2019, while new contracts will start
in H2 2020

ending and increased competition

• The disposal of low-performing

• Field services impacted by completion
of supplier certification in 2018 for
new IATF 3 standard

operations in the USA will positively
impact Field services profitability

• Testing services growth expected

to improve

GOVERNMENTS AND INSTITUTIONS

260

Revenue in CHF million

(4.4)%

Constant currency growth in 2019

4
8
2

0
6
2

2019

2018

OVERVIEW

OUTLOOK

• Top and bottom line impacted by

• Underlying drivers in trade facilitation

unanticipated changes in import and
transit policies and delays in collection

• Positive impact of the European
directive on tobacco products

• Remote inspection and optimization
of container tracking services with
one global operational center launched
in Q3 2019

and compliance remain strong

• New digital services launching in 2020

• Solid opportunity pipeline for TransitNet

• Automation and robotization of low

value-added tasks

• Pursue acquisition strategy started

in 2017 in digital trade and non-trade
related services

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ORGANIC GROWTH

BALANCED PORTFOLIO

SGS continues to increase revenue and
shareholder value from existing affiliates
at a level that is well above the TIC sector
average. Despite the recent commodities
downturn, we have made solid progress in
repositioning divisions, strengthening our
core business through new services and
making management changes, all of which
have driven solid organic growth across
the majority of our services.

These adjustments complement our
innovation and efficiency initiatives, through
which we are continuously improving
productivity in order to provide enhanced
customer service.

ACHIEVEMENTS

2.6% organic revenue growth

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The SGS portfolio covers nine
business lines that service
multiple global industries, each
with a large and diversified
customer base. This diversified
structure allows us to balance
our short-term growth and long-
term objectives to maximize
returns while reducing
our vulnerability to market
fluctuations, increasing our
flexibility to react to market
developments, and minimizing
our exposure to risk.

Our portfolio management does
not focus only on growth and
margins but also on return on
invested capital (ROIC) as a key
driver of value for shareholders.

ACHIEVEMENTS

Dashboard for asset review
successfully deployed

Organic revenue growth across
7 business lines

We use a dashboard process
to analyze and actively manage
the criteria for business
performance and ensure all
changes to the portfolio are
guided by our objectives
to advance sustainability,
accelerate growth and increase
productivity.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

INVESTOR RELATIONS

Investor Relations plays a critical role in supporting the financial
community to make informed decisions. By formally
communicating with our shareholders, bond holders, analysts
and investors, we foster transparency, trust and accountability.
The Group also engages with the proxy agencies that advise
certain shareholders on governance and voting matters.

SGS completed a comprehensive global annual Investor Relations
program in 2019. The Investor relations team met over 440
investors and SGS Senior Management attended 18 investor
conferences. We also hosted an investor site visit in the USA to
our laboratories in Fairfield. In addition, our annual Investor Days
event, which provides a significant level of access to our Senior
Management and the Operations Council, was held in Changzhou
and Taipei representing our North East Asia (NEA) region.

We look forward to presenting the next stage of the SGS strategic
evolution at the 2020 Investor Days, which will be held in
Europe on 5–6 November.

Details of these meetings can be found on our website:
www.sgs.com/en/our-company/investor-relations/investor-overview.

ACHIEVEMENTS

440 investors met by IR team and
Senior Management

18 investor conferences attended

Investor Days attendance was up
20% compared to other events held
outside of Europe

STRATEGIC
TRANSFORMATION

We continue to drive
operational excellence and
improve productivity through
our shared service centers
in a more mature Global
Business Services model.

WORLD CLASS SERVICES
AND OPERATIONAL
EXCELLENCE

As announced in our 2018
Annual Report, SGS has
started implementing a new
methodology called World
Class Services (WCS) to
improve productivity, reduce
waste and enhance working
conditions. World Class
Services is a version of
World Class Manufacturing
– a continuous improvement
approach that was
originally developed in the
manufacturing industry. It is
designed to foster a culture
which improves safety,
quality and efficiency, and
eliminates waste.

The ambition is to achieve
zero accidents, zero waste,
zero defects and zero
breakdowns, and to hold. This
endeavor will not only benefit

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us but also our customers.
Higher testing quality and
quicker turnaround times
are examples. To date,
20 SGS sites have adopted
the WCS methodology.

While WCS applies a
systematic approach,
we have also continued
to employ other selected
initiatives. For example,
in some of our food
laboratories, focused
improvements have
been applied to enhance
performance and capacity,
and extend capabilities.
Actions included process
reorganization, workflow
optimization and automation.
These actions have improved
data sample management
and reporting processes.

We have further extended
the use of robotics process
automation solutions to
reduce human error and
improve the quality of our
services. This has been
deployed in a range of
activities, including laboratory
operations and manual
data entry, but also on
traditional services like ISO
questionnaires. It has notably
improved productivity.

GLOBAL BUSINESS SERVICES

Our Global Business
Services model has improved
efficiency by harmonizing the
Group’s back-office activities
and support functions. This
has increased productivity,
through shared service
centers, regional hubs and
outsourcing. A new shared
service center has been
launched in Colombia,
bringing our total number
to four.

Our shared service centers
continue to grow, helping
us achieve operational
excellence. The consolidation
of transactional and
standardized activities in
the centers has further
progressed with the
centralization of additional
Procure-to-Pay, Order-
to-Cash and Record-to-
Report processes for seven
countries in Europe and Asia.

The shared service centers
are now also leveraging
their scale to impact the
broader value chain. For
our Environment, Health
and Safety business, for
example, we have started
to provide offshore data

management services
to some laboratories,
improving turnaround times
and creating cost savings,
making the process faster
and more efficient for
customers. Other business
lines, notably Certification
and Business Enhancement
and Governments and
Institutions Services, are
taking advantage of these
capabilities to support their
growth plans.

ACHIEVEMENTS

20 sites using World
Class Services

150 days of
classroom training

200 kaizen events

1 new shared service
center set up in Colombia

1 400 shared service
center employees

4 shared service centers
(Manila, Katowice,
Changzhou, Bogota)

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2019 ACQUISITIONS AND STRATEGIC PARTNERSHIPS

SGS has long made strategic acquisitions to support its goals. This is particularly true for geographic areas with service gaps
or where we need to build skills and technological capacities. In some instances, we acquire businesses offering similar
services so that we can benefit from economies of scale and technical synergies. In 2019, we made 11 acquisitions and
one minority investment.

LEANSIS
PRODUCTIVIDAD
(MAJORITY STAKE)

FLORIAAN B.V.

SPAIN

NETHERLANDS

TESTING, ENGINEERING
AND CONSULTING
SERVICES, INC.

USA

Established in 2005, LeanSis Productividad
provides operational and manufacturing
training and capacity building services
to over 200 clients across Spain.

Established in 2004, Floriaan provides
integral fire safety services, addressing
complex safety challenges, to industrial and
real estate companies in the Netherlands.

TEC Services is a leading independent
testing, engineering and consulting services
laboratory, focused on meeting the quality
requirements of the construction industry.

PT WLN INDONESIA
(MAJORITY STAKE)

CHEMICAL
SOLUTIONS LTD.

i2i INFINITY LTD.

INDONESIA

USA

UNITED KINGDOM

WLN is a leading provider of water,
soil and air testing services to multiple
industries across Indonesia.

CSL is a nationally recognized testing
laboratory, specializing in elemental and
heavy metal testing for food, nutraceuticals,
pharmaceutical and cosmetic products.

i2i is the leading provider of Electronic
Certificates of Origin in the UK. The company
provides customs compliance services to
exporters and chambers of commerce using
innovative proprietary software solutions.

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MAINE POINTE LLC
(MAJORITY STAKE)

USA

VIRCON LTD.
(20% OF OUTSTANDING
SHARES)

HONG KONG

ASSETS AND OPERATIONS
OF FORENSIC ANALYTICAL
LABORATORIES, INC.

USA

Maine Pointe is a supply chain and
operations consulting firm that delivers
business process optimization and
improvement through its proprietary
methodology Total Value Optimization™.

Vircon operates in the fast-growing
Building Information Modelling market
in Hong Kong and elsewhere in the North
East Asia region.

FALI is one of the leading providers of
industrial hygiene, mold, bacteria, metals,
particles, contamination control and
asbestos and fibers testing on the West
Coast of the USA.

DMW ENVIRONMENTAL
SAFETY LTD.

UNITED KINGDOM

ARGUS
INTERNATIONAL, INC.
(MAJORITY STAKE)

USA

BUSINESS AND ASSETS OF PPE
TESTING AND CERTIFICATION
ACTIVITIES OF FIOH

FINLAND

DMW is a leading solution provider of
health and safety services, including
asbestos surveys, monitoring and analysis,
building compliance services, water hygiene
services (legionella risk assessment), fire
safety audits and occupational hygiene.

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ARGUS is a provider of data-driven
inspection, audit, safety and compliance
solutions to the global aviation market.

Previously operated as an independent
public law institution, SGS has acquired the
personal-protective-equipment testing and
certification activities of the Finnish Institute
of Occupational Health.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

MANUFACTURED
CAPITAL

—

Our services help improve many aspects
of our customers' manufactured capital.
In our own operations we add value
to society by enhancing infrastructure
efficiency and safety through sustainable
capital investment.

Procurement and Supply Chain Management

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ADVANCING
ENERGY
STORAGE

“Every step along
the way, we are
helping to make
a better, more
sustainable world.”

LAURA GARCIA BAGLIETTO
Division Manager e-Mobility, Germany

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END-TO-END
SUSTAINABILITY

Electric batteries require cobalt,
which due to a quirk of geography,
has to be sourced almost
exclusively from the Democratic
Republic of Congo. There are
well-known sustainability issues
around this activity, including risks
of child labor. SGS provides
services to assure the sustainability
of the raw materials, as well as
supporting the transition to electric
vehicles through testing the final
components. We also help develop
recycling technology for lithium-ion
batteries. Every step along the
way, we are helping to make
a better, safer world.

Battery storage:
DRIVING
MORE THAN
JUST BETTER
VEHICLES

In the automotive space, we are supporting the

transition to electric vehicles (EVs) by helping our

customers to overcome technological obstacles,

make their products safe and meet regulatory approval.

By helping to usher in a new era of e-mobility we are

also helping to tackle the climate crisis.

To reach Paris Agreement targets, we need to switch to
renewable energy. But to do that we need to deal with a
fluctuating renewable electricity supply. This means storage.
One of the most effective potential ways to deal with the
storage problem is to store energy in a decentralized fashion.
The rising popularity of electric vehicles makes cars a
surprising contender. Storing energy in cars has the advantage
that their peak usage times are limited to rush hours. Surges
in power requirements in factories could, for example, be
managed from the energy in car batteries parked outside.
The cars could then be recharged from local solar energy
generated on the factory roof, during non-peak times.
With the marginal cost of electricity approaching zero,
electricity could be freely exchanged for the mutual benefit
of everyone.

THE TRANSITION
TO NEW TECHNOLOGY

We not only expect technological
disruption, we are helping to shape
it (see page 21). This means we can
anticipate where the market and
technology will be in five years time.
This is important because we can
develop testing services that will be
fit for purpose then. For example, we
anticipate a major increase in EV testing
in Europe from 2022 onwards when
new European legislation is expected
to make EVs more attractive as fleet
cars. Additionally, as 5G is rolled out in
the next 3–4 years, vehicle-to-vehicle,
vehicle-to-infrastructure and vehicle-
to-device communication and security
testing will become more important.
SGS is part of the 5G Automotive
Association and our colleagues in
Korea are already contributing to
the standardization of these areas.

“We can
anticipate
where the
market will
be in five
years time.”

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SGS e-Mobility laboratory, Gelting, Germany.

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THE TIME IS RIGHT

For the first time, we are seeing electric cars being designed
specifically as electric vehicles from the ground up – not as
conversions of existing vehicles. This allows for new interior
design and the range of electric vehicles is increasing with
each new generation. As a result, users are getting more value
for money. People will see that these cars perform and provide
a better user experience. The end of 2020 will be a turning
point for electric vehicles.

“I believe the end of 2020
will be the turning point
for electric vehicles.”

SAFETY

According to OECD data, there were more than
20 000 fatalities on German roads in 1970.
By 2018, this figure had fallen to around 3 300.
Safety has clearly improved but more can be
done. Today, the worst problems on German
roads are road traffic accidents involving vehicles
and pedestrians, bikes and motorbikes. Legislation
is expected by 2022 that will make it compulsory
for all cars to be equipped with radar detection
systems. Interestingly, this is part of the electronic
circuitry that we will eventually need for fully
autonomous vehicles. SGS is helping to test these
devices. Battery safety is much better now, too.
In the old days, electric batteries had a reputation
for igniting, but that is very much a problem
of the past. Yet as the range and power of EVs
increases, the quest for ever safer batteries
continues. In our laboratories, we ‘drown’
batteries in water and simulate car crashes,
where batteries are surrounded by fire. We are
playing an important role in ensuring that batteries
are safe for use.

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KNOWLEDGE
SHARING

We develop advanced testing
technology within the Group.
For example, we have to simulate
and test the effects of ten years
of driving on car batteries (within
a six-month timeframe). To do this,
we have tailored shaker tests that
rattle the battery the way driving
might do. The technology is highly
innovative and can potentially benefit
other units within SGS.

100% RENEWABLE ENERGY

Our e-Mobility testing laboratory in Munich
is run on 100% renewable electricity. Locally
produced, laterally scaled with smart distribution
and storage, we are on the cusp of a genuine
paradigm shift. Our e-Mobility laboratories
are ISO 14001 certified and we are constantly
working to improve our sustainability KPIs.
Across the global network, 94% of our
electricity is currently from renewable sources
and we have pledged to move to 100% by 2020.

THE FUTURE

The perfect picture in 2030 would be the
greatest possible use of electric vehicles
and renewable energy. In the long term,
e-mobility will contribute to sustainable
mobility in society. This will be a key
element in cleaning up the environment.
It would mean that sustainable energy is
driving the grid, with e-mobility playing
a key role in stability, ‘peak-shaving’ and
storage of energy on the grid.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

A
RISING
WIND

The energy markets are
changing. Renewable energy
moving from the periphery to
the center isn’t a hypothetical
future possibility anymore. It is
happening right now. Solar may
have captured the headlines
but wind energy is blowing up
a storm of its own.

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FREDERIC SCHENK
Group Vice President,
Head of Business Development
Industrial Services

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“We will also need to develop
improved storage technology but
this is happening right now. We are
seeing a significant development
in battery technology, particularly
with car manufacturers teaming up
with utility companies to build huge
battery stations. These can store
energy and then release it when
needed to smooth supply.” There are
also decentralized battery options
emerging with regard to electric cars
(see page 43).

SGS LEADERSHIP

“We were one of the players who
helped to develop the European
market,” Frederic explains. “Now
we are supporting these same
companies with their expansion
overseas, particularly in Asia.”
There are a number of reasons they
are choosing to work with us. Firstly,
our track record of serving these
customers during their emergence
in Europe, our 141-year history

(these are long-term projects
and our customers need
partners in place for the
whole economic lifecycle)
and our global footprint.

“We have the biggest and
strongest network in Asia
in the TIC Industry”, says
Frederic. “We supervise
the building of the
windfarm foundations,
then oversee the health
and safety elements during
construction, as well as
supervising the build of
the mast, turbines and

components. Obviously, with our lab
network, we offer testing services
on all the materials and coatings,
and once the site is up and running,
we offer in-service inspections
and non-destructive testing.
Fundamentally we offer a full-blown,
end-to-end quality assurance
solution.” By supporting our
customers with their manufactured
capital inputs and outputs, we are
helping the spread of wind energy
around the world – and doing our bit
to help tackle the climate crisis.

“THE TIPPING
POINT FOR
WIND HAS
ALREADY
BEEN
REACHED,
AS IT HAS
FOR SOLAR”

Another major
trend Frederic
sees is that
the renewable
energy industry
is going
global. “There
are several
very large
players who
are moving
out of their
home markets
and moving to
areas like the
USA, Asia and
the Middle East. Sometimes they
are doing it alone, sometimes they
are partnering with traditional energy
companies, such as oil and gas
companies, who are also beginning
to invest heavily in renewables.”
“At the moment, the North Europeans
have a competitive advantage in
the development, financing and
operation of offshore windfarms",
he notes, and it is these firms that
are leading the push into other
markets. Notable activity in these
areas is taking place in Taiwan,
South Korea and Japan. The Eastern
Seaboard in the USA, from New
England to the mid-Atlantic states,
is another rapidly expanding market.
SGS is very much at the forefront
of these developments.

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THE IMPORTANCE OF WIND ENERGY

“I think the cost tipping point has
already been reached for wind
energy in the same way as it has for
solar,” says Frederic Schenk, Head
of Business Development, Industrial
Services. “We are looking at costs
of 0.45 to 0.7 Euro per KWH in
certain regions, which means that it
is competitive with newly installed
hydroelectric and gas-fired power
and largely less expensive than
coal-fired or nuclear power.”

If solar seems more visible, that’s
because it literally is. While solar
panels can be set up on rooftops
everywhere, the most effective
development approach for wind
energy is offshore windfarms.
These can be scaled up in terms
of size and power output but
have massively less social and
environmental impacts compared
to onshore windfarms.

While they may be deliberately
out of sight of the public, they are
most definitely in the minds of
energy experts. A large offshore
windfarm now has around the same
production capacity as a mid-size
traditional power plant. So, while
solar lends itself to local production
and smart distribution, wind still
follows a centralized production
model favoring big players and major
infrastructure investments.

NEW MARKET TRENDS

An engineer by training, Frederic
has spent 16 years with SGS,
witnessing the change in the energy
landscape firsthand. “We are seeing
large investments in distribution in
places like Germany, to allow for the
electricity produced in the North Sea
to be transmitted to the industrial
south”, he explains.

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PROCUREMENT AND
SUPPLY CHAIN MANAGEMENT

In 2019, we continued the implementation of our 2020
Procurement and Supply Chain strategy, which aims to achieve
cost savings, efficiency improvements and innovations that
support profitable growth. Working together with stakeholders
and suppliers, we have continued our work based on our
four strategic pillars: cost and cash flow leadership, global
sourcing solutions, sustainable procurement and supply chain,
and contribution to the Inspection and Laboratory of the
Future program.

ACHIEVEMENTS

Internal purchasing catalog usage reached 47%

'Uber for business' launched across the SGS Group,
supporting employee mobility

Order-Transport Management (OTM) online system
rolled out in France and the USA, enabling easy evaluation
of delivery options

Usage of the SGS eSourcing tool has almost doubled
reaching 44% online sourced spend in 19 countries

Rollout of SGS Supplier portal continued, reaching
66 000 electronic invoices

1. COST AND CASH FLOW LEADERSHIP

Procurement and Supply Chain
Management further increased
incremental gross savings in 2019
and is well on track to reach the target
for the period 2018 to 2020.

2. GLOBAL SOURCING SOLUTIONS

Our commitment is to deliver the best
global, regional and local solutions,
taking a total cost of ownership and
user-centric approach. This is achieved
through global category strategies that
drive cost reductions, standardization and
efficiency improvements. We continually
build closer partnerships with our main
global suppliers and identify ways
through which SGS can benefit from the
capabilities of our supplier ecosystem.

To improve sourcing for our laboratories,
we have built distributor networks
with a particular focus on regions with
complex logistics, e.g., South America,
South East Asia Pacific and Africa.

We also strengthened and extended
relationships with our core IT suppliers
across hardware, software and
telecommunications. The partners

we work with must optimally support
SGS and enable us to leverage our
global footprint.

3. SUSTAINABLE PROCUREMENT
AND SUPPLY CHAIN

For the first time, SGS was ranked
in first position for supply chain
management in the Dow Jones
Sustainability Index (DJSI).

Extending our initiative from 2018,
we have now successfully deployed
the SGS Supplier Code of Conduct
and Self-Assessment Questionnaire
in 30 countries, assessing more than
2 700 suppliers to date.

We have continued the deployment
of our Sustainable Mobility programs,
and performed sustainability analyzes
in Spain, the USA, the UK and France,
to support the development of more
sustainable fleets. We will continue
deploying our sustainable fleet program
and expand it to other countries in 2020
and beyond.

Find out more about our sustainable
procurement supply chain strategy
in our 2019 Sustainability Report:
www.sgs.com/cs-report-2019.

SGS SUPPLIER CODE OF CONDUCT

STRATEGIC
PILLARS

1
COST AND
CASH FLOW
LEADERSHIP

2
GLOBAL
SOURCING
SOLUTIONS

3
SUSTAINABLE
PROCUREMENT
AND SUPPLY
CHAIN

4
CONTRIBUTION
TO INSPECTION
AND
LABORATORY
OF THE FUTURE
PROGRAM

STRATEGIC
ENABLERS

SUSTAINABLE
MOBILITY
PROGRAMS
DEPLOYMENT

United Kingdom

France

Spain

USA

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NEW LABORATORY
DISTRIBUTOR
NETWORK

South America

Africa

South East
Asia Pacific

< BACK TO CONTENTS

4. CONTRIBUTION TO
INSPECTION AND LABORATORY
OF THE FUTURE PROGRAM

Testing and inspection are core SGS
activities, representing a large portion of costs.
The contribution to Inspection and Laboratories of the
Future pillar brings together initiatives such as inventory
management, asset management and automation.
The program supports the World Class Services global
program to drive efficiencies in our laboratories.

We collaborate in a cross functional team called the Advanced
Technology Group. SGS experts, strategic suppliers and our
Procurement function devise next-generation technical
and digital inspection and laboratory solutions.

Through one such strategic partnership we identified an
opportunity to use artificial intelligence and machine
learning in our laboratories to create significant efficiency
improvements. We developed and piloted the
associated algorithms in one of our main food
laboratories. Following the success of
the pilot, the algorithm will go live
in operations in 2020.

STRATEGIC ENABLERS

The achievement of goals
related to our four pillars is
supported by four strategic
enablers: our Target Operating
Model, supplier partnership
management, internal business
partnering and high-performing
procurement teams. We
have implemented improved
processes and deployed
Oracle Enterprise Resource
Planning together with finance
in a number of countries.
The Procure to Pay (P2P)
compliance and efficiency
process (e.g., No PO No Pay)
has been a key focus, enabling
higher spend transparency
and bundling with preferred
suppliers. In the source-to-
contract process, we have
increased usage of purchasing
catalogs and eSourcing.
These catalogs provide SGS
employees user-friendly

access to pre-negotiated
items from preferred vendors
along with increased process
efficiency and automation.
The percentage of spend
sourced online through
eSourcing has nearly doubled
allowing for increased savings
and greater efficiency.

As part of the supplier
partnership management
program, 105 of our most
important suppliers were
asked to provide input into
a broad range of topics, such
as sustainability commitment,
P2P process adherence and
financial strength. This valuable
information is used to select
the best partners and generate
maximum value through better
collaboration and specific
action plans.

Effectively servicing our internal
business partnerships must be
ingrained in everything that we

do. All initiatives start by asking
the relevant SGS business
about its needs and then
agreeing on how procurement
can best provide support.

A further enabler of all
our activities is our highly
passionate and collaborative
team. Good results from
the Catalyst employee
engagement survey confirmed
the engagement of the
procurement teams around
the world and provided
valuable insights into what can
be done to further support
passion and strengthen
the performance culture.

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INTELLECTUAL
CAPITAL

—

We add value to society by improving
knowledge through innovation.
We empower our clients through the range
of training and education services we offer.

Innovation

Information Security and Data Protection

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“Hacking
is not a
static thing –
attacks are
evolving all
the time.”

MARTIN SCHAFFER
Global Head of Secure Products and Systems,
Digital Trust Services

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THE
CYBER
EDGE

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HIGH-IMPACT
CYBERSECURITY

For around a thousand
years, a fortress has
dominated the city of
Graz. The imposing
structure sits on a hill in
the center of Austria's
second largest city and
is a fitting backdrop
for a project that is
concerned with a more
modern means of
defence – cybersecurity.

In February 2019, in
conjunction with the
Graz University of
Technology (TU Graz),
SGS announced the
development of the
Cybersecurity Campus
Graz. The campus will
include a new non-
profit research center,
focusing on high-impact
cybersecurity research.
It will also house the TU
Graz Security Research
Institute – a world-
renowned research
facility known for its
work on the Meltdown
and Spectre hacks.
Additionally, it will
also be home to SGS
Cyberlab Graz, which
will focus on products
and systems testing
services as part of our
larger portfolio of digital
trust services. We will
be particularly engaged
in hardware security,
specifically, microchip
security testing.

THE CUTTING EDGE

To remain at the cutting
edge of security
developments over the
long term, you need
to support advanced
practical research. This is
why we have partnered
with TU Graz. It is one
of the few universities
in the world with the
kind of hardware security
expertize that we were
looking for.

Together we will be
moving into a new
purpose-built building
that will house up to
500 security experts,
including a university
research team, staff
from our Cyberlab, our
joint venture research
center and other partners.
We will be working to
improve microchip
design, to develop
security testing
processes and to educate
the next generation of
security experts.

As a part of this
project, members of
our laboratory team
will become part of the
teaching staff on the
University’s master’s
programs. One potential

Around 2 500 new
smart devices are being
connected to the global
network every second.
Ten years ago, hacking
felt remote – businesses
and governments were
hacked, not individuals.
But now it is becoming
an issue that is much
more personal. Mobile
phones are hacked,
home security cameras
are hacked, even your
car can be hacked.

The problem is that
security is not a feature
that people ask for.
They expect it to be
there already. Certainly,
they don’t expect to pay
more for it. Yet, with the
regulatory environment
still relatively nascent,
this actually creates
a disincentive to build
high levels of security
into devices. This is
a problem. The global
network is only as
strong as its weakest
link. Once low-security
products are connected,
it will become a much
harder problem to fix.
We need to address this
issue now, starting with
the components that are
being used.

< BACK TO CONTENTS

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advantage to us is the
opportunity to identify
and develop emerging
talent to join our team,
but more broadly we are
also helping to address
the general talent
shortage on the device
production side. At
the moment, there are
simply not enough
well-trained people to
make these products
more secure going
forward – and this is
an issue with potential
societal-level impacts.

Additionally, whenever
we identify solutions to
problems, we will make
them publicly available
free of charge through
the joint venture. We
can afford to do this
because our revenues
will ultimately come
from offering testing
services around these
solutions. As a result,
it’s fair to say that the
collaboration looks set
to benefit both partners,
our stakeholders and
society at large.

“Security
is not a
feature that
people ask
for. They
expect it
to be there
already.”

GRAZ, AUSTRIA

MADRID, SPAIN

THE FUTURE
OF INSPECTION

By the end of 2020, there will be
30 billion connected devices – roughly
four for every person alive. That
number will only grow. We strongly
believe in the potential of the Internet
of Things (IoT) to reshape the way
we do business. So, in May 2019,
we launched a new IoT Competence
Center in Madrid. The center will
allow us to develop next-generation
inspection technology.

The IoT-based inspection market is
growing at 7% a year. To ensure that
we remain the point of reference
for these developments we have
partnered with Swisscom and
Microsoft. Swisscom is providing
a dedicated and secured IoT
communications network for our data
to be transmitted, which will then be
managed and stored by Microsoft.

SGS can then leverage its experience
to develop game-changing IoT
inspection devices that will be
configurable, scalable and extremely
easy to operate. These devices won’t
just allow us to provide a better service
to individual customers, they will
enable us to offer predictive services,
through our development of advanced
analytics, machine learning and
artificial intelligence algorithms.

< BACK TO CONTENTS

This will put us at the forefront
of developing smart cities, smart
agriculture and smart industries. We
are moving quickly. Even though we
only started in May we have already
developed our first product, Smart
Warehouse. Built for the agricultural
industry, Smart Warehouse delivers
timely and accurate information to
protect stored commodities (e.g. grain).

While traditional inspection methods
offered a useful snapshot of the
status of the commodity, with
24/7 monitoring, Smart Warehouse
offers continuous support. It can
monitor elements such as moisture,
temperature and CO2 levels, and
therefore prevent contamination with
molds, mites, insects and microbes,
and premature germination.

Our IoT Smart Warehouse solution is
currently being implemented in Egypt,
Hungary, Spain, Kazakhstan, Ukraine,
the Netherlands and the Baltic region.
We anticipate that the service will
also be sought after for monitoring
commodities on cargo vessels.

As big data develops across devices,
we will be able to offer even better
predictive services. For example,
we will be able to alert a customer
if humidity and temperature present
a risk of fermentation in the following
48 hours. This is of course great news
for our customers, but it is also good
for society because it has the potential
to massively reduce food waste. In
addition, the carbon footprint from
regular site visits for inspections will be
significantly reduced and insecticide
usage will be minimized as our devices
also monitor phosphine levels. All of
this helps us add value to society.

ALEKSANDAR MITREVSKI
COMPETENCE CENTER PROGRAM DIRECTOR

“SGS can leverage its

experience to develop
game-changing IoT
inspection devices.”

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ACHIEVEMENTS

Cybersecurity Campus Graz security opened
in Austria, in partnership with the Graz
University of Technology

CYBERSECURITY
CAMPUS GRAZ

IoT Center of Competence opened in Madrid,
in partnership with Swisscom

INNOVATION

Our strategy is focused on digital services, e-commerce and online
presence, and a culture of innovation. We are committed to the
development of innovative services that benefit our customers and
better processes that enable SGS to deliver our services more efficiently.
We invest in projects that deliver on our internal efficiency goals, provide
our customers with solutions and create services that bridge digital and
traditional methodologies.

SGS online optimized for efficiency
and effectiveness

Innovation Ecosystems put in place to
support the development of ideas with
strong potential

43 innovation projects launched across
the SGS Group in 2019

DIGITAL SERVICES

We aim to be a global leader in developing safe,
effective and profitable digital solutions for all
sectors we operate in. By continuing to provide
best-in-class services that transform the TIC
industry, while enhancing everything we do with
digital services, we build on our ability to add
value for our customers and improve our internal
efficiencies for the benefit of our employees.

E-COMMERCE AND ONLINE PRESENCE

Expanding our business-to-business-to-consumer
presence online is an SGS 2020 objective that we
aim to achieve through our e-commerce platform,
SGS online. Consumers have access to services
provided by our Environment, Health and Safety;
Agriculture, Food and Life Sciences; Oil, Gas
and Chemicals; and Certification and Business
Enhancement business lines, as well as by our
Cybersecurity Services unit, and we are constantly
investigating further services that can be moved
to this delivery platform.

Our emphasis is now on improving how SGS online
communicates with and sells to customers. The
online-offline customer journey is one area in which

we are seeing notable advances, in particular with
regard to how SGS online links to our offline services
and improves understanding of SGS products.

INNOVATION CULTURE

At SGS, we have a culture that values innovation.
We have a process in place that recognizes and
leverages creative ideas and we encourage all
of our employees to put them forward. We do
this through a series of Idea Challenges that are
designed to crowd source ideas from across the
SGS Group. When we find ideas that are novel or
will enhance existing processes, we work with the
employees that have proposed them to develop
business propositions. To provide this support we
have developed Innovation Ecosystems where
representatives from all parts of the SGS Group –
business lines, geographical regions and functions –
come together to contribute to idea development
and critical review.

In 2019, as a result of our Innovation Ecosystems
we created a rich pipeline of innovation projects
at various stages of analysis and development.
Ultimately we communicate about ideas that are
progressed and we celebrate the innovations
that help make a difference to our organization.

< BACK TO CONTENTS

controls, based on international
standards and best practices.
Our IT Management team
works closely with our Business
Continuity team to ensure
effective crisis management
planning systems are in place
to deal with any eventuality.

DATA PROTECTION

SGS clearly defines what is
expected across the Group
to ensure that personal
information is effectively
managed and database access
is strictly controlled.

As with all companies, there are
risks associated with holding
personal information, in terms
of data leakage, data misuse
and unauthorized access to
the information. Our reputation
depends first on our ability
to prevent issues from arising,
and second, on our processes
for managing issues should
they occur.

We strive to be transparent
and open about the data we
collect, respecting individual
rights and choices, and to
protect the data we hold from
unauthorized use or disclosure.
To manage this, we have the
SGS Data Privacy Policy.

TRAINING

We run a continuous security
awareness training program
and, as part of this, conduct
information security training
several times a year for
all employees. In 2019,
cybersecurity and risk were

added to the SGS Onboarding
program. We also recognize that
senior managers are subject to
specific security threats and as
such we have a further training
course specifically for this group,
while we also provide courses
dedicated to the needs of
specific SGS businesses.

Global awareness training on
Data Protection and Privacy
principles was rolled out as an
e-learning module in 2018 to
SGS employees around the
world. It is relevant to everyone
who works at SGS, whether they
collect and process personal data
or not. As such, new employees
are now required to complete it
as part of the SHINE Onboarding
program. As with the Information
Security modules, we have also
introduced a specific version of
the course focused on the needs
of senior managers. Data Privacy
Officers receive training through
workshops on GDPR compliance
and data breach management,
while we also provide courses
dedicated to the needs of
specific SGS businesses.

ACHIEVEMENTS

Data Protection and Privacy principles added
to the SGS SHINE Onboarding program

Cybersecurity and risk added to the SGS SHINE
Onboarding program

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INFORMATION
SECURITY
AND DATA
PROTECTION

As a company that holds itself
to the highest standards of
professional behavior, protecting
personal data and compliance
with associated privacy laws are
essential commitments for SGS.

Our data protection strategy
is focused on the prevention,
detection, management and
response to security risks.
It encompasses enhancing IT
systems, putting policies and
procedures in place to streamline
processes, and developing
capabilities so that SGS is
operating in a controlled-risk
environment.

INFORMATION SECURITY

SGS has a framework and
a team in place to protect
intellectual property, business
services, personal information
and customer data. Our strategic
aim is to ensure that we always
keep our network, IT systems
and data secure. At SGS, we
define the information we are
responsible for keeping secure
as all data, specifications,
results, facts, correspondence,
methods and knowledge
pertaining to SGS, our employees,
contractors, customers, suppliers,
methods and tangible and
intangible assets.

In terms of digital information,
by carefully managing our IT
Security and Anomaly Detection
Systems, while deploying
tools to identify vulnerabilities
and forecasting trends in the
cybersecurity landscape, we
work to prevent and defend SGS
against threats. SGS utilizes
several detection systems that
monitor our network, system
infrastructure and applications.
The most critical of these
detection systems are monitored
on a continuous basis, while the
rest keep audit information for
analysis in case of enquiries or
suspicion of fraudulent activity.

Response times to potential
incidents are monitored
according to specific timeframe
requirements depending on
the severity of the threat and
its criticality. As a business,
we implement the best security

< BACK TO CONTENTS

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

HUMAN CAPITAL

—

We add value to society by protecting
the health of our employees. We reduce
social risks by reinforcing human rights
compliance. Our services ensure food,
medicines and products are safe and
promote a safer, healthier and more
sustainable environment for people
around the world.

Compliance and Integrity

Talent Management and Equal Opportunities

Operational Integrity

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SHEIDA HÖNLINGER
Business Manager, Life Sciences and CPHC, Germany and Austria

WOMEN
IN SCIENCE

ANITHA JEYARAJ
Head of Laboratories,
Consumer and Retail Services,
India

LAURA GARCIA
BAGLIETTO
Division Manager e-Mobility,
Germany

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“EMOTION
SHOWS YOUR
PASSION”

C
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s
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Ö
H
A
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I
E
H
S

When I was a young girl I was
always interested in science.
As a biology student at the
University of Vienna, I realized
that while working in a lab can
be fascinating, it wasn’t really
what I wanted to do with my life.
Instead, I wanted to find a way
of combining my knowledge of
biology with project management,
planning and working face-to-face
with people.

I first found that kind of work
at the Austrian Health Ministry,
where I gained valuable early
experience. For ten years I
worked there and learnt how
to manage scientific projects.
Notably, I helped build the
first cosmetics testing lab in
Austria, which ended up giving
me fantastic insight for my later
career. I enjoyed my time there,
but an opportunity at SGS caught
my attention. I felt it offered
the chance for personal and
professional growth.

“My advice
to young
women is to
be yourself”

< BACK TO CONTENTS

A SERIOUS CAREER PATH

I was right. In the 14 years since
I joined SGS, I’ve been business
manager for Germany and
Austria for both Life Sciences
and Cosmetics, Personal and
Home Care (CPHC), managing
350 people across five sites
in Germany and one in Austria.
I also sit on the country
Management Board for Germany
and I’m a member of the
Compliance Committee here.

SGS definitely appreciates the
work and expertize of women.
Where we could do a little better
is helping women take the
next step into top management
positions, but I think the
willingness to support women
is genuinely there. Here in
Germany, for example, through
the Compliance Committee,
I brought a proposal forward
to support women’s career
development. I am the only
woman in the Committee at
the moment, and my male
colleagues were very welcoming
of the idea. So, having been
joined by two ladies from the
Legal and HR departments,
we are planning to roll out
the project in 2020. We want
to help coach them, give them
exposure to different parts of
the business and offer them
more working flexibility.

My advice to these young
women (and to young women
scientists wherever they work)
is to be themselves. You don’t
need to act like a man to be
successful even in a technical
role. You can show your
emotions – it demonstrates
your passion for your work.
You can be proud of your role
as a mother, talk about your
children, wear dresses and
makeup, if that’s who you are,
and still build an outstanding
career. Just be yourself.

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MATRIARCHAL BEGINNINGS

ADVICE TO YOUNGER PEOPLE

I would say to any young woman –
or indeed any young person – to
try to free themselves of any
expectation from other people
and to try to find what it is that
makes them truly happy in life.

I had a teacher in school who
had a PhD in physics but who
also spent time working in a
bakery because she loved

making bread. That was an
amazing mixture of passions.
She taught me that it doesn’t
matter what you do. It just has
to make sense to you. You are
the one with the passion for it.
But if I was specifically trying to
encourage women into science,
I would tell young girls that they
have the chance to change the
future. Science lets you do that.
And that is a rare opportunity.

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i
D

“NO ONE TOLD ME
THERE WERE JOBS
THAT WOMEN DIDN'T
TRADITIONALLY DO”

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9
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I grew up in a traditionally
matriarchal society in the north
of Spain. So, no one ever told
me there were jobs that women
didn’t traditionally do. It was only
later when I moved to Central
Europe that I began to see that
technical jobs were male-
dominated here. But honestly,
I just don’t think that way – I don’t
think in terms of gender but in
terms of people.

I joined SGS in 2006 as a testing
engineer. I think I was always
drawn to engineering. When
I was eight years old, I did my
first technical drawing (of sorts),
of a carriage for my toy horses.
So, in the end, choosing
engineering science at university
was a natural step for me. My first
job was to certify electrotechnical
components. Now I am Division
Manager for e-mobility. I oversee
65 people in five laboratories on
three different sites.

WHAT GENDER ISSUE?

If I am completely honest, my
first reaction on being asked
to write this was why? My
instinctive response was – do
we really need this today?
I personally just don’t feel the
gender divide at SGS. I’ve had
no difficulty in advancing my
career here and I’ve never had
any specific problems because
of my gender. I’ve never noticed
any such issues here at all.

Yet, on reflection, while SGS
is a good environment for
women, not everywhere is the
same. And even here, there are
still challenges for women. For
example, engineering is still a
male-dominated vocation, and
men and women communicate
differently. When I stopped and
thought more about it, I realized
that I had learned at some point
to present myself differently with
my male colleagues. That was
actually a challenge at the time.

I think things are changing
for the best here. Women are
more frequently taking up the
vocation. I was lucky with my
upbringing, and so, to a degree,
I don’t always notice the positive
changes. The attitude just feels
normal to me.

< BACK TO CONTENTS

My career with SGS has been
interesting from the very
beginning. I joined the company
in early 1997 as a technologist
in our Softlines business. My
job was to manage the testing
and final evaluation of textile
materials for export. I’ve been
with the Consumer and Retail
business line ever since, but my
role has developed.

After a while with the company
I became a quality manager – at
the time there was a major trend
of companies in India moving
towards ISO accreditation.

22 YEARS OF
PROFESSIONAL
GROWTH

a
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“I enjoy the management
aspect as much as I did my
scientific roles”

< BACK TO CONTENTS

Then I was asked to take up a
more customer-facing role as a
key account manager for a few
very high-level accounts with
global clients. Subsequently, I was
promoted to Laboratory Manager.

SGS recognized my hard work
and in 2011 I was made National
Operations Manager, covering
all Softlines laboratories in
India. After five years in this
role, I was promoted to Head
of Laboratories, India in 2016.
In this role, I manage both the
business and service excellence
of the business line in India with
a 600-strong team.

I enjoy the management aspect
as much as I did my scientific
roles. SGS is a global leader with
a clear strategic vision and very
strong values. I sincerely believe
that, with this foundation of
integrity and trust, SGS is one of
the best employers any woman
can work for.

It is true that the TIC industry
is kind of male-dominated.
But I think that in India this is
partly because, traditionally,
inspections roles involved a lot
of travelling, and sometimes you
have to work late at a customer
site. India is a very traditional
society, and these aspects
of work were considered
unsuitable for women. However,
things are beginning to change,
and more women are coming
into the industry here.

A WONDERFUL PROFESSION

I would definitely encourage
more women to get into the
science side of things. While
I see women moving into IT,
HR and Finance roles within the
TIC industry, I feel science is a
bit at the back of the queue –
women probably only make up
around 10-15% of lab employees.
Men and women have a different
yet complementary approach to
business. That makes it all the
more important that both men
and women should be present
to ensure good growth and
quick advances in any industry.
So, it’s very important for us to
encourage more young women
to study science subjects and
take on scientific roles.

Testing is a wonderful profession.
It is a chance to make the world
a better place and I would like
to see more women involved.

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COMPLIANCE AND INTEGRITY

Integrity is at the heart of the SGS brand, and our success
is built on the trust our customers place in us. To maintain
this trust, we expect our employees to embody SGS’ values
in everything they do. As an industry leader, we believe our
behavior inspires other businesses to create a better working
environment for all.

SGS does not engage in any form of bribery or corruption,
and we adhere to the legal requirements of every country we
operate in. We hold anyone acting on behalf of or representing
SGS to the highest standards of professional integrity, at all
times – as defined by the SGS Code of Integrity. This Code
applies to all SGS employees as well as affiliated companies,
contractors, subcontractors, joint venture partners and agents.
SGS’ Supplier Code of Conduct sets out our standards
for suppliers on respecting human rights in our and our
customers’ supply chains. Our shared values on individual
and organizational professional conduct keep us from seeking
business advantage by means that threaten our assets,
brand, people or intellectual property. Both employees and
suppliers receive clear guidance on grievance mechanisms.
Any suspected violations can be reported using confidential
integrity helplines or by contacting local or corporate-level
compliance teams.

SGS conducts a mandatory Annual Integrity Training, based on
the Code of Integrity, for all employees. Additionally, all new
hires must complete an e-learning module within three months
of joining the Company. This ensures clarity on SGS’ integrity
expectations and standards, with violations leading to possible
disciplinary action, termination and/or criminal prosecution.

ACHIEVEMENTS

99% of employees attended the annual integrity training

A new Integrity Helpline was launched in 2019, providing all
affiliates with improved procedures, reporting and analysis

Human rights e-learning training rolled out in all countries
where we operate

PERFORMANCE

100%

0
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1

Employees signing the Code of Integrity

2014

2015

2016

2017

2018

2019

% OF EMPLOYEES SIGNING THE CODE OF INTEGRITY

1
4
2

5
4
2

7
0
2

7
2
2

7
3
2

1
1
2

2111

Code of Integrity reports

2014

2015

2016

2017

2018

2019

TOTAL NUMBER OF INTEGRITY ISSUES REPORTED THROUGH CORPORATE INTEGRITY HELPLINES

“Helplines” means channels used by employees and external parties to report suspected violations

of the Code of Integrity. These reports can be submitted online or by phone, fax, email or post.

2
4

1
3

6
3

8
2

2
2

Code of Integrity non-compliances

2014

2015

2016

2017

2018

2019

TOTAL NUMBER OF BREACHES OF THE CODE OF INTEGRITY IDENTIFIED THROUGH CORPORATE INTEGRITY HELPLINES

“Helplines” means channels used by employees and external parties to report suspected violations

of the Code of Integrity. The reports can be submitted online or by phone, email, fax or post.

0
0
2

7
7
1

1
5
1

7
6

0
7

8
4

2014

2015

2016

2017

2018

2019

Code of Integrity investigations

TOTAL NUMBER OF VALID REPORTS INVESTIGATED

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SGS CODE OF INTEGRITY RESPONSIBILITIES

BODY

RESPONSIBILITIES

INCLUDES

PROFESSIONAL
CONDUCT
COMMITTEE

• Ensures implementation of the

• Chairman of the Board of Directors

Code of Integrity

• Advises Management on all issues

of business ethics

• Two other Board members

• Chief Executive Officer

• Chief Compliance Officer

CHIEF
COMPLIANCE OFFICER

CORPORATE
SECURITY TEAM

• Implements procedures governing
ethical behavior and conducting
investigations of alleged staff
misconduct

• Ensures security arrangements

adequately protect people and assets
and respect human rights

• Continuously evaluates assets

and businesses

HUMAN RIGHTS
COMMITTEE

• Oversees implementation of
human rights commitments

• Chief Executive Officer

• Chief Compliance Officer

• Supports human rights as defined
in the Code and Business Principles

• Vice President Corporate Sustainability

< BACK TO CONTENTS

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

TALENT MANAGEMENT AND
EQUAL OPPORTUNITIES

Our efforts to attract and retain staff, provide
equal opportunities and increase diversity in our
workforce are fundamental to our ability to operate.

In 2019, we continued the implementation of our
global Human Resources (HR) strategy, which is
based on five pillars:

OUR GLOBAL HUMAN
RESOURCES (HR) STRATEGY

Aligning the
HR structure
to better
meet global
and regional
business
prerogatives

Implementing
a competitive
and transparent
talent
acquisition
strategy

Fostering an
integrated
talent
management
mindset –
based on
consistent
succession
planning
practices

Strengthening
our leadership
and employee
capabilities
with tools and
guidelines

Leveraging our
footprint to
promote career
development
opportunities
across the
Group

ACHIEVEMENTS

4.6 million hours in staff training

Catalyst employee engagement survey
simplified, with improved targeting and
reporting. The survey was deployed in
19 countries and among three global teams,
with 15 773 employees participated

71/100 score on Employee Engagement Index

+100 SGS recruiters took part in +1 400
hours of training provided through the new
SGS Recruiter Academy

SGS Campus knowledge management
platform was rolled out to all employees

1 239 SGS employees from 14 countries
participated in the Virgin Pulse Global
Challenge, which promotes healthier lifestyles

SHINE onboarding program revamped
to improve useability and scope

65% males and 35% females in the
global workforce

13 nationalities represented across the
Operations Council

< BACK TO CONTENTS

The focus of our strategy is on talent development,
which ultimately leads to employee retention.
We are also aiming to provide a work experience
tailored to the needs of both current and future
SGS employees. To remain the industry leader,
it is imperative that we continue to attract and
retain high-caliber experts across the SGS Group.
Our HR strategy is making SGS more agile and
transparent in the way we acquire and develop
talent and increasing the visibility of career and
growth opportunities within the Group.

SGS is a diverse organization that supports all
employees in realizing their potential. Our employees
span nationalities, cultures, religions, generations
and genders, and we recognize their contribution to
our business success. Our approach to diversity is
grounded in our Business Principles where respect is
defined as “making sure we treat all people fairly.”

TALENT ACQUISITION

Our talent attraction and acquisition strategy
focuses on actively hunting for the right talent
to meet our current needs and engaging with
talent communities for the future. We achieve this
through efficient management of the recruitment
process using our new, best-in-class e-recruitment
tool. We complement this with competency-based
assessments and efficient onboarding of new staff,
especially in relation to our values, culture and
business processes.

Talent acquisition is managed locally, with global
support. The SGS Recruiter Academy, launched in
2019, is part of this assistance framework. It aims
to develop our talent acquisition expertize and our
more data driven approach to recruitment. It also
favors the sharing of best practices and raises
awareness of expertize held within the business.
A similar program for hiring managers was piloted
in 2019, with a plan in place to deploy to more than
400 managers in 2020. We use digital tools and
social media platforms to foster connections and
hunt for potential future talent around the world
and to communicate with potential employees. The
SGS Onboarding program plays a significant role in
integrating new employees into the SGS business.

LEARNING AND DEVELOPMENT

Developing our people’s expertize supports
individual and team development while helping
us to maintain quality standards. SGS has a global
talent development strategy, which is part of our
HR strategy, but day-to-day implementation is
carried out at a local level, giving our businesses
the flexibility to adapt to local market conditions,
business needs, employees and communities.

In 2019, we rolled out our new learning management
platform, SGS Campus. The aim is to create an open
learning center for all employees that offers easy
access to a wide variety of knowledge and online
training content applicable to all our businesses and
functions. Employees can access content, share
knowledge and set up training programmes from
anywhere and using any device.

We also analyzed our top 200 positions to ensure
we have the right succession plans in place, and
that we are mobilizing and developing our key talent
appropriately. As part of this, 18 senior leaders
attended Institute for Management Development
leadership programs.

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REWARD AND INCENTIVES

Reward plays a key role in attracting, motivating and retaining
talent at SGS. Our compensation practices are benchmarked
against the markets in which we operate, using a standard
methodology, while we depend on local Management to define
and maintain competitive compensation practices that appeal
to both existing and future talent. We reward our employees
for their performance, competencies and experience, based
on local competitive conditions, and encourage profit-sharing
through appropriate variable compensation plans, both long
term and short term. We offer benefits, such as pension
and healthcare plans, in accordance with local market norms.
We regularly benchmark our compensation practices to
confirm they are competitive in all locations around the world.

To facilitate our benchmarking activities, we classify SGS
positions based on the nature of the jobs and their relative
level and weight. Then, using our competitiveness against
market practices assessment, together with internal equity
and affordability considerations, we make informed
decisions on target salary ranges. By using a common
methodology and language,
we ensure alignment
throughout SGS and
facilitate internal mobility.

PERFORMANCE MANAGEMENT

Managing performance
is recognized within the
company to be a joint
responsibility between
an employee and their
manager, alongside
corporate and regional
human resources teams.

Employees are expected
to be proactive about
setting their own
performance goals,
evaluating their
achievements and
identifying learning
opportunities, while
managers are expected to
be clear about expectations
and deliverables,
evaluate and critically
discuss performance,
and to support career
management and
encourage continuous
learning.

In 2019, we invested
in reinforcing our
performance management
culture, with a particular emphasis on evolving how we
approach feedback, moving away from one-time feedback
to a more continuous appraisal methodology.

DIVERSITY AND EQUAL OPPORTUNITIES

The SGS Business Principles, Code of Integrity and Human
Rights Policy all underline our commitment to diversity and
equal opportunities and our employees and managers are
trained annually in the principles of non-discrimination.
We strive to treat everyone fairly and without discrimination
while providing employees with career development support
that enables them to meet customer requirements and our
own standards. SGS employees, subcontractors, business

< BACK TO CONTENTS

partners and suppliers are entitled to work in an environment
and under conditions that respect their rights and dignity.
We respect freedom of association and cooperate with the
trade unions and work councils that our employees collectively
choose to represent them within the appropriate national legal
frameworks. All SGS policies and codes are informed by the
International Bill of Human Rights, the International Labour
Organization’s Declaration on Fundamental Principles and
Rights at Work, the Children’s Rights and Business Principles,
the United Nations Women’s Empowerment Principles and
the United Nations Global Compact.

EMPLOYEE ENGAGEMENT AND WELL-BEING

SGS continues to focus on performance management to
develop and engage employees. We support our leaders
understanding of employees’ experiences working with SGS
by inviting all employees to complete a survey.

Catalyst, our employee engagement survey, provides
employees with the opportunity to voice their opinions and
provide feedback to Management. In so doing, they initiate

a process that ultimately
gives managers the
opportunity to launch
improvement actions
with their teams.

Additionally, SGS provides
various well-being
initiatives tailored to the
specific needs of local
affiliates. These range
from flexible working hours
to semi-retirement plans.
In some instances the
programs are outcome-
based health promotions,
while in others, they are
campaigns to encourage
positive behavior change
(e.g. cycle-to-work
schemes). Where possible,
remote IT connections and
teleconferencing facilities
enable employees to work
from home and save them
from having to travel to and
from meetings.

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PERFORMANCE

TARGET 30%

6
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5
2

3
.
6
2

2
.
6
2

4
.
6
2

7
.
6
2

26.7%

Women in leadership positions (CEO -3)

2015

2016

2017

2018

2019

TARGET 15%

8
.
2
1

9
.
1
1

1
.
2
1

0
.
3
1

6
.
4
1

6
.
3
1

13.6%

Natural Turnover

PEOPLE LEAVING BY THEIR OWN WILL

2014

2015

2016

2017

2018

2019

As of 2016, this KPI is calculated based on permanent (fixed-term and open-ended) contracts.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

OPERATIONAL INTEGRITY

We believe that operating safely and with integrity is essential to business success and we encourage
a no-harm culture that prioritizes employee health and safety, alongside environmental protection.

Our goal is zero incidents – this means
zero health, safety or environmental
issues. To achieve this, we have a Global
Mission comprising five overarching
aims. We work to achieve these aims
through Leadership, Education and
Discipline initiatives developed in line
with seven strategic pillars: Leadership;
Communication; Training and Awareness;
Resources and Skills; Key Performance
Indicators; Audits and Compliance; and

THE OPERATIONAL INTEGRITY
GLOBAL MISSION

Protect SGS employees and stakeholders,
our physical assets, the environment and the
communities in which we work and live

Accelerate our cultural change and journey
towards HSE excellence

Leverage HSE ownership, leadership and
stakeholder involvement

Improve our performance by providing HSE
expertize and guidance through the deployment
of OI strategies, programs and tools

Support full compliance with legal, regulatory,
customer and Group HSE requirements

Health, Safety and
Environmental
(HSE) Risk
Assessments.

Each strategic
pillar focuses on
a topic where
there is the most
Operational
Integrity (OI)
risk for SGS and
has long-term
objectives set
against it. The
delivery of our
OI strategy is
supported by
our group-wide
Operational
Integrity
Management
System, which
is aligned with
internationally
recognized
standards1 on
health, safety and
the environment.

and monitored as part of our OI Cultural
Index. Annually, we also determine
specific objectives, such as the digital
tools to be developed to support the OI
initiatives. The Group Vice President,
Operational Integrity, Business
Continuity and Integrity Programs
reports directly to the CEO and leads
the deployment of the OI strategy and
objectives, focusing on key programs,
including incident investigations, risk
assessments, training, leadership visits
and best practices.

OPERATIONAL INTEGRITY
CULTURAL INDEX

In 2019, one of our focus areas
was the enhancement of
the Operational Integrity Cultural
Index (OI CI), which was
launched in 2018 and has
now become an important
performance management
tool. Consisting of
14 indicators split into
the three areas of
Leadership, Education
and Discipline, the
OI CI provides clear
country-by-country OI
analysis and supports
decision making.

PERFORMANCE

0.26

0
6
.
0

8
3
.
0

TARGET 0.30

7
2
.
0

3
2
.
0

5
2
.
0

6
2

LEADERSHIP

Our OI strategy and performance are
reviewed quarterly by the Executive
OI Steering Committee, the Group
Vice President, Operational Integrity,
Business Continuity and Integrity
Programs and the CEO. Each year we
look at what we have set out to achieve
in the coming year and adapt to any
emerging requirements. Within each
strategic pillar, proactive OI objectives
are part of our everyday processes and
we are working towards integrating
them into managers' annual objectives.
Manager OI objectives are reported on
through our Crystal reporting system

Lost Time Incident Rate (LTIR)
(200 000 hours)

2014

2015

2016

2017

2018

2019

1
1
.
1

TARGET 0.55

5
6
.
0

3
5
.
0

0
4
.
0

1
4
.
0

4
4
.
0

0.44

Total Recordable Incident Rate (TRIR)
(200 000 hours)

2014

2015

2016

2017

2018

2019

While we are able to look back at yet another year of injury
rates well below target, it is with deep regret that we report
the loss of two lives in our operations in 2019. Any fatality is
unacceptable and we will continue to work toward achieving
our goal of zero harm.

1. SGS remains committed to achieving and maintaining international certification for Health, Safety, and Environment

in accordance with ISO 14001 and ISO 45001 (OSHAS 18001) at our largest sites around the world. For 2019, 148 sites,
covering more than 16 000 employees, achieved or maintained ISO 45001 and/or ISO 14001 certifications.

< BACK TO CONTENTS

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COMMUNICATION, RESOURCES AND TRAINING

Using our Incident Investigation Compliance Scores we help
countries to identify where OI resources need to be improved.
All SGS leaders are trained to conduct a minimum of six
leadership visits per year, where they assess business and
site level OI conditions, and demonstrate their commitment
in the field. At the same time, all OI employees are provided
with a suite of online tools to help them stay up to date
with SGS Group OI requirements, along with training on
site standard operating procedures, Group OI Management
Systems and Rules for Life.

Our Rules for Life are 15 life-saving principles that apply
to all employees, contractors and other people working
on behalf of SGS.

Available in 14 languages, the Rules for Life
are incorporated into all our safety-related
campaigns. Regular Safety Talks and
Integrity Talks are also provided for
all employees.

also expected to perform risk assessments and to develop
associated action plans.

INDUSTRIAL HYGIENE

Our risk assessment process is holistic and covers health
risks and safety and environmental risks. The aim is to protect
the health and well-being of employees through disease and
fatality prevention. For example, risk assessment teams use
Chemwatch to facilitate the evaluation of chemical risks and
the identification of additional controls, if needed. Chemwatch
is a global tool we use to manage safety data sheets and
chemical inventories across 57 languages.

BUSINESS CONTINUITY

SGS’ long-term success depends on our ability to continue

delivering our products and services to pre-defined

S G S R ULES FOR LIFE

acceptable levels following disruptive events.
However, the ultimate goal is to ensure

that sufficient resilience is built into our

CONTROL WORKING
AT HEIGHT

CONTROL OF
CONFINED SPACES

organization to prevent any disruptions to

the services we deliver to our customers.

WEAR SEATBELTS

WEAR PERSONAL
FLOTATION DEVICE

OBTAIN WORK
PERMITS AND
PREVENTION PLANS

MANAGE FATIGUE

CONTROL
OF ENERGY

COMPLY WITH
SUBSTANCE
ABUSE POLICY

ELIMINATION OF
IGNITION SOURCES

GET OUT OF THE
LINE OF FIRE

WEAR HEAD
PROTECTION AND
HIGH-VISIBILITY
CLOTHING

FOLLOW
SPEED LIMITS

DANGERS OF
ENGULFMENT AND
SUFFOCATION

ENGINE ON –
CELL PHONE AWAY

CONTROL OF WORK
AROUND MOBILE
EQUIPMENT

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In recent years, the Business Continuity
function at SGS has been enhanced
in terms of its overall management,
strategic approach, team and training.
Business Continuity now sits within the
broader Operational Integrity function,
where it benefits from synergies
in risk assessments, strong group
level support and integration into
management processes.

In 2019, we launched a new

Global Business Continuity Strategy,
focusing on what is critical in terms of
sites, processes and service delivery.
The strategy is aimed at enabling us
to respond to any disruption efficiently

and effectively, with minimal impact
on our operations. Building on the team

enhancement made in 2018, we have
added eight new Regional Business Continuity
Officers and a Global Business Continuity
Manager in 2019. A major focus for the team
in 2019 was further embedding Business
Continuity into the SGS culture.

ACHIEVEMENTS

Total Recordable Incident Rate (TRIR) and
Lost Time Incident Rate (LTIR) reduced by
60% and 57%, respectively, since 2014

65 086 employees participated in the
SGS “Safe -Start” themed Annual Safety
Month, which was held in September

2.5 million hours of OI training for SGS
employees were completed in 2019

300% more Business Continuity training
sessions and workshops for regional and
local teams in 2019 compared with 2018

The annual Safety Month
further enforces the Rules
for Life and the outcomes
of both initiatives are
systematically tracked.
We also drive behavioral
change across the
organization through
our Behavioral-Based
Safety peer-to-peer
observation program,
which uses positive
reinforcement to
promote safe behavior.

AUDITS, KPIS AND RISK
ASSESSMENTS

Centrally we audit regional
and country-level OI
performance, while local OI
managers annually audit country
laboratories, offices and facilities
for health and safety risks as well
as environmental impacts. Using
information from these site audits
along with incidents and hazards
information captured locally,
we generate performance
reports and customer-mandated
reports. All site managers are

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SOCIAL AND
RELATIONSHIP
CAPITAL

—

We add value to society by generating trust
in products and services. We provide peace
of mind for clients and suppliers through
careful relationship management. We invest
in the communities we operate in and
our services help governments combat
fraud and protect resources.

Customer Satisfaction

Local Community Support

Brand, Reputation and Sustainability

Market Leadership

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A
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MINNIE SARA ABRAHAM
Heart for India Foundation, India Manager
SGS India partner, SGS Academy for the Community

“We’re empowering women and
giving them hope for the future.”

BUILDING IS THE GREATEST SOLUTION

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THE TRUE VALUE
OF EDUCATION

At SGS, we know the importance of knowledge. Our whole business is built on the expertize
of our people. Our services rely on our employees' high level of education and technical
know-how, while we pride ourselves on guiding other businesses on knowledge-based
development journeys.

However, while education is recognized as a basic human right, not
everyone around the world can access it. There are many barriers that
prevent children and young adults from studying and these are far more
prevalent when there is a high level of poverty, or for disadvantaged
groups, such as women and people with disabilities.

TRANSFORMING MORE THAN BUSINESSES

Education is empowering. We believe the right educational programs can transform lives and add value to society in ways
that brighten the future of individuals, families and all those around them.

As a provider of high-level vocational training courses through our SGS Academy, we can help. Which is why we established
the SGS Academy for the Community, through which we aim to increase the wealth of local communities in which we operate.
We achieve this by providing high-quality SGS Academy technical training and improving the employment prospects of people
who complete our courses.

So that we could establish the SGS Academy for the Community where it is needed most, all branches of the SGS Academy
were given the opportunity to propose local community projects. Each was evaluated and four projects, in four countries
in different parts of the world were identified.

INDIA

CHILE

SOUTH AFRICA

TAIWAN

India is growing.
Both in terms of
population and prosperity.
But there are still
many people living
below the poverty line.
This is both a cause
and an outcome of
a lack of education.

Chile is not considered to
have high levels of poverty,
but there is significant
inequality, which is often
unseen. As a result of the
country’s education system,
not all children can attend
good schools or even get
an education at all.

South Africa is one
of the most developed
economies on the
African continent.
However, extremely
high unemployment,
poverty and inequality
mean the country is
facing ongoing challenges.

Taiwan is going through
a period of change.
It is now focused on
growing seven major
innovative industries.
Poverty is extremely
low, but the change
has created a different
employment market.

1.3 billion
21.9% below poverty line

18.0 million
14.4% below poverty line

50.7 million
49.2% below poverty line

23.3 million
1.78% below poverty line

SGS Academy

Santiago
de Chile

Rosslyn/
Soshanguve

Multiple
locations

High school support courses
tackle the issue of a lack of
practical working skills among
school leavers.

Food safety courses address
a skills gap identifed by
the government.

Courses provide alternative
opportunities for highly skilled
unemployed people.

“My life has changed
for the better, I feel like
I have more control.
I learn new things
every day and my
family is happy.”

VIOLA KININI SEBOTHOMA
Food safety course

Chennai

Course topics are linked to
India’s employment market,
e.g., desk top publishing,
physiotherapy and nursing (see
next page for more information).

“As the eldest daughter
of aging farmers,
the responsibility
to support my family
is on me. Now I can
do this well.”

M PRASHANTHI
Physiotherapy course

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SGS
ACADEMY
FOR THE
COMMUNITY
IN INDIA

THE POWER OF PARTNERSHIP

Minnie Sara Abraham, Heart for India Foundation,
India Manager explains how SGS Academy for
the Community courses are helping to move Indian
families out of poverty.

“Our project with SGS is about
empowering underprivileged
women. The women who come
to us are the poorest of the poor.
Most of them cannot afford
an education,” explains Minnie
Sara. SGS has been partnering
with the HFI Foundation since
2017 in delivering life-changing
vocational training courses. This
means that students unable to
study for financial reasons are
being given the opportunity to
have both an education and a
career. “The courses are usually

for 18-20 year-old students,”
continues Minnie Sara,
“but we often relax the age,
because there are a lot of
women who dropped out
many years ago who want
a second chance in life.”

Beyond having access to further
education, beneficiaries are
also supported while they study
with nutritious food, medical
programs, fitness classess,
IT training and a range of
workshops and seminars.

“We couldn’t achieve what we
do without SGS. Our great
partnership makes it possible.”
The ultimate goal is to empower
the students to go into the
workforce with confidence,
and to achieve financial
independence and security.
“We teach them to the maximum
excellence,” concludes Minnie
Sara. “They have to be able to
survive in the working world, to
get a job and to be independent:
they have to support themselves
and their families.”

ENHANCING SKILLS, ENHANCES LIVES

Nilesh Jadhav, Business Director, SGS Academy describes
how skills development together with employment
opportunities provide beneficiaries with the best outcome.

“We developed a comprehensive
portfolio of courses designed
to empower women. There are
a few sections of the job market
here in India that are growing
significantly,” explains Nilesh.
“For example, the IT sector,
hospitality and nursing. So, we
created vocational courses in
these areas.”

SGS Academy was already
delivering many vocational
courses, but for the community
program it is important that the
support extends beyond the
course itself. Nilesh decided that,

to achieve this, SGS needed to
work with a partner organization
experienced in finding
employment opportunities.
“Our first objective is clear to
all stakeholders,” describes
Nilesh, “enhancing the skills of
the underprivileged candidates,
but the second objective go
beyond this and target the
outcome of employment.
This then contributes to our
broader objective: to improve
the students’ overall standard
of living in a long-term and
sustainable way.”

Nilesh details the

course success to

date: “The first courses started
in 2018 with close to 130 female
candidates. These have already
been completed and most of the
students are now in internships
that will lead to offers of
employment.” Beyond the first
intake, the second round of
courses are currently underway
and the aim is the same. “For us,
the key is that the objectives of
the community project are met,
only then can we consider the
overall project a success.”

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SETTING OUR SIGHTS
ON INCLUSION

“Our aim is to get children with learning difficulties
accommodated beautifully in mainstream schools
without pushing them to the fringes of the
so-called normal education sector. But more than
this, our aim is to develop the education sector
to make it robust enough to accommodate
these kids. It can't just be about building
the capacity of the children, we have to
build the capacity of the system as well.”

POOJAA JOSHI
Executive Director, Mimaansa, Thane Municipal School, Kisan Nagar

Mimaansa is a non-governmental organization working to address
the issue of learning disabilities in less privileged schools in the city of Thane,
in Maharashtra, India. SGS supports Mimaansa in achieving its aims.

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CUSTOMER
SATISFACTION

It is important to us that our
customers recognize the value
of our services and have positive
experiences that bring them
back to us time and time again.
To achieve this, we ensure that
all our employees have the
skills and knowledge required
to deliver our services to the
highest quality standards. At the
same time, we are continuously
enhancing the systems and
processes we have in place
to anticipate and respond to
customer needs as they arise.

CUSTOMER RELATIONSHIP
MANAGEMENT

Our approach is decentralized:
each business line has its own
customer care department.
These act as the direct point
of contact for customers
and connect them with the
relevant parts of SGS. We
monitor and periodically review
customer contact as part of our
Management Review processes.

Our customer interactions
are a combination of face-
to-face customer meetings,
follow-up emails/phone calls,
hard-copy and online feedback
questionnaires. We also support
our daily customer interactions
with seminars and workshops,

as well as with social media
communications, responses to
web enquiries and online chat
functions (automated, guided
and manual).

CUSTOMER RELATIONSHIP
MANAGEMENT SYSTEMS

The quality of the relationship
SGS is able to maintain with
its customers relies on the
IT infrastructure in place to
support it.

In 2018, we launched the first
version of our customer portal
in our Online Services pilot.
This portal enables customers
to engage directly with SGS,
while at the same time providing
employees with a new customer
relationship management
system that supports better
customer interactions.

In 2019, we enhanced these
pilots, based on the feedback we
received from our customers. Our
aim is to continually improve our
customer interfaces. Our ultimate
goal is to offer all our prospects
and customers a seamless
experience, with a single point of
personalized access to SGS.

CUSTOMER FEEDBACK

Understanding how our
customers feel about their
experiences and learning
about their specific interests,
suggestions and expectations

is important to SGS. We regularly
communicate with our customers
and we analyze customer
sentiment through our Voice of
the Customer surveys.

In 2019, we introduced a new
global IT platform through which
to run and manage all online
Voice of the Customer surveys.
This new platform provides
advanced analytics that can be
aggregated on a global scale,
giving us a broader understanding
of customer experience across
the business.

The largest of our annual Voice
of the Customer surveys is
our Laboratory Excellence
Program. Each year, SGS
laboratory customers are asked
to complete a survey about their
experience and service from our
laboratories. The results enable
SGS to continually improve
laboratory services.

ACHIEVEMENTS

Introduction of new Voice of the Customer
global IT platform to create a global
customer survey

+9 600 Voice of the Customer responses
analyzed in 2019

91% satisfaction score across all
Voice of the Customer surveys*

* Results for 2019 surveys analyzed the complete year

of experiences in 2018.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

LOCAL COMMUNITY SUPPORT

PERFORMANCE

We are committed to investing in the communities in which
we operate in a way that has a positive, measurable and
lasting effect. Our community strategy is managed under
three pillars: Empowerment, Education and Environmental
Sustainability. It is aligned to the Sustainable Development
Goals and our actions seek to address global priorities linked to
poverty, health, education, climate change and environmental
degradation. We encourage our employees to volunteer and
donate cash, as well as our own corporate resources.

PROGRAM MANAGEMENT

Increasing our investment in
communities around the world by 30%
(against a 2014 baseline) is one of our
Sustainability Ambitions 2020.
In working towards this goal, we
are facilitating responsible business
operations and helping to address
development challenges. Our
community programs are selected
and managed in line with the Group
Community Policy and Guidelines,
at a global and local level.

The majority of the initiatives are led
by our affiliates through collaboration

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9
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2
1
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TARGET 1 003

1
7
7

1 412

Investment in community1
(CHF thousand)

2014

2015

2016

2017

2018

2019

1. Including cost of volunteering hours (on a constant currency basis).

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1
2

2
2
2

2
6
4

1
4
4

441

Community projects

2014

2015

2016

2017

2018

2019

with local organizations. To evaluate
the effectiveness of our programs, we
conduct an annual community survey,
which is aligned with the London
Benchmarking Group criteria, the global
standard in measuring and managing
corporate community investment.
The survey is deployed across the
network as part of our sustainability
reporting process.

SGS COMMUNITY PILLARS: BREAKDOWN OF INVESTMENT

EMPOWERMENT
54%*

Our empowerment programs (including
economic development, health,
gender equality and alleviation from
poverty and hunger) support physical,
emotional, intellectual and economic
empowerment by providing access to
health care, counseling, microcredit
and enterprise schemes.

EDUCATION
31%*

Our education projects improve
access to all levels of schooling and
promote informal learning in the form
of employment training schemes and
skills workshops.

ENVIRONMENTAL SUSTAINABILITY
15%*

Our environmental initiatives focus on
the protection of endangered species
and restoring natural habitats.

* Percentage of total

community investment.

ACHIEVEMENTS

17 197 employee
hours volunteering
in local communities

CHF 934 000
cash donation
given in 2019

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BRAND, REPUTATION AND SUSTAINABILITY

Building and maintaining
a positive brand reputation
is essential to maintaining
our market leading position.
A positive brand perception
increases confidence, loyalty
and trust both internally,
among our employees and
investors, and externally,
with our customers and
consumers. Focusing on
sustainability as the key
driver for brand perception
ensures that SGS is perceived
not only as a leader in the TIC
industry but also in society
as a whole.

Sustainability is at the
core of our brand offering.
It is embedded in the
decision-making process
of all company functions
as part of our integrated
leadership model.

This is why sustainability at
SGS is driven from the very
top, with the CEO actively
leading our sustainability
vision. It is also enshrined
in our Business Principles
(see page 15).

Sustainability at SGS is
managed by a dedicated
team, which oversees
activities across four
pillars: People, Professional
Excellence, Environment
and Community.

The weight of our internal
sustainability activities
is guided by the results
of our Materiality Matrix
(see page 26) and our
effectiveness is measured
both against published
key performance indicators
and our Sustainability
Ambitions 2020 (see page 12).
Our efforts are also
aligned to the Sustainable
Development Goals.

In 2017, we became one
of the first companies
in the world to publish
a quantitative valuation of
our value to society. This is
an exercise we repeated
in 2018 (see page 82).

More detailed information
on our sustainability
efforts is available in our
Sustainability Report
www.sgs.com/cs-report-2019.

1st

2014
Industry Leader

2015

2016

2017

2018

2019

DOW JONES SUSTAINABILITY INDICES

Our best-in-class
sustainability performance
is valued by our
customers, appealing to
the job market and highly
attractive to the rising
numbers of sustainable
investors active in the
global financial markets.

ACHIEVEMENTS

SGS is a member of the CDP
(formerly the Carbon Disclosure
Project) A list

SGS was awarded best Integrated
Report from PwC

Dow Jones Sustainability Indices
Industry Leader for the sixth year
in a row

FTSE4Good Index includes SGS
for the third consecutive year

Platinum Award from EcoVadis

Named a CDP (formerly the
Carbon Disclosure Project)
Supplier Engagement Leader

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MARKET LEADERSHIP

Evolving with customer needs
and adapting to megatrends
(see page 20) are essential to the
Group’s success. Our leadership
position is driven by our ability
to invest, develop and strengthen
our expertize in strategic markets
and geographies. This expertize is
enhanced by the depth and variety
of talent that we have in the company.
Introducing different perspectives
and global views enables SGS to be
a better, smarter, more creative and
more innovative company.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

NATURAL CAPITAL

—

We add value to society through our
carbon neutral strategy and commitment to
managing finite resources more effectively.
Our services guarantee secure, sustainable
food sourcing, reduce the use of natural
resources, prevent land degradation and
reduce the impact of extractive activities.

Climate Change

Water and Waste Management

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RESPONSIBLE
SOURCING

“We are beginning to see
a change in the market.”

DERICK GOVENDER
Executive Vice President, Minerals

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MINING:

AN EVOLVING
INDUSTRY

The mining sector is often seen as very traditional
in its approach but we have seen a fair bit of evolution
over the years.

While the existing SGS minerals portfolio is geared
towards primarily servicing exploration, mining
and commodity trading organizations, there has
been significant interest from the commodity
end-user market for increased visibility of supply
chain activities. This is a result of consumers
seeking more clarity on the origin of commodities
that are essential in the manufacture of end
products such as vehicles, electronic devices
and other related products.

TRACEABILITY

Responsible sourcing is about
producing and manufacturing
in a socially, ethically and
legally responsible manner.
It includes key elements such
as environmental protection,
safeguarding natural resources
and ensuring the safety and
sustainability of all activities.

One example of a commodity
that is generating interest
in terms of tracing its path
from source to end product is
cobalt. 50% of all global cobalt
that is extracted from ground
is used in the manufacture
of rechargeable batteries and
impacting growing industries
such as the electric vehicle
and mobile phone markets.
The Democratic Republic of
Congo and Zambia account

for more than
50% of global
cobalt production.

“Well-publicized
issues include
the risk of child
labor in the
supply chain.”

Of the cobalt production in
the Democratic Republic
of Congo, as much as 25%
comes from artisanal mining.
Well-publicized issues
around this activity include
poor environmental and
safety planning and the risk
of child labor appearing in
the supply chain.

SGS Minerals recently
entered into a strategic
collaborative agreement with
the European technology
development group, Circulor,
to develop and deploy a range
of digital and other tools,
including blockchain, facial
recognition, remote sensing
and satellite monitoring
to deliver end-to-end
visibility of minerals
supply chains from
mine to consumer.

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“These services allow
companies to be
sure their materials
are ethically
sourced.”

The global network of SGS
minerals testing laboratories
and portable tools will be
leveraged to ascertain the
provenance of the metals,
their authenticity and socio-
environmental attributes
throughout the supply chain.

Since SGS’ global footprint
spans multiple industries,
we are able to provide world-
class traceability services
to our new customers and
industries. We are currently
assessing advanced tracking
tools to provide
a link between
the physical
material
and a digital
database. This
is essential for
our customers
to be able to
manage the
sustainability
of their end
products. Our
end-to-end
traceability
services also
help companies
accurately
measure and
manage the
environmental
and social footprint of their
supply chains and their
products through their
lifecycle, such as the carbon
footprint of producing a
vehicle or a phone. This also
enables circular or closed-
loop supply chains by tracking
the provenance, quality and
content of recycled minerals.

When combined with our
environmental and safety
testing, these traceability
services allow manufacturers
to be sure that their raw
materials are ethically
sourced and managed.

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PRECISION MINING

Our portfolio of precision
mining and processing
services helps companies
reduce, recycle or monetize
production waste through
improving innovation and the
efficiency of their processes.

Within the Minerals business
line, our metallurgical group
is currently working on
programs with strategic
partners to assess how
best to optimize the mineral
composition of batteries.

of their products, such as
batteries and electronics,
and design optimal recycling
metallurgical processes.
Given the scarcity of some of
these minerals, ensuring that
recycling is effective is critical
to the long-term viability of
these sorts of products.

SUPPORTING
BETTER OPERATIONS

We don’t just look at the
materials though. We help
improve the way mines

This improvement in
manufacturing has the
potential to further their long-
term sustainability, as well
as reducing the extraction
footprint in the short term.

We also work in the recycling
space. Our Governments and
Institutions Services business
line ensures that electronic
products and the minerals
in their batteries meet
the regulatory framework
of local jurisdictions to
support recycling mineral
and e-waste. We can
also help companies
assess the recyclability
and recycling efficiency

operate. We consult on
reducing water usage
through process water
recycling, which places
less strain on local water
resources. We also test the
quality of water run-off to
ensure it meets the required
environmental standards and
isn’t toxic to flora and fauna.

Our Environment, Health and
Safety business conducts
emissions testing to ensure
that mines and smelters
meet the necessary air
quality standards, helping
our customers to manage
their carbon footprint and
limit air pollution.

We are also helping
mines reduce their energy
consumption. Using
advanced technical and
scientific insights, we are
often able to find lower
energy solutions that do not
negatively impact production.
This saves our customers
money and, of course,
contributes to the battle
against climate change.

Finally, we are also
constantly looking at
innovative approaches
to improving our own
performance. Services
such as digital inspections,
where we use video and
other digital tools, not only
speed up processes for
customers (by reducing the
inspection timeframe from
up to 48 hours to just a few
hours), but also improve our
operations. The advanced
video technology reduces
our travel time, which boosts
productivity, and minimizes
our carbon footprint, while
having no negative impact on
the quality of our service (in
some instances, it provides
a better one). We are also
introducing field services
technology, which allows
us to analyze samples
closer to mine drill rigs.
This avoids heavy rocks
being transported long
distances to laboratories
for testing. Again, this helps
speed up processes for
our customers and minimizes
our carbon footprint.

All of these actions, no
matter how small, all add
value to society and for our
customers. This is Double-
Positive transformation in
action (see page 30).

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ACHIEVEMENTS

+650 buildings in
the EEB program

+400 energy
conservation
measures identified

70% of data centers
are now held
within the cloud,
on completion of
a two-year program

SUSTAINABLE TRANSPORT

Our Vehicle Emissions Policy,
introduced in 2016, promotes
the use of low-emission fleet
cars. The policy commits us
to reducing our vehicle fleet
CO2 emissions every year
until 2020. By the end of this
period, average CO2 emissions
per km for our worldwide fleet
shall not exceed 95 grams per
km and no vehicle covered
by the policy should exceed
105g CO2/km.
While continuing to
deliver against the Vehicle
Emissions Policy, we are
also collaborating with Group
Procurement to develop a

SGS EMPLOYS A 3-PRONGED APPROACH TO
DEVELOP ITS CARBON NEUTRALITY STRATEGY

REDUCING ENERGY CONSUMPTION

We reduce energy consumption at source
through processes such as Energy Efficiency
in Buildings and sustainable transport

USING RENEWABLE ENERGY

We generate renewable energy on site or
purchase renewable energy whenever possible

OFF-SETTING RESIDUAL EMISSIONS*

Finally, any energy that we still consume
after these reductions is mitigated through
our off-setting strategy

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CLIMATE CHANGE

We minimize the impact of our processes and operations
on the environment by reducing carbon emissions and
by helping other businesses do the same.

REDUCING ENERGY
CONSUMPTION

The energy used in our
2 600 offices and laboratories
worldwide accounts for
62% of our global energy
consumption. Improving
efficiency in this area is
therefore critical to our
energy reduction strategy.
We achieve this through
our Energy Efficiency in
Buildings (EEB) program
and through our approach
to sustainable transport,
our Add Value with Lëss
internal awareness-raising
initiativeand our Green
IT Policy.

ENERGY EFFICIENCY IN
BUILDINGS PROGRAM

Our EEB program evaluates
and reduces energy
consumption in new and
existing buildings. It achieves

this through energy-efficiency
action plans for existing
buildings and applying
environmental assessments
to the design, construction
and refurbishment of SGS
buildings.

At the same time, the SGS
Green Building Guidelines
provide a rating tool that
supports the delivery of the
EEB Program by assessing
new buildings using key
performance indicators
that cover energy, waste
and water. They define
the minimum requirements
in areas such as lighting
system energy performance
and water consumption.
The guidelines propose
measures to improve
environmental performance
and guidance with regard
to cost implications and
associated responsibilities.

PERFORMANCE

TARGET 2.1

6
.
2

4
.
12
.
2

9
.
1

7
.
1

1.7

Carbon Intensity by Employee
(metric tonnes CO2e / FTE)*

2014

2015

2016

2017

2018

2019

8
.
9
3

7
.
6
3

TARGET 31.8

0
.
2
3

6
.
8
2

7
.
5
2

4
2

24.2

Carbon Intensity by Revenue
(metric tonnes CO2e / million CHF)*

2014

On a constant currency basis.

2015

2016

2017

2018

2019

1
.
4
1
2

3
.
3
0
2

9
.
6
8
1

9
.
5
7
1

0
.
8
6
1

8
.
9
5
1

2014

2015

2016

2017

2018

2019

159.8

Total GHG Emissions
(thousand metric tonnes CO2e)*

* Market-based figures. Excludes district heating and

refrigerant gases emissions due to unavailability of data.
Scope 3 emissions only include Category 3: business travel.
Please refer to our Basis of Reporting.

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wider SGS Sustainable Mobility
Strategy. As part of this, we
are analyzing more sustainable
vehicle options, while still
meeting our business needs,
in the regions where we have the
largest fleets: Europe and North
America. The SGS Sustainable
Mobility Strategy will also
include driving efficiency training,
rationalization of the fleet,
inclusion of more sustainable
vehicles in the catalog and an
alternative transportation study.

ADD VALUE WITH LËSS

In 2019, we launched our Add
Value with Lëss internal initiative.
The aim of the initiative is to
both raise awareness and lead to
increased efficiency in different
areas, including environmental
sustainability. It intends to

make every SGS employee feel
empowered to drive operational
efficiency, improve quality, and
to reduce our environmental
footprint, while at the same time,
contributing to a more agile and
innovative SGS.

DATA CENTERS

Rationalizing our data centers
has had a significant impact
on our energy consumption.
We have committed by 2020
to migrate 80% of the servers
we had in 2018. We have already
migrated 70% and are on track
to reach our target by the end
of 2020.

USING RENEWABLE ENERGY

SGS is a signatory of the RE100
initiative, pledging to use 100%

energy from renewable sources
by 2020. To achieve this goal,
we use on-site energy generation
and purchase electricity from
renewable sources.

In 2019, we invested in
422 GWh of renewable energy
mechanisms to reduce our CO2
emissions in the communities
where we operate. In several
locations, we are exploring Power
Purchase Agreements, where
affiliates would develop an
off-site renewable energy plant.

ACHIEVEMENTS

Investment in 422 GWh
of renewable energy
mechanisms to mitigate
our CO2 emissions

PERFORMANCE

934

Total energy (GWh)

RENEWABLE ENERGY

351

Vehicle fuels (GWh)

583

Electricity and
non-transport fuels (GWh)

RENEWABLE ENERGY

422

0
1
8

7
4
8

6
8
8

2
0
9

4
4
9

4
3
9

2014

2015

2016

2017

2018

2019

4
5
3

0
6
3

7
5
3

8
6
3

1
5
3

2
3
3

2014

2015

2016

2017

2018

2019

8
7
4

3
9
4

6
2
5

4
4
5

7
7
5

3
8
5

2014

2015

2016

2017

2018

2019

6
1
4

2
2
4

3
6
3

3
3
3

6
6
2

9
1
2

Renewable energy (GWh)

2014

2015

2016

2017

2018

2019

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

EXTERNAL PARTNERSHIPS
AND INITIATIVES

We establish external partnerships
and take part in initiatives that help
us demonstrate our commitment
to strengthening our sustainability
performance, including:

• The World Business Council
for Sustainable Development

• RE100

• Climate Neutral Now

• Science Based Targets Initiative

For more information on SGS' external
partnerships and initiatives, please refer
to the SGS Sustainability Report:
www.sgs.com/cs-report-2019.

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OFF-SETTING RESIDUAL EMISSIONS

Carbon off-setting is an important part of SGS’ environmental efforts and bridges
the gap between the current reality and a more sustainable future. While we focus
on reducing our CO2 emissions, any residual emissions* are compensated for through
our carbon off-setting strategy.

The strategy allows us to assign a clear cost to the carbon that we generate (our internal
cost of carbon). Each SGS affiliate takes responsibility for their CO2 emissions and the
cost of off-setting them. We look for credible and verified carbon off-setting projects
that directly benefit communities where we have an impact.

ACHIEVEMENTS

Four voluntary carbon off-setting
schemes supported

* Market-based emissions. Excludes district heating and refrigerant gases emissions due to unavailability of data. Scope 3 emissions only include

Category 3: business travel.

< BACK TO CONTENTS

WATER AND WASTE
MANAGEMENT

We are committed to managing
finite resources, such as water,
more effectively and developing
ways to reuse, recycle and
prevent waste. While our
global water consumption is
relatively low in comparison
with other industries, managing
water resources is a critical
issue in some areas where
SGS operates. Through our
services, we handle quantities
of hazardous and nonhazardous
waste, which need to be
disposed of responsibly, without
risk to our workers and society.

WATER MANAGEMENT
PROGRAMS

Our water usage is concentrated
in our laboratories, with
additional usage for drinking,
food preparation and sanitation.

Across all our operations we
monitor the amount of water
we consume. Where possible,
we seek to improve our water
efficiency. For example, the
SGS Energy Efficiency in
Buildings program manages
water efficiency – by assessing
water consumption and
installations and recommending
site-specific improvements.

As a signatory of the World
Business Council for Sustainable
Development pledge for access to
safe water, sanitation and hygiene
(WASH), we are committed to
ensuring that all employees enjoy
access to clean water.

WASTE MANAGEMENT
PROGRAMS

We have traditionally produced
relatively small amounts of
hazardous and non-hazardous
waste compared to other
industries. This includes
chemicals, test samples, paper,
plastic and organic waste from
our offices and laboratories.

The waste is produced in varying
proportions, determined by the
industry or industries served
by each site. Specially crucial
is the high-density voluminous
test samples coming from
our mineral and construction
industries. Business growth in
these industries have driven the
inclusion of waste management

< BACK TO CONTENTS

PERFORMANCE

1.90

Total water purchased
(million m3)

54 032

Total waste generated
(metric tonnes)

HAZARDOUS

NON-HAZARDOUS

8
9
.
1

8
8
.
1

4
8
.
1

0
9
.
1

7
9
.
1

0
9
.
1

2014

2015

2016

2017

2018

2019

7
6
4
3
4

4
8
1
3
4

0
9
8

2
4

8
9
6
5
4

6
3
5
8
4

2
3
0

4
5

2014

2015

2016

2017

2018

2019

The non-hazardous waste increase is mainly due to the business growth of laboratory services analysing
clients' high-density voluminous samples of minerals or cement. The majority of these samples are later
recycled. We are currently enhancing our reporting system to accurately quantify the proportion of client
samples waste.

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as a material topic for the
company and we are currently
working on improving reporting
tools to tailor actions.

Our Add Value with Lëss initiative
encourages efficiency in our
offices and laboratories. This
includes environmentally-related
actions such as minimizing
printing and optimizing
consumables. We promote
recycling of office waste through
effective separation, and we draw
on external resources to help us
reuse and recycle materials.

WHAT COULD YOU

CHANGE
TO ADD VALUE
WITH LËSS ?

Streamline processes? Hold more efficient meetings?
Improve standardisation? Enhance safety? Or something else?

SGS5574_19_CC_Chase_The_Waste_Poster_Changing_Room.indd 1

17.05.19 12:15

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

MEASURING
OUR VALUE
TO SOCIETY

—

We are convinced that our long-term
success depends on our capacity to deliver
sustainable value not just to our shareholders
but to society as a whole. To understand
our value creation we have developed the
SGS Impact Valuation Framework. This aims
to quantify and give a monetary value to our
positive and negative impacts on society
beyond our financial return.

Our Impact Valuation Framework

The Measure of Our Value to Society

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OUR IMPACT VALUATION FRAMEWORK

—

By measuring our Value to Society in a non-abstract, concrete and systematic way, we are effectively
measuring our impact on societal prosperity and well-being, alongside SGS wealth and performance. Our aim is
to make value to society tangible and to provide a meaningful cost-benefit analysis to support strategic decision
making. Our SGS Impact Valuation Framework provides a cutting-edge methodology to achieve this.

The SGS framework values the societal impacts that result from SGS-driven activities
across six capitals: Financial (see page 32), Manufactured (see page 42), Intellectual
(see page 50), Human (see page 56), Social and Relationship (see page 66) and
Natural (see page 74) and measures them in a common unit: the Swiss Franc (CHF).
These impacts can be either positive or negative in order to reflect an associated
benefit or cost.

This framework has been developed to understand the value of our non-financial
performance both to SGS and to society. It guides us in maximizing our positive
impact and minimizing our negative impact and ultimately provides us with a more
holistic view of the value we add, beyond our financial return. While our model cannot
yet incorporate calculations estimating the value of our entire service portfolio to
society, we have explored the value of a few case studies.

NATURAL, HUMAN AND
MANUFACTURED CAPITAL
CASE STUDY

VEHICLE INSPECTION SERVICES

SGS ensures that public and
private vehicles are compliant
with safety and emission
standards issued by regulatory
authorities. SGS tests more than
25 million vehicles annually, and
as a result, reduces the number
of road accidents in 15 countries.
This provides enormous associated
positive economic impacts by
saving lives, protecting well-being,
reducing medical and insurance
costs, and avoiding damage
to property.

Similarly, air pollution has been
minimized by limiting the
circulation of over-polluting
vehicles. This in turn prevents
damage to human health and
ecosystems and the associated
economic and social costs.
The Value to Society derived
from our Vehicle Inspection
Services amounts to
CHF 125 million1 for Natural
Capital, CHF 1 400 million1 for
Human Capital, CHF 100 million1
for Manufactured Capital
and CHF 590 million for
Financial Capital.

< BACK TO CONTENTS

NATURAL CAPITAL
CASE STUDY

SEED AND CROP SERVICES

Precision agriculture and fertility
management solutions help
the agricultural sector to
effectively use sustainable
practices to reduce resource
usage, while increasing the
production to meet changing
demands due to global population
growth and new food habits.

We achieve this through solutions
such as agronomy services,
precision farming and soil and water
analysis. Thanks to these solutions,
society benefits in a number of ways.

With reduced fertilizer usage there
is less water pollution. By helping
to optimize the use of water by
the agricultural sector, public water
shortages and the associated
vulnerabilities are diminished.

Finally by enhancing crop yields,
farmers are more effective and
productivity is maximized.

In South America and Africa alone,
we delivered an estimated value
to society of CHF2.4 billion1 in
Natural Capital through reduced
fertilizer and water usage and
CHF2.1 billion1 in Financial Capital
through increased farm productivity.

OUR INDICATORS

In order to calculate our impact on each
capital, we use a set of 31 measurable
indicators. These relate to specific
corporate-level performance indicators,
such as CO2 emissions, sickness
absence and research and development.

Each indicator has an economic value
that, in turn, contributes to the positive
or negative flow of each capital.
The sum of the collective positive and
negative impacts of these indicators
in the six capitals provides us with
a figure that represents our value to
society in quantitative terms.

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EXAMPLE INDICATORS

GHG EMISSIONS

The social cost of the CO2
released into the atmosphere
as a result of our activities.

OCCUPATIONAL SAFETY

The human and societal costs
(e.g. cost of treatment) of injuries
and fatalities resulting from
workplace incidents.

RESEARCH AND DEVELOPMENT

The social benefit of enhancing
know-how through research
and development activities.

1. Relates to 2018 figures.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

THE MEASURE OF OUR VALUE TO SOCIETY

—

Our calculations1 demonstrated that SGS generated +CHF 7 641 million of positive societal benefit, primarily
created through profit generation, the paying of taxes and wages, and training and development programs.
We also generated CHF 991 million of negative societal impacts, which were primarily driven by
the SGS supply chain's environmental footprint. SGS’ positive impacts were primarily driven
by the Company's own operations, which accounted for 69% of the total positive impacts.

CHF 6 650mio

The total value to society of SGS direct
operations and supply chain activities

CHF 922mio

CHF 305mio CHF (405)mio

CHF (107)mio CHF (313)mio

CHF 6 650mio

CHF 6 247mio

FINANCIAL
CAPITAL

MANUFACTURED
CAPITAL

INTELLECTUAL
CAPITAL

HUMAN
CAPITAL

SOCIAL AND
RELATIONSHIP CAPITAL

NATURAL
CAPITAL

VALUE
TO SOCIETY

This chart includes Direct Operations and Supply Chain Value to Society figures. We are in the process of extending our Impact
Valuation Framework methodology to calculate the value of our entire service portfolio to society. Once integrated, we expect
to see a significant increase in our Value to Society figure as many of our services enable other businesses and governments
to deliver positive outcomes to society.

1. Value to society is calculated on 2018 figures.

< BACK TO CONTENTS

For more information
on how SGS measures
its value to society and
case studies on the
capitals impacts of our
services, see the SGS
Sustainability Report.

SUSTAINABILITY REPORT

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OUR APPROACH TO
SUSTAINABILITY REPORTING

—

SGS is committed to providing stakeholders with accurate
and timely updates on our sustainability activities
and our performance, and we strive to produce a report that is fair,
transparent and balanced, and meets the needs of our stakeholders.

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1.1 SCOPE AND BOUNDARIES

The scope of the Sustainability Information contained in this Integrated Annual Report1 covers all regions and
business lines of the SGS Group for the 2019 calendar year. A full list of SGS affiliates can be found on pages
197–200 of this report. Unless stated otherwise, our reported data scope covers the Group business and targets
for the period 1 January to 31 December 2019.

We have identified and prioritized our most material impacts on the business and on stakeholders across our value
chain, and this Integrated Annual Report includes performance data for our direct operations and information on
how we are managing the most material issues. For more information on how we define our material issues, please
see page 26 of this report.

Our past and present performance is disclosed in this report over a five-year period. Sometimes historical data may
differ from previous reports due to the availability of more accurate data or improved data gathering and/or reporting.
In such cases, variations in data of less than 5% are generally considered immaterial: significant changes to prior
year data are disclosed where they first appear in the report.

1.2 EXTERNAL STANDARDS

For the past ten years, SGS has published a Sustainability Report, and since 2015, we have integrated sustainability
content into our Integrated Annual Report as we move towards a fully integrated reporting structure in line with
the Integrated Reporting Framework.

SGS supports the principle of integrated reporting. In 2019, we moved forward again with our alignment to the
integrated reporting framework by using the six Capitals it defines as the structure of our Integrated Annual Report.

The sustainability content in this Integrated Annual Report is drawn from our Sustainability Report, to be published
in March 2020. Since 2013, our Sustainability Report has been developed using the guidelines for the AA1000
Accountability Principles Standard and the Global Reporting Initiative's Standards. Our Sustainability Basis of
Reporting (also to be published in March 2020) explains further our reporting approach.

1.3 ASSURANCE AND BASIS OF PREPARATION

External assurance of sustainability performance indicators is an important part of our approach, and our
sustainability reporting has been independently assured since 2011.

In 2019, we appointed Deloitte LLP to provide independent assurance of our sustainability performance. Deloitte’s
Assurance Report describes the work undertaken and their conclusion for the reporting period to 31 December
2019. Documents relating to independent external assurance in the years prior to 2019 are available in our
Reports, Policies and Multimedia section on our website: www.sgs.com/en/our-company/corporate-sustainability/
sustainability-at-sgs/reports-policies-and-multimedia.

Please see independent assurance for further information about our assurance process on pages 86–87 of this
Integrated Annual Report.

1. The sustainability content can be found on pages 5, 12–13, 22–27, 45, 48, 54–55, 61–65, 71–73, 78–81, 83–85 of this report.

< BACK TO CONTENTS

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

Deloitte SA
Rue du Pré-de-la-Bichette 1
1202 Geneva
Switzerland

Phone: +41 (0)58 279 8000
Fax: +41 (0)58 279 8800
www.deloitte.ch

2019 Annual Report Assurance Statement

Independent assurance statement by Deloitte SA to SGS SA on selected sustainability information presented
in the 2019 SGS Annual Report

What we looked at: Scope of our work
SGS SA (“SGS”) has engaged us to perform limited assurance in respect of the SGS Sustainability Report for the year ended
31 December 2019. Our separate opinion will be published in that document. Selected sustainability information from the
Sustainability Report also appears in the SGS Annual Report for the year ended 31 December 2019 (“the Report”). The selected
sustainability information which comprises the Subject Matter relevant to this assurance statement appears on pages 5, 12–13,
22–27, 45, 48, 54–55, 61–65, 71–73, 78–81, 83–85 of the Report.

What standards we used: basis of our work and level of assurance
We used the International Standard for Assurance Engagement (ISAE) 3000 (Revised), issued by the International Auditing and
Assurance Standards Board to carry out our limited assurance engagement on the Subject Matter. To achieve limited assurance,
ISAE 3000 requires that we review the processes and systems used to compile the areas on which we provide limited assurance.
This standard requires that we comply with the independence and ethical requirements and to plan and perform our assurance
engagement to obtain sufficient appropriate evidence on which to base our limited assurance conclusion. It does not include
detailed testing of source data or the operating effectiveness of processes and internal controls. This is designed to give a similar
level of assurance to that obtained in the review of interim financial information. This provides less assurance and is substantially
less in scope than a reasonable assurance engagement.

Inherent limitations
The process an organisation adopts to define, gather and report data on its non-financial performance is not subject to the formal
processes adopted for financial reporting. Therefore, data of this nature can be subject to variations in definitions, collection
and reporting methodology with no consistent, accepted standard. This may result in non-comparable information between
organizations and from year to year within an organisation as methodologies develop. To support clarity in this process, SGS
prepares sustainability information in accordance with the principles of the Global Reporting Initiative (GRI) Standards. The SGS
Sustainability Report further describes SGS’s approach to reporting sustainability information, including the scope and standards
selected (“the Reporting Criteria”). Further detail appears in SGS’s Basis of Reporting document, available on request from the
company. We have carried out our assurance against this criteria and it should be read together with this report.

What we did: key assurance procedures
To form our conclusions, we undertook the following procedures:
•

•

Interviewed management at SGS and those with operational responsibility for sustainability performance to critically evaluate
the reporting process, criteria and key controls;
Interviewed management at SGS to understand the design of controls and functionality of the group sustainability information
management and reporting databases used to manage sustainability data at a corporate level (‘Solaris’ and ‘Crystal’),
and performed selected systems integrity tests to assess the accuracy of information generated by the systems;
Identified potential material quantitative and qualitative sustainability key performance indicators and disclosures from
the 2018 SGS Sustainability Report, by considering criteria such as the outputs of the company’s materiality process;
peer reporting; susceptibility of misstatement due to error or fraud; whether a misstatement or control deficiency was noted
in the prior-year; indicators or disclosures related to estimates and estimation methods; changes in calculation methods
from prior-year;
For the determined sustainability key performance indicators (as presented in Table 1 and a sample of related disclosures
we undertook the following procedures:
o management interviews and documentation checks to understand and test the reporting boundary and group consolidation

o
o

and validation checks for complete, accurate and appropriate presentation of the information;
reviewed the design and implementation of SGS’s half year and full year data validation controls, and tested the operating
effectiveness of key data validation review and sign-off controls;
conducted trends analysis on full year data to identify and query anomalies in reported data;
conducted sample-based substantive testing of Operational Integrity, to assess the accuracy of data classification, in line
with the group reporting criteria; and
checked the quantitative and qualitative disclosures in the Report related to the selected sustainability key performance
indicators against our understanding of the sustainability governance and management structures and performance over
the year.

• Where necessary, we made recommendations to SGS management based on findings identified during the assurance that

required improvement.

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SGS SA
2019 Annual Report
Assurance Statement

Table 1: Selected sustainability key performance indicators

Total number of integrity issues reported through corporate helplines (absolute number)
Natural turnover (%)

•
•
• Women in leadership positions (CEO -3) (%)
•
•
•
•
•

Total recordable incident rate
Lost time incident frequency rate
Total number of fatalities (absolute number)
Total greenhouse gas emissions (Scope 1, 2, and 3) (thousand tonnes CO2e)
Total energy consumption by source (GWh)

What we found: our assurance conclusion
Based on our procedures described in this report, nothing has come to our attention that causes us to believe that the
Subject Matter in the SGS Annual Report for the year ended 31 December 2019 has not been prepared, in all material respects,
in accordance with the Reporting Criteria.

Emphasis of matter

We reviewed SGS’ basis for excluding direct emissions from refrigerants consumption from their Scope 1 GHG Inventory.
Per discussions with management we noted their judgement that insufficient data was available to make a reasonable
estimation for the refrigerants emissions, particularly given the high annual variability of refrigerant consumption.

We have also reviewed SGS’ basis for excluding emissions from district heating consumption from their Scope 2 GHG Inventory.
Per discussions with management, we noted that data quality and completeness was not sufficient to approximate a reasonable
estimation for district heating consumption.

A disclosure has been provided on pages 78 and 80 of the SGS 2019 Annual Report as a caveat to the Scope 1 and Scope 2
inventory exclusions noted above. This emphasis of matter did not modify our assurance opinion, as stated above.

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Our independence and competence in providing assurance to SGS
We complied with Deloitte’s independence policies, which address and, in certain cases, exceed the requirements of the Code of
Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, and in particular preclude us from
taking financial, commercial, governance and ownership positions which might affect, or be perceived to affect, our independence
and impartiality, and from any involvement in the preparation of the report. We have confirmed to SGS that we have maintained
our independence and objectivity throughout the year and in particular that there were no events or prohibited services provided
which could impair our independence and objectivity. We have applied the International Standard on Quality Control 1 and
accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding
compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Our team consisted
of a combination of Auditors with professional assurance qualifications and professionals with a combination of sustainability
reporting and subject matter experts including many years experience in providing sustainability report assurance.

Roles and responsibilities
The Directors are responsible for the preparation of the information and statements contained within the Report. They are
responsible for determining the goals and establishing and maintaining appropriate performance management and internal control
systems from which the reported information is derived.

Our responsibility is to independently express conclusions on the subject matters as defined within the scope of work above to SGS
in accordance with our letter of engagement. Our work has been undertaken so that we might state to SGS those matters we are
required to state to them in this statement and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than SGS for our work, for this report, or for the conclusions we have formed.

Deloitte SA

Joëlle Herbette
Partner
Auditor in Charge

Geneva, 17 February 2020

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Matthew Sheerin
Partner

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

CORPORATE
GOVERNANCE

—

Group Structure and Shareholders

Capital Structure

Board of Directors

Operations Council

Compensation, Shareholdings and Loans

Shareholders’ Participation Rights

Change of Control and Defense Measures

Auditors

Information Policy

101

102

103

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This Corporate Governance Report informs shareholders, prospective investors and the public at large on
SGS policies in matters of corporate governance, such as the structure of the Group, shareholders’ rights,
composition roles and duties of the Board of Directors and its Committees and Management, and internal
controls and audits. This report has been prepared in compliance with the Swiss Exchange (SIX) Directive
on Information Relating to Corporate Governance of 20 June 2019 and with the Swiss Code of Best Practice
for Corporate Governance. The SGS Corporate Governance framework aims to achieve an efficient allocation
of resources and clear mechanisms for setting strategies and targets, in order to maximize and protect
shareholder value. SGS strives to attain this goal by defining clear and efficient decision-making processes,
fostering a climate of performance and accountability among managers and employees alike and aligning
employees’ remuneration with the long-term interests of shareholders.

3.6. Definition of areas
of responsibility

3.7. Information and control
instruments vis-à-vis
the management

6. SHAREHOLDERS’
PARTICIPATION RIGHTS 102

6.1. Voting rights and

representation restrictions

102

6.1.2. Rules on instructions

4. OPERATIONS COUNCIL 99

4.1. Members of the

Operations Council

4.2. Other activities and
vested interests

4.3. Changes in the

Operations Council

4.4. Limits on external mandates

4.5. Management contracts

101

to the independent
proxy and electronic
participation in the Annual
Shareholders Meeting

102

6.2. Statutory quorums

102

6.3. Convocation of General

Meetings of Shareholders

102

6.4. Inclusion of items on

the Agenda

6.5. Registration in

the share register

102

5. COMPENSATION,
SHAREHOLDINGS
AND LOANS

5.1. Content and method of

101

7. CHANGE OF
CONTROL AND
DEFENSE MEASURES 102

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determining the compensation
and the shareholding programs 101

7.1. Duty to make an offer

7.2. Clauses on change of control

5.2. Rules on approbation by
the Annual Shareholders
Meeting of executive pay

5.2.1. Rules on performance-
related pay and
allocation of equity-
linked instruments

5.2.2. Rules on loans, credit

facilities and post-
employment benefits

5.2.3. Rules on vote on pay

101

102

101

8. AUDITORS

8.1. Duration of the mandate
and term of office of the
Lead Auditor

8.2. Audit fees

8.3. Additional fees

8.4. Information instruments

pertaining to the external audit 102

9. INFORMATION
POLICY

103

1. GROUP STRUCTURE
AND SHAREHOLDERS

1.1. Group structure

1.1.1. Operational group
structure

1.1.2. Listed companies
in the Group

1.1.3. Non-listed companies

in the Group

1.2. Significant shareholders

1.3. Cross-shareholdings

2. CAPITAL STRUCTURE 91

2.1. Issued share capital

2.2. Authorized and conditional

share capital

2.3. Changes in capital

2.4. Shares and

participation certificates

2.5. Dividend-right certificates

2.6. Limitations on transferability

and admissibility of
nominee registrations

2.7. Convertible bonds and
warrants/options

3. BOARD OF
DIRECTORS

3.1. Members of the

Board of Directors

3.2. Other activities

3.3. Limits on external mandates

3.4. Elections and terms of office

3.5. Internal organizational structure 95

3.5.1. Allocation of tasks within

the Board of Directors

3.5.2. Members list, tasks

and area of responsibility
for each Committee of
the Board of Directors

3.5.3. Working methods

of the Board and
its Committees

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

1. GROUP STRUCTURE
AND SHAREHOLDERS
1.1. GROUP STRUCTURE

1.1.1. OPERATIONAL GROUP STRUCTURE

SGS SA, registered in Geneva (CH),
also referred to as the “Company”,
controls directly or indirectly all entities
worldwide belonging to the SGS Group,

which provides independent inspection,
verification, testing, certification and
quality assurance services.

The shares of SGS SA are listed on
the SIX Swiss Exchange and are traded
on SIX Europe (Swiss Security Number:
249745; ISIN: CH0002497458). On
31 December 2019, market capitalization
was approximately CHF 20 057 million
(2018: CHF 16 871 million).

The operations of the Group are divided
into seven regions, each led by a Chief
Operating Officer who is responsible
for the SGS businesses in that region
and for the local implementation of
Group policies and strategies.

At 31 December 2019, geographic
operations were organized as follows:

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AMERICAS

• North America

EUROPE, AFRICA, MIDDLE EAST

ASIA PACIFIC

• Western Europe and Africa

• North East Asia

• South and Central America

• North and Central Europe

• South East Asia Pacific

• Eastern Europe and Middle East

The Group is also structured into nine
lines of business. Each business line is
responsible for the global development
of Group activities within its own sphere
of specialization and the execution of
strategies with the support of the
Chief Operating Officers.

At 31 December 2019, the business
lines are organized as follows:

• Agriculture, Food and Life

• Minerals

• Oil, Gas and Chemicals

• Consumer and Retail

• Certification and

Business Enhancement

• Industrial

• Environmental, Health and Safety

• Transportation1

• Governments and Institutions

Each line of business is led by an
Executive Vice President. Chief
Operating Officers and Executive
Vice Presidents are members of
the Operations Council, the Group’s
most senior management body.

1. On 1 January 2020, all Transportation

activities were allocated and integrated
across multiple business lines to generate
operational synergies and reinvigorate their
growth profiles.

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1.1.2. LISTED COMPANIES IN THE GROUP

None of the companies under the direct
or indirect control of SGS SA have
listed shares or other securities on
any stock exchange.

1.1.3. NON-LISTED COMPANIES
IN THE GROUP

The material legal entities consolidated
within the Group are listed on pages
197–200 of the Annual Report,
with details of the share capital,
the percentage of shares controlled
directly or indirectly by SGS SA and

the registered office or principal place
of business. The disclosure of legal
entities is limited to entities whose
contribution to the Group revenues
in 2019 represent at least 1% of the
consolidated revenues, but includes, in
addition, the main operating legal entity
in every country where the Group has
permanent operations, even when such
legal entities represent less than 1%
of the Group consolidated revenues.
This definition of materiality excludes
dormant companies, pure sub-holding
companies or entities used solely for
the detention of assets. Details of

acquisitions and disposals made by the
SGS Group during 2019 are provided
in note 3 of the consolidated financial
statements included in the section SGS
Group Results on pages 144–145 of this
Annual Report.

1.2. SIGNIFICANT SHAREHOLDERS

To the knowledge of the Company the
shareholders owning more than 3%
of its share capital as at 31 December
2019, or as the date of their last
notification as per Article 20 of the
Swiss Stock Exchange Act were:

(% of detention)

Groupe Bruxelles Lambert (acting through Serena SARL and URDAC)1

Mr. August von Finck and members of his family (acting in concert)2

BlackRock, Inc.

MFS Investment Management

2019

16.73%

15.66%

4.00%

3.81%

2018

16.60%

15.52%

4.00%

3.02%

1. The ultimate beneficial owners of the Groupe Bruxelles Lambert are Stichting Administratekantoor Frère-Bourgeois, Paul Desmarais Junior

and André Desmarais.

2. The Company was informed on 4 February 2020, that the von Finck family has disposed of a large portion of their holding, resulting in their

participation falling below the threshold of 3% of the share capital and voting rights.

As at December 31, 2019, the SGS
Group held 0.18% of the share capital
of the company (2018: 1.09%).

In 2019, 1 683 treasury shares were sold
to cover the equity compensation plans
and no shares were purchased .

During 2019, the Company has
published regularly on the electronic
platform of the Disclosure Office of the
SIX Swiss Exchange Ltd. all disclosure
notifications received from shareholders
of transactions subject to the disclosure
obligations of Article 20 SESTA.

On February 4, 2019, the Group initiated
a share buyback program which ended
on 19 December 2019. SGS SA did not
repurchase shares during the buyback
program, neither on the ordinary
trading line, nor on the second trading
line for cancellation.

1.3. CROSS-SHAREHOLDINGS

Neither SGS SA nor its direct and
indirect subsidiaries have any cross-
shareholding in any other entity,
whether publicly traded or privately held.

2. CAPITAL STRUCTURE
2.1. ISSUED SHARE CAPITAL

The share capital of SGS SA is 7 565 732
as of 31 December 2019 and comprises
7 565 732 fully paid-in registered shares
of a par value of CHF 1. On 31 December
2019, SGS SA held 13 342 treasury
shares (2018: 83 025). The shares
related to the share buyback program
are directly held by SGS SA, the shares
to cover the equity compensation plan
are held by a subsidiary company.

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2.2. AUTHORIZED AND CONDITIONAL
SHARE CAPITAL

The Board of Directors has the authority
to increase the share capital of the
Company by a maximum of 500 000
registered shares with a par value of
CHF 1 each, corresponding to a
maximum increase of CHF 500 000
in share capital. If increased by the
maximum amount of the authorized
share capital, the existing share capital
of 7 565 732 shares would grow by
approximately 6.6% to 8 065 732 shares.
The Board is authorized to issue the new
shares at the market conditions prevailing
at the time of issue. In the event that the
new shares are issued for the purpose
of an acquisition, the Board is authorized
to waive the shareholders’ preferential
right of subscription or to allocate
such subscription rights to third parties.
The authority delegated by the
shareholders to the Board of Directors
to increase the share capital is valid until
22 March 2021.

The shareholders have conditionally
approved an increase of share capital
by an amount of CHF 1 100 000 divided
into 1 100 000 registered shares with a
par value of CHF 1 each. This conditional
share capital increase is intended to
obtain the shares necessary to meet the
Company’s obligations with respect to
employee share option plans and option
or conversion rights of convertible bonds
or similar equity-linked instruments
that the Board is authorized to issue.
If increased by the maximum amount of
the conditional share capital, the existing
share capital of 7 565 732 shares would
increase by approximately 14.5% to
8 665 732 shares. The conditional capital
is not limited in time.

The right to subscribe to such conditional
capital is reserved to beneficiaries of
employee share option plans and holders
of convertible bonds or similar debt
instruments and therefore excludes
shareholders’ preferential rights of
subscription. The Board is authorized to
determine the timing and conditions of
such issues, provided that they reflect
prevailing market conditions.

The term of exercise of the options
or conversion rights may not exceed
ten years from the date of issuance
of the equity-linked instruments.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

2.3. CHANGES IN CAPITAL

The share capital of the Company was
reduced twice in the last years, once in
2017 and once in 2019 to cancel shares
purchased by application of share buy-
back programs initiated by the Company:
At the Company’s Annual General
Meeting in 2019, the Shareholders
approved a reduction of the share
capital, by cancellation of 68 000 shares
which were purchased as part of
a share buyback program completed
in December 2018. Consequently,
the share capital of the Company
was reduced from CHF 7 633 732
to 7 565 732 in 2019.

Previously, in 2017, the share capital
was reduced from CHF 7 822 436 to
CHF 7 633 732 by cancellation of 188 704
shares purchased by the Company.

No other changes in the share capital of
the Company were made in the course
of the last three years.

2.4. SHARES AND
PARTICIPATION CERTIFICATES

All shares, other than treasury shares
held by SGS SA, have equal rights to the
dividends declared by the Company and
have equal voting rights. The Company
has not issued any participation
certificates (bons de participation/
Partizipationsscheine).

2.5. DIVIDEND-RIGHT CERTIFICATES

The Company has not issued any
dividend-right certificates.

2.6. LIMITATIONS ON
TRANSFERABILITY AND ADMISSIBILITY
OF NOMINEE REGISTRATIONS

SGS SA does not limit the transferability
of its shares. The registration of shares
held by nominees is not permitted by
the Company’s Articles of Association,
except by special resolution of the
Board of Directors. By decision of the
Board, the Company’s shares can be
registered in the name of a nominee
acting in a fiduciary capacity for an
undisclosed principal, provided however
that shares registered in the names
of nominees or fiduciaries may not
exercise voting rights above a limit of
5% of the aggregate share capital of
the Company. This rule was made public
on 23 March 2005. The Company has a
single class of shares and no preferential
rights, statutory or otherwise, have been
granted to any shareholder.

2.7. CONVERTIBLE BONDS AND
WARRANTS/OPTIONS

No convertible bonds have been issued
by the Company or by any entity under
its direct or indirect control. In 2019,
no options or similar instruments have
been issued by the Company or by any of
the Group’s subsidiaries. Options plans

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previously granted to members of the
Operations Council, to senior managers
and selected key employees have been
discontinued by the Company in 2015
and the last outstanding options under
this legacy stock option plan will expire,
if not exercised, in 2020.

Details of all options outstanding are
provided in note 28 of the consolidated
financial statements of the Group
(Annual Report pages 170–172).

3. BOARD OF DIRECTORS

The Board of Directors is the highest
governing body within the Group. It is the
ultimate decision-making authority except
for those decisions reserved by law to
the General Meeting of Shareholders.

3.1. MEMBERS OF THE BOARD
OF DIRECTORS

This section presents the Members of
the Board of Directors of the Company
with their functions in the Group, their
professional backgrounds and all their
material positions held outside the
Group in governing and supervisory
boards, management positions and
consultancy functions, official tenures
and political commitments, both in
Switzerland and abroad.

By delegation of the Board, the
Nomination and Remuneration
Committee has set out criteria for
the selection of new Directors and
has conducted a search which has
resulted in changes to the composition
of the Board of Directors in 2019.
The aim of this exercise is to ensure
that the Board is continuously in a
position to provide leadership, strategic
oversight and guidance and contribute
to setting ambitious targets for the
Group and meeting long-term value
creation objectives.

The competencies sought by the
Group for its Board of Directors
include, experience of senior executive
leadership in international businesses,
strategic planning, finance, technology
and innovation. When selecting
candidates for the Board of Directors,
the Company pays due regard to
experience, professional qualifications,
areas of expertize, age, gender, national
background and leadership style,
so that at all times, the Board and its
Committees have the required skills.

At the Annual Shareholders Meeting
of March 2019, Luitpold von Finck,
Calvin Grieder and Kory Sorenson were
appointed to the Board of Directors.
August von Finck and Christopher Kirk
did not stand for re-election. Biographical
information on former members of the
Board of Directors is available in the

Corporate Governance reports of prior
years, including pages 79-81 of the 2018
Integrated Annual Report.

The members of the Board of Directors
at 31 December 2019 were as follows:

PETER KALANTZIS (1945)

Swiss/Greek

FUNCTION IN SGS

Member:

• Chairman of the Board of Directors

INITIAL APPOINTMENT TO THE BOARD

March 2009

PROFESSIONAL BACKGROUND

Peter Kalantzis holds a Ph.D. in
Economics and Political Sciences from
the University of Basel and engaged in
research as a member of the Institute
for Applied Economics Research at the
University of Basel between 1969 and
1971. Prior to 2000, Peter Kalantzis
was responsible for Alusuisse-Lonza
Group’s corporate development and
actively involved in the de-merger and
stock market launch of Lonza, as well
as the merger process of Alusuisse and
Alcan. Dr. Kalantzis served as head of the
Chemicals Division of Alusuisse-Lonza
Group from 1991 until 1996. In 1991,
Dr. Kalantzis was appointed Executive
Vice President and Member of the
Executive Committee of the Alusuisse-
Lonza Group. Dr. Kalantzis has worked
as an independent consultant since 2000.

OTHER ACTIVITIES AND FUNCTIONS

Clair AG, Cham (CH), Chairman of
the Board since 2004

Degussa Sonne/Mond Goldhandel AG,
Cham (CH), Chairman of the Board
since 2012

Consolidated Lamda Holdings Ltd.,
Luxembourg (LU), Member of the Board
since 2002

Paneuropean Oil and Industrial Holdings
SA, Luxembourg (LU), Member of the
Board since 2001

*Von Roll Holding AG, Breitenbach
(CH), Chairman of the Board since 2010,
Member of the Board since 2007

Hardstone Services SA, Geneva (CH),
Chairman of the Board since 2014,
Member since 2009

Gnosis Foundation, Vaduz (FL), President
of the Foundation Board since 2008

John S. Latsis Public Benefit
Foundation, Vaduz (FL), President of
the Executive Board since 2015

* Listed company.

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PAUL DESMARAIS, JR (1954)

Canadian

FUNCTION IN SGS

Member:

• Board of Directors

INITIAL APPOINTMENT TO THE BOARD

July 2013

PROFESSIONAL BACKGROUND

Chairman and Co-Chief Executive
Officer, *Power Corporation of Canada.

Paul Desmarais, Jr. has a Bachelor
of Commerce Degree from McGill
University, Montréal and an MBA from
the Institut Européen d’Administration
des Affaires (INSEAD), France.

He has received honorary doctorates
from various Canadian universities.

He joined Power Corporation of Canada
in 1981 and assumed the position
of Vice President the following year.
In 1984, he led the creation of Power
Financial Corporation to consolidate
Power’s major financial holdings, as well
as Pargesa Holding SA, under a single
corporate entity. Mr. Desmarais served
as Vice President of Power Financial
from 1984 to 1986, as President and
Chief Operating Officer from 1986 to
1989, as Executive Vice Chairman from
1989 to 1990, as Executive Chairman
from 1990 to 2005, as Chairman of
the Executive Committee from 2006
to 2008 and as Executive Co-Chairman
since 2008. He was named Chairman
and Co-CEO with Power Corporation
in 1996. After Power Financial and the
Frère Group of Belgium took control of
Pargesa in 1990, Mr. Desmarais moved
to Europe from 1990 to 1994, to develop
the partnership with the Frère Group and
to restructure the Pargesa group.

From 1982 to 1990, he was a member
of the Management Committee of
Pargesa, in 1991, Executive Vice
Chairman and then Executive Chairman
of the Committee; in 2003, he was
appointed Co-Chief Executive Officer
and in 2013 named Chairman of the
Board. He is a Director of many Power
Group companies in North America.

OTHER ACTIVITIES AND FUNCTIONS

*Groupe Bruxelles Lambert, Brussels
(BE), Chairman of the Board of Directors

*Great-West Lifeco Inc., Winnipeg
(CAN), Member of the Board (including
those of its major subsidiaries)

*IGM Financial Inc., Winnipeg (CAN),
Member of the Board (including those
of its major subsidiaries)

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*Pargesa Holding SA, Geneva (CH),
Board Member since 1992,
Chairman of the Board since 2013

*LafargeHolcim Ltd, Zurich (CH),
Member of the Board since 2015

Member of the Advisory Council
the European Institute of Business
Administration (INSEAD)

Trustee of the Brookings Institution and
a Co-Chair of the Brookings International
Advisory Council (USA)

From 2000 onwards, Mr. von Finck
focused his activities on the Mövenpick
Group in Switzerland and its diversified
international operations, and became
the owner of the company in 2005.

OTHER ACTIVITIES AND FUNCTIONS

Mövenpick Holding Ltd, Baar (CH)
and its major subsidiaries,
Chairman of the Board of Directors

Clair Ltd, Cham (CH), Member of the Board

Past Chairman and a Member of the
Business Council of Canada (CAN)

Custodia Holding, Munich (DE),
Member of the Board

AUGUST FRANÇOIS VON FINCK (1968)

IAN GALLIENNE (1971)

Swiss

FUNCTION IN SGS

Member:

• Board of Directors

• Audit Committee

• Nomination and

Remuneration Committee

French-Belgian

FUNCTION IN SGS

Member:

• Board of Directors

• Nomination and

Remuneration Committee

INITIAL APPOINTMENT TO THE BOARD

July 2013

May 2002

PROFESSIONAL BACKGROUND

August François von Finck holds a
Master of Business Administration from
Georgetown University, Washington. D.C.

OTHER ACTIVITIES AND FUNCTIONS

*Custodia Holding SE, Munich (DE),
Member of the Board since 2018

*Staatl. Mineralbrunnen AG, Bad
Brückenau (DE), Member of the Board
since 2001

Bank von Roll, Zürich (CH), Vice
President of the Board since 2009

*Von Roll Holding AG, Breitenbach (CH),
Member of the Board since 2010

LUITPOLD VON FINCK (1971)

German and Swiss

FUNCTION IN SGS

Member:

• Board of Directors

INITIAL APPOINTMENT TO THE BOARD

March 2019

PROFESSIONAL BACKGROUND

Luitpold von Finck’s educational
background is in the banking sector.
He was successfully involved in
various parts of the von Finck family
business, including real estate and
mid-sized industrial companies.

PROFESSIONAL BACKGROUND

CEO of *Groupe Bruxelles Lambert
since 2012, Ian Gallienne has an MBA
from INSEAD in Fontainebleau. From
1998 to 2005, he was a Director at the
private equity funds Rhône Capital LLC
in New York and London. In 2005, he
founded the private equity fund Ergon
Capital Partners in Brussels and was
its Managing Director until 2012.
He has been a Board Member of
*Groupe Bruxelles Lambert since 2009.

OTHER ACTIVITIES AND FUNCTIONS

*adidas (D), Member of the
Supervisory Board

*Imerys, Paris (F), Member of the
Board, Chairman of the Strategic
Committee, Member of the
Compensation Committee, Member
of the Appointments Committee

*Pernod Ricard SA, Paris (F), Member
of the Board, Member of the Strategic
Committee and Member of the
Remuneration Committee

Frère-Bourgeois SA (BE), Member
of the Board

Compagnie Nationale à Portefeuille SA
(BE), Member of the Board

Société Civile du Château Cheval Blanc
(France), Member of the Board

Marnix French ParentCo (groupe Webhelp),
Paris (France)

* Listed company.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

CALVIN GRIEDER (1955)

OTHER ACTIVITIES AND FUNCTIONS

SHELBY R. DU PASQUIER (1960)

Swiss

FUNCTION IN SGS

Member:

• Board of Directors

• Audit Committee

• Nomination and

Remuneration Committee

INITIAL APPOINTMENT TO THE BOARD

March 2019

PROFESSIONAL BACKGROUND

Calvin Grieder holds an Engineering
Master of Science from the ETH Zurich
and has completed an Advanced
Management Program (AMP) at
Harvard University.

In 1980, Mr. Grieder started his career
as Marketing Manager at Georg Fischer
in Switzerland and continued in various
executive positions at Swiss and
German companies. These included
Swiss Industrial Company (SIG) and
Swisscom Telecom, where he served
as Head of the Mobile and Internet
business and Member of the
Executive Board. He was CEO of Bühler,
an international engineering group,
from 2001 to 2016.

OTHER ACTIVITIES AND FUNCTIONS

*Givaudan SA, Vernier (CH),
Chairman of the Board

Bühler Group AG, Uzwil (CH),
Chairman of the Board

AWK Group AG, Zurich (CH),
Chairman of the Board

Avenir Suisse, Zurich-Oerlikon (CH),
Member of the Board of Trustees

CORNELIUS GRUPP (1947)

Austrian

FUNCTION IN SGS

Member:

• Board of Directors

• Professional Conduct Committee

INITIAL APPOINTMENT TO THE BOARD

March 2011

PROFESSIONAL BACKGROUND

Dr. Grupp holds a Doctorate in Law and
a Master in Business Administration.

He is the Owner and General Manager of
Tubex Holding GmbH, Stuttgart, Germany,
a company active in the packaging
industry and of CAG Holding GmbH,
Lilienfeld, Austria, which is active in the
field of aluminum, glass and biomass.

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Schoellerbank AG, Vienna (AT),
Member of the Board since 1999

Stölzle Oberglas, Koeflach (AT),
Member of the Board since 1989

Honorary General Consul of Austria
to the Land of Baden-Württemberg

GÉRARD LAMARCHE (1961)

Belgian

FUNCTION IN SGS

Member:

• Board of Directors

Chairman:

• Audit Committee

INITIAL APPOINTMENT TO THE BOARD

July 2013

PROFESSIONAL BACKGROUND

Chairman of Multifin SA (BE), since 2019

Gérard Lamarche is a graduate in
Economic Sciences from the University
of Louvain-la-Neuve (Belgium) and the
INSEAD Business School (Advanced
Management Program for Suez Group
Executives). He also trained at the
Wharton International Forum in 1998-99
(Global Leadership Series).

He began his career with Deloitte
Haskins and Sells in Belgium in
1983 and was appointed as an M&A
consultant in the Netherlands in 1987.
In 1988, he joined Société Générale
de Belgique as Investment Manager.
He was promoted to Controller in 1989
before becoming an Advisor to the
Strategy and Planning Department from
1992 to 1995.

He joined Compagnie Financière de
Suez as Special Advisor to the Chairman
and Secretary to the Suez Executive
Committee (1995-1997); he was
later appointed Senior Vice President
in charge of Planning, Control and
Accounting. In 2000, Gérard Lamarche
joined NALCO (the US subsidiary of the
Suez Group and world leader in industrial
water treatment) as General Managing
Director. He was appointed CFO of
the Suez Group in 2003.

He was the Co-CEO of Groupe Bruxelles
Lambert from 2012 to 2019.

OTHER ACTIVITIES AND FUNCTIONS

*Umicore, Brussels (B),
Member of the Board

*Groupe Bruxelles Lambert (B),
Member of the Board

Swiss

FUNCTION IN SGS

Member:

• Board of Directors

• Professional Conduct Committee

• Nomination and Remuneration

Committee

INITIAL APPOINTMENT TO THE BOARD

March 2006

PROFESSIONAL BACKGROUND

Attorney at Law, Partner, Lenz & Staehelin
Law firm, Geneva.

Shelby R. du Pasquier holds degrees from
Geneva University Business School and
School of Law as well as from Columbia
University School of Law (LLM). He was
admitted to the Geneva Bar in 1984 and
to the New York Bar in 1989. He became
a Partner of Lenz and Staehelin in 1994.

OTHER ACTIVITIES AND FUNCTIONS

*Swiss National Bank, Member of
the Board since 2012

Stonehage Fleming Family & Partners
(Jersey) Limited, Member of the Board
since 2012

Pictet and Cie Group SCA, Chairman
of the Supervisory Board since 2013

KORY SORENSON (1968)

British

FUNCTION IN SGS

Member:

• Board of Directors

• Audit Committee

PROFESSIONAL BACKGROUND

Kory Sorenson has a DESS in Corporate
Finance from the Institut d’Etudes
Politiques de Paris and a master’s
degree in Applied Economics from
the Universite de Paris – Dauphine.
She also holds a bachelor’s degree in
Econometrics and Political Science from
the American University in Washington,
D.C., a certificate in Governance from
Harvard Executive Education and a
certificate in Leadership and Governance
from INSEAD.

She began her career in finance in 1992
in the Treasury Department of Total
in Paris before moving to banking in
1995 and investment banking in 1997.
She was Managing Director, Head of
Insurance Capital Markets of Barclays
Capital, and held senior positions in

* Listed company.

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the capital markets and the financial
institutions divisions of Credit Suisse,
Lehman Brothers and Morgan Stanley.

5. The director must not be affiliated
with a significant customer or
supplier of the company.

6. The director must have no personal

services contract(s) with the
company or a member of the
company’s senior management.

7. The director must not be affiliated
with a not-for-profit entity that
receives significant contributions
from the company.

8. The director must not have been
a partner or employee of the
company’s external auditor during
the past three years.

9. The director must not have any other
conflict of interest that the board
determines to mean they cannot be
considered independent.

Based on this review, the Board has
concluded that all the Directors meet
the above mentioned criteria, are
independent from management and
free of any relationships that could
materially interfere with the exercise
of their independent judgement.

The remuneration of the Members of
the Board of Directors is detailed in the
Remuneration Report. The Chairman of
the Board, jointly with members of the
Board of Directors, reviews periodically
the performance of the Board as a
whole, of its Committees and of each
of its individual members.

On the basis of this periodic assessment,
changes to the composition of the Board
membership are regularly proposed to
the Company’s Annual General Meeting
of Shareholders.

This periodic performance evaluation
is designed to ensure that the Board
is always in a position to provide an
effective oversight and leadership role
to the Group.

3.2. OTHER ACTIVITIES

Other activities and vested interests of
the members of the Board of Directors
are indicated on page 92, section 3.1.

3.3. LIMITS ON EXTERNAL MANDATES

In compliance with the Ordinance against
Excessive Compensation at Listed
Joint-Stock Companies (OaEC), the
Company’s Articles of Association limit
the number of mandates permissible
to Board members. These rules limit
the number of mandates that board
members can accept to no more than ten
board memberships in entities outside
the Group, out of which a maximum of
five memberships in board of companies
whose shares are traded on a stock

OTHER ACTIVITIES AND FUNCTIONS

*SCOR SE, Paris (FR), Member of the
Board and Chair of the Audit Committee,
member of the boards of SCOR’s
US subsidiaries: SCOR Reinsurance
Company, SCOR Global Life Americas
Reinsurance Company and SCOR Global
Life USA Reinsurance Company

*Phoenix Group Holdings PLC, London
(UK), Member of the Board and Chair
of the Remuneration Committee

*Pernod Ricard SA, Paris (FR),
Member of the Board and Chair of
the Remuneration Committee

Bank Gutmann, Vienna (AU), privately
owned, Member of the Supervisory Board

Chateau Mondot, Bordeaux (FR),
Member of the Supervisory Board

The Directors bring a wide range of
experience and skills to the Board.
They participate fully in decisions on key
issues facing the Group. Their combined
expertize in the areas of finance,
commercial law and strategy, and their
respective positions of leadership in
various industrial sectors are important
contributing factors to the successful
governance of an organization of the size
of the SGS Group.

The Board undertakes a periodic review
of the Directors’ interests in which
all potential or perceived conflicts of
interests and issues relevant to their
independence are considered.

The Board considers the following
criteria to assess the independence
of its members:

1. The director must not have been
employed by the company in an
executive capacity within the last
five years;

2. No family member of the director is
employed or was employed during
the past three years by the Group
in any management capacity;

3. Neither the director or a family

member has received any payments
from the Group other than Board
remuneration approved by the Annual
General Meeting of Shareholders

4. The director is not acting (and must

not be affiliated with a company that
is acting in material manner as) an
adviser or consultant to the company
or a member of the company’s
senior management.

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exchange. Mandates assumed at the
request of a controlling entity do not
count towards the maxima defined in
the Articles of Association.

In addition, the Articles of Association
limit to ten, the permissible participations
in boards of associations and other non-
profit organizations. All Board members
have confirmed that they comply with
these rules.

3.4. ELECTIONS AND TERMS OF OFFICE

The Articles of Association of SGS SA
provide that each Member of the Board
of Directors, and among them the
Chairman of the Board of Directors and
the Members of the Nomination and
Remuneration Committee, is elected
each year by the shareholders for a
period ending at the next Annual General
Meeting. Each Member of the Board
is individually elected. There is no limit
to the number of terms a Director may
serve. The initial date of appointment
of each Board Member is indicated
on page 92, section 3.1.

3.5. INTERNAL ORGANIZATIONAL
STRUCTURE

The duties of the Board of Directors
and its Committees are defined in the
Company’s Articles of Association and
in its internal regulations, which are
reviewed periodically. They set out all
matters for which a decision by the Board
of Directors is required. In addition to
the decisions required by Swiss company
law, the Board of Directors approves
the Group’s strategies and key business
policies, investments, acquisitions,
disposals and commitments in excess
of delegated limits.

3.5.1. ALLOCATION OF TASKS WITHIN
THE BOARD OF DIRECTORS

The Chairman of the Board is elected
by the Annual Meeting of Shareholders.
He or she plans and chairs the Board
meetings, defines the agenda of the
meetings and conducts the deliberations
of the Board of Directors. All members
of the Board of Directors participate in
deliberations of the Board and participate
equally in its decisions.

Within the limits permitted by law or
by the Articles of Association, the Board
of Directors can decide to delegate
certain of its tasks to standing or
ad-hoc committees. With the exception
of the members of the Nomination
and Remuneration Committee, who
are elected by the shareholders, the
members of other Committees are
appointed by the Board.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

3.5.2. MEMBERS LIST, TASKS AND AREA OF RESPONSIBILITY FOR EACH COMMITTEE OF THE BOARD OF DIRECTORS

The following chart describes the Committees and their membership as at December 31, 2019:

August Francois von Finck

Ian Gallienne

Calvin Grieder

Cornelius Grupp

Gérard Lamarche

Shelby du Pasquier

Kory Sorenson

NOMINATION AND
REMUNERATION

Member

Chair

AUDIT

Member

Chair

Member

PROFESSIONAL
CONDUCT COMMITTEE

Member

Chair

Mr. Kalantzis, Chairman of the
Board, attends the meetings of the
Committees, with a consultative vote.

Each Committee acts within terms
of reference established by the Board
of Directors and set out in the internal
regulations of the Company. The
minutes of their meetings are available
to all Directors.

NOMINATION AND
REMUNERATION COMMITTEE

Members of the Nomination and
Remuneration Committee are elected
individually by the Annual Meeting
of Shareholders, with the chairman
of the Committee designated among
them by the Board of Directors. The
Committee acts in part in an advisory
capacity to the Board, and in part as
a decision-making body on matters
that the Board has delegated to the
Committee. The Committee advises
the Board of Directors on matters
regarding the remuneration of the
Members of the Board of Directors and
Management, and on general policies
relating to remuneration applicable to
the Group. The Committee defines the
conditions of share-based remuneration

plans or other plans for the allocation
of shares, issued from time to time by
the Company. The Committee reviews
and approves the contractual terms of
the employment of the Chief Executive
Officer and the other members of
the Management. The Committee
validates the appointment of members
of the Operations Council and makes
recommendation to the Board regarding
the nomination of the CEO. It also
assists the Board in selecting new
members of the Board of Directors.

AUDIT COMMITTEE

The Audit Committee supports the
Board of Directors in discharging
its duties in relation to financial
reporting and internal controls. Such
duties include consideration of the
appropriateness of accounting policies,
the adequacy of internal controls, risk
management and regulatory compliance.
It is also responsible for the supervision
of the internal and external auditors
of the Group, each of which provides
regular reports to the Committee
on findings arising from their work.
The Committee reports regularly to
the Board of Directors on its findings.

PROFESSIONAL CONDUCT COMMITTEE

The Professional Conduct Committee
assists the Board of Directors and
Management in establishing policies
relating to professional conduct and
oversees their implementation. The
Group’s professional conduct policies
are embodied in the Code of Integrity,
which sets out the principles governing
business conduct, which are applied
across the whole SGS Group. These
principles reflect the Business Principles
for Countering Bribery issued by
Transparency International and Social
Accountability International, and
incorporate the rules adopted by the
TIC Council, the professional association
for the inspection industry.

In addition to the Board Members,
the Professional Conduct Committee
comprises the Chief Executive

officer, the General Counsel and
Chief Compliance Officer (General
Counsel). The head of Internal Audit
attends all meetings of the Professional
Conduct Committee.

MEETINGS HELD IN 2019

FREQUENCY OF MEETINGS

NUMBER OF
RESOLUTIONS APPROVED
OUTSIDE MEETINGS

AVERAGE DURATION
OF MEETINGS

Board of Directors

6 times (including 1 phone conference) 1

Nomination and Remuneration Committee 2 times

3 hours

90 minutes

Audit Committee

6 times (including 1 phone conference)

2 hours and 30 minutes

Professional Conduct Committee

1 times

1 hour

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3.5.3. WORKING METHODS OF
THE BOARD AND ITS COMMITTEES

The Board of Directors and each
Committee convene regularly scheduled
meetings with additional meetings held
as and when required, in person or
by phone conference. The Board and
the Committees may pass resolutions
by written consent. Each Board
Member has the right to request that
a meeting be held or that an item for
discussion and decision be included
in the agenda of a meeting. Board
and Committee members receive
supporting documentation in advance
of the meetings and are entitled to
request further information from the

Management in order to assist them
to prepare for the meetings. The Board
and each of the Committees can
request the attendance of members
of the Management of the Group. The
Board and each of the Committees are
authorized to hire external professional
advisors to assist them in matters
within their sphere of responsibility.
To be adopted, resolutions need a
majority vote of the members of the
Board or Committee, with the Chairman
having a casting vote. The Board and
its committees convene as often as
required. In principle the Board meets
at least four times a year, i.e. once every
quarter. The Audit Committee meets

at least three times a year, i.e. once
before the publication of the annual
and half-year results, and once outside
these periods, to review and approve
the scope of internal and external audit.
The Professional Conduct Committee
and the Nomination and Remuneration
Committee at least once a year.

ATTENDANCE TO BOARD AND
COMMITTEE MEETINGS

The chart below summarizes the
attendance by each Board Member in
2019 at the meetings (including meetings
by phone conference) of the Board and
the respective standing Committees.

MEMBER

Peter Kalantzis
Paul Desmarais
August François von Finck
Luitpold von Finck1
Ian Galllienne
Calvin Grieder1
Cornelius Grupp
Gérard Lamarche
Shelby du Pasquier
Kory Sorrenson1
August von Finck2
Christopher Kirk2

BOARD
MEETINGS

NOMINATION AND
REMUNERATION

AUDIT

PROFESSIONAL
CONDUCT COMMITTEE

6/6
4/6
6/6
3/3
6/6
3/3
5/6
6/6
6/6
3/3
3/3
1/3

2/2

2/2
1/1

2/2

1/1

5/6

5/5

6/6

5/5

1/1
1/1

1/1

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1. Directors elected for the first time in March 2019.

2. Directors not re-elected in March 2019.

3.6. DEFINITION OF AREAS
OF RESPONSIBILITY

The Board of Directors is responsible
for the ultimate direction of the Group.

The Board discharges all duties and
responsibilities that are attributed
to it by law. In particular, the Board:

• Leads and oversees the conduct,
management and supervision
of the Group

• Determines the organization

of the Group

• Assesses risks facing the business
and reviews risk management and
mitigation policies

• Appoints and removes the Group’s
Chief Executive Officer and other
members of management

• Defines the Group’s accounting and

control principles

• Decides on major acquisitions,

investments and disposals

• Discusses and approves the Group’s
strategy, financial statements and
annual budgets

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• Prepares the General Meetings

of Shareholders and implements
shareholders’ resolutions

• Notifies the judicial authorities in the
event of insolvency of the Company,
as required by Swiss law

In accordance with the Company’s
internal regulations, operational
management of the Group, a function
which the Board of Directors has
delegated, is the responsibility of the
Operations Council. The Operations
Council has the authority and
responsibility to decide on all issues
that are not attributed to the Board of
Directors. In the event of uncertainty
on a particular issue regarding the
separation of responsibility between the
Board of Directors and the Management,
the final decision is taken by the
Chairman of the Board. The Chairman
is regularly informed of the activities
of the Operations Council by the Chief
Executive Officer, the Chief Financial
Officer and the General Counsel.

The Operations Council is chaired by
the Chief Executive Officer and consists
of those individuals entrusted with the
operational management of the Group’s
activities, as follows:

• The Chief Operating Officers (COOs)
are responsible for operations in
the Group’s seven regions (page 90,
section 1.1.)

• The Executive Vice Presidents (EVPs)
are entrusted with the management
and development of the Group’s nine
business lines (page 90, section 1.1.)

• The Senior Vice Presidents (SVPs)

represent the principal Group support
functions (Finance, Human Resources,
IT, Communications and Investor
Relations, Corporate Development,
Legal and Compliance, and Strategic
Transformation)

The composition, role and organization
of the Operations Council are detailed
on page 99, section 4.

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

3.7. INFORMATION AND CONTROL
INSTRUMENTS VIS-À-VIS
THE MANAGEMENT

A. RESPONSIBILITY OF THE BOARD

The Board of Directors has ultimate
responsibility for the system of internal
controls established and maintained
by the Group and for periodically
reviewing its effectiveness. Internal
controls are intended to provide
reasonable assurance against financial
misstatement and/or loss, and include
the safeguarding of assets, the
maintenance of proper accounting
records, the reliability of financial
information and compliance with
relevant legislation, regulation and
industry practice.

B. GOVERNANCE FRAMEWORK

The Group has an established governance
framework, which is designed to oversee
its operations and assist the Company
in achieving its objectives. The main
principles of this framework include the
definition of the role of the Board and its
Committees, an organizational structure
with documented delegated authority
from the Board to Management, and
procedures for the approval of major
investments, acquisitions and other
capital allocations.

The Chief Executive Officer and the
Chief Financial Officer participate in
the meetings of the Board of Directors
and the Audit Committee.

The Group Controller and the Head of
the Internal Audit Function participate
in the meetings of the Audit Committee.

The Head of Human Resources
participates in the meetings of the
Nomination and Remuneration
Committee, and the General Counsel
and Chief Compliance Officer attends
all meetings of the Board of Directors
and its Committees.

The other members of the Operations
Council and other members of
Management only participate in the Board
and Committee meetings by invitation.

C. INFORMATION TO THE BOARD

The Board of Directors is constantly
informed about the operational and
financial results of the Group by way of
detailed monthly management reports,
which describe the performance of
the Group and its divisions.

During each Board meeting, the Chief
Executive Officer and the Chief Financial
Officer present a report to the Board
of Directors on the operations and
financial results, with an analysis of
deviations from prior year and from
current financial targets.

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During Board Meetings, the Board is
updated on important issues facing
the Group. The Chief Executive
Officer, the Chief Financial Officer
and the General Counsel and Chief
Compliance Officer (hereafter “Senior
Management”) attend all of the Board
of Directors meetings, while other
Operations Council members attend
from time to time to discuss matters
under their direct responsibility. The
Board of Directors meets regularly with
the members of the Operations Council.

During Board Meetings or Committee
Meetings, Board members can
require any information concerning
the Group. The Board reviews and
monitors regularly and formally previous
acquisitions and large investments as
well as the implementation of related
Group strategies.

The Group has a dedicated Internal Audit
function, reporting to the Chairman of
the Board and the Audit Committee,
which assesses the effectiveness
and appropriateness of the Group’s
risk management, internal controls
and governance processes as well as
the reliability of internal financial and
operational information, and ensures
that the standards and policies of
the Group are respected. Internal
Audit reviews and identifies areas of
potential risk associated with the key
business activities performed by a
particular office, highlights opportunities
for improvement and proposes
constructive control solutions to reduce
any exposures. All key observations
are communicated to the Operations
Council and the Chairman of the Board
through formal and informal reports.

The Audit Committee is regularly
informed about audits performed and
important findings, as well as the
progress in implementing the agreed
actions by Management.

D. GENERAL COUNSEL AND
CHIEF COMPLIANCE OFFICER

Furthermore, the Group has a
Compliance Function, headed by
the General Counsel and Chief
Compliance Officer, who is a member
of the Professional Conduct Committee
and has direct access to the Chairman
of the Board. The Compliance
Function supports the implementation
of a compliance program based on
the SGS Code of Integrity, available in
30 languages. The goal of the program is
to ensure that the highest standards of
integrity are applied to all of the Group’s
activities worldwide in accordance with
international best practices. The General
Counsel and Chief Compliance Officer
reports violations of compliance rules
every semester to the Professional
Conduct Committee.

The Committee monitors disciplinary
actions taken and the implementation
of corrective actions.

E. OTHER

In addition, the main business lines have
specialized technical governance units,
which ensure compliance with internally
set quality standards and industry
best practices. Formal procedures are
in place for both internal and external
auditors to report their findings and
recommendations independently to
the Board’s Audit Committee.

F. RISK ASSESSMENT

The Board conducts on a yearly basis
an assessment of the risks facing the
Group. This process is conducted with
the active participation and input of the
Management. Once identified, risks are
assessed according to their likelihood,
severity and mitigation.

The Board deliberates on the adequacy
of measures in place to mitigate
and manage risks and assigns
responsibility to designated managers
for implementation of such measures.
As part of this process, the ownership of
and accountability for identified risks are
approved by the Board.

The implementation of such actions is
audited by Internal Audit. These findings
are communicated to the Board of
Directors so that progress and identified
risks can be monitored objectively and
independently from Management.

The risks identified and monitored by the
Board fall broadly into three categories:
first, environment risk, which includes
circumstances outside the Group’s
direct sphere of influence, such as
competition and economic or political
landscape; second, process risks that
include risks linked to the operations of
the business, the management of the
Group and the integrity of its reputation
in the market place; and third, risks
associated with information and decision
making. For each of the risk categories
and within these categories, for each
significant risk identified, the Board
deliberates on proposed mitigation, risk
avoidance or risk transfer measures
and approves action plans designed to
control such risks. The Board receives
regular updates on the implementation
of risks mitigation measures and their
effectiveness is tested by internal audit
which reports to the Board, respectively
the Audit Committee.

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4. OPERATIONS COUNCIL

The Operations Council (as defined
on page 90, section 1.1.) meets on
a regular basis, in principle at least
five times a year. Between meetings,
it holds regular phone conferences
and may make decisions on such calls
or by electronic voting.

4.1. MEMBERS OF
THE OPERATIONS COUNCIL

Members of the Operations Council
bring to the Group years of experience
and expertize in their respective fields.
They come from a wide range of
backgrounds that reflects the multiple
aspects of the Group. The Group
strives to promote talent internally and
encourages women to assume senior
leadership positions. The members of
the Operations Council at 31 December
2019 were as follows:

FRANKIE NG (1966)
Swiss/Chinese

Chief Executive Officer

BA in Economics and
Electronics Engineering

Joined SGS in 1994

OLIVIER MERKT (1962)
Swiss

FABRICE EGLOFF (1969)
French

Chief Compliance Officer

Doctorate in Law, admitted to the bar
in Switzerland

Joined SGS in 2001

COO, Africa and Western Europe
(since February 2019)

Master of Business Administration
in International Business Affairs

Joined SGS in 1995

PREVIOUS RESPONSIBILITIES

2006–2008: VP, Corporate Development

PREVIOUS RESPONSIBILITIES

2001–2006: Senior Counsel

TEYMUR ABASOV (1972)
Azerbaijani

COO, Eastern Europe and Middle East

Degree in Electrical Engineering

Joined SGS in 1994

2009–2017: Managing Director, France

2004–2008: Managing Director,
Hong Kong

LUIS FELIPE ELIAS (1959)
Peruvian

COO, South and Central America

Industrial Engineering Degree and MBA

PREVIOUS RESPONSIBILITIES

Joined SGS in 2004

2006–2007: Managing Director,
Kazakhstan and Caspian Sub-Region

2004–2006: Managing Director,
Azerbaijan and Georgia

2003–2004: Managing Director, Georgia

PREVIOUS RESPONSIBILITIES

2012–2018: Managing Director,
Ecuador and Peru

2004–2012: Deputy Managing
Director, Peru

HELMUT CHIK (1966)
Chinese

DERICK GOVENDER (1970)
South African

EVP, Minerals

PREVIOUS RESPONSIBILITIES

COO, North East Asia

2011–2015: EVP, Industrial Services

Master of Business Administration

2005–2011: EVP, Consumer
Testing Services

2002–2004: Managing Director,
US Testing

DOMINIK DE DANIEL (1975)
German

Chief Finance Officer
(since February 2019)

Degree in Banking, CEFA
Investment Analyst

Joined SGS in 2019

PREVIOUS WORK EXPERIENCE

2015–2018: CFO and Chief Operating
Officer, IWG plc. UK, the global

leader for flexible workspace

2006–2015: CFO Adecco Group,
Switzerland

Joined SGS in 1991

Diploma in Analytical Chemistry

Post graduate in Business Management

PREVIOUS RESPONSIBILITIES

Joined SGS in 2002

2004–2017: COO, China and Hong Kong

2003: Managing Director, Hong Kong

2002: Vice President Softline Global,
Consumer Testing Services

OLIVIER COPPEY (1972)
Swiss

EVP, Agriculture, Food and Life

MSc Economics

Joined SGS in 1994

PREVIOUS RESPONSIBILITIES

2009–2013: Vice President Seed
and Crop, Agricultural Services

2006–2008: Vice President North
America, Agricultural Services, USA

1994–2006: Managerial positions,
Agricultural Services, Switzerland/
India/Cameroon

PREVIOUS RESPONSIBILITIES

2014–2015: Minerals Manager, Chile

2010–2014: VP Minerals, Africa

2007-2010: Regional Minerals Manager,
SGS Southern Africa

DIRK HELLEMANS (1958)
Belgian

COO, North and Central Europe

Degree in Chemical Engineering and
Master in Business Administration

Joined SGS in 1988

PREVIOUS RESPONSIBILITIES

2012–2015 : COO, Northern, Central
and Southern Europe

2004–2012: COO, Central and North
Western Europe

2002–2004: COO, North West Europe

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JOSÉ MARÍA HERNÁNDEZ-SAMPELAYO (1961)
Spanish

ROGER KAMGAING (1966)
Swiss

PETER POSSEMIERS (1962)
Australian/Belgian

SVP, Human Resources

EVP, Governments and Institutions

EVP, Environmental, Health and Safety

Bachelor in Law

Master in Commercial Law and Tax

BSc Chemistry and Microbiology

Master of Business Administration

Master in Auditing and Consulting

Joined SGS in 1983

Joined SGS in 1996

Initially joined SGS in 1996, rejoined in 2014

PREVIOUS RESPONSIBILITIES

2007–2012: Global Sales, OGC

2010–2017: Managing Director, Spain

2001–2010: HR Manager, Western Europe

1996–2010: HR Manager, Spain

CHRISTOPH HEIDLER (1969)
German

Chief Information Officer (member of
the OC since April 2019)

Degree in Electrical Engineering and
Information Technologies

Joined SGS in 2015

PREVIOUS RESPONSIBILITIES

2015–2019: Chief Information Officer

PREVIOUS WORK EXPERIENCE

2014–2015: Chief Information Officer,
CompuGroup Medical

2011–2014: Vice President Global
Infrastructure Services, Schindler
Informatik

2007–2011: Head of Global
Infrastructure, HeidelbergCement

FRÉDÉRIC HERREN (1955)
Swiss

SVP, Digital and Innovation

Master in Economics

Initially joined SGS in 1986, rejoined
in 1999

PREVIOUS RESPONSIBILITIES

2010–2017: COO, Africa

2006–2014: EVP, Governments and
Institutions Services

2003–2010: EVP, Automotive Services

2000–2012: Governments and
Institutions Services, Global Head
Business Development

1997–2000: Governments and
Institutions Services, Sales Manager

OTHER WORK EXPERIENCE

2012–2014: Kamgaing Associates
(Consulting) and Time (African
Business Incubator)

CHARLES LY WA HOY (1966)
French

EVP, Consumer and Retail

Engineer in Electronics

Initially joined SGS in 1992, rejoined
in 2008

PREVIOUS RESPONSIBILITIES

2016–2018: Vice President of Retail
Solutions and European Business
Development, Consumer and Retail

2013–2016: Global Head of Materials
and Manufacturing, Industrial Services

2009–2013: Vice President of
Strategic Global Accounts,
Consumer Testing Services

JEFFREY MCDONALD (1964)
Australian/American

EVP, Certification and
Business Enhancement

Postgraduate Diploma in Education

Joined SGS in 1995

PREVIOUS RESPONSIBILITIES

2007–2015: COO, North America

2004–2007: EVP, Systems and
Services Certification

2003: Global Project Manager,
Systems and Services Certification

2005–2007: Managing Director, Korea

2003–2005: OGC Business Development
Manager Asia Pacific, China

TOBY REEKS (1976)
British

SVP, Investor Relations

BA in Economics

Joined SGS in 2018

OTHER WORK EXPERIENCE

2013–2018: Executive Director,
Morgan Stanley

2011–2013: Director, Merrill Lynch

2005–2011: Vice President, Merrill Lynch

MALCOLM REID (1963)
British

COO, South East Asia and Pacific

BSc Chemistry

Joined SGS in 1987

PREVIOUS RESPONSIBILITIES

2012–2015: EVP, Consumer
Testing Services

2007–2011: EVP, Systems and
Services Certification

2005–2007: Managing Director, Australia

ALIM SAIDOV (1964)
Azerbaijani/Canadian

EVP, Oil, Gas and Chemicals

PhD in Science

Joined SGS in 1993

PREVIOUS RESPONSIBILITIES

2007–2013: EVP, Oil, Gas and Chemicals
Services and Environmental Services

2005–2007: COO, Eastern Europe and
Middle East

2004: COO, North America and
Managing Director, Canada

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101

traded on a stock exchange. Mandates
assumed at the request of a controlling
entity do not count towards the maxima
defined in the Articles of Association.

In addition, the Articles of Association
set limits to participations in boards
of associations and other not-for-profit
organizations to no more than ten
such memberships.

4.5. MANAGEMENT CONTRACTS

The Company is not party to any
management contract delegating
management tasks to companies
or individuals outside the Group.

5. COMPENSATION,
SHAREHOLDINGS
AND LOANS
5.1. CONTENT AND METHOD OF
DETERMINING THE COMPENSATION
AND THE SHAREHOLDING PROGRAMS

The Group’s overriding compensation
policies are defined by the Board of
Directors. The objectives of these
policies are twofold: a) to attract and
retain the best talent available in the
industry and b) to motivate employees
and managers to create and protect value
for shareholders by generating long-term
sustainable financial achievements.

In line with these principles, Board
members are entitled to a fixed fee,
which takes into account their level
of responsibility. Members of the
Operations Council receive a fixed
remuneration and are entitled to a
performance-related annual bonus and
a Long-Term Incentive plan.

In compliance with the requirements
of the Ordinance against Excessive
Compensation at Listed Joint-Stock
Companies (OaEC), the Annual General
Meeting approves the compensation
payable to the Board and the
Operations Council. The rules on the
vote on pay applicable in the Group are
explained below.

The ultimate responsibility for defining
remuneration policies and deciding on
all matters relating to remuneration
rests with the Board of Directors,
subject to decisions that require binding
resolutions of the Annual General
Meeting. The Board of Directors is
assisted in its work by a Nomination
and Remuneration Committee, which is
elected by the Annual General Meeting.

5.2. RULES ON APPROBATION BY
THE ANNUAL SHAREHOLDERS MEETING
OF EXECUTIVE PAY

The Company’s Articles of Association
provide that the Annual Shareholders
Meeting approves a year in advance
the maximum amount at the disposal
of the Board of Directors to pay a
fixed remuneration to members of
the Operations Council. In the event
of changes in composition of the
Operations Council occurring after
the approval by the Annual General
Meeting of the fixed remuneration of the
executive team, the Board is authorized
to increase up to a maximum of 25%
the amount authorized by the
shareholders for that purpose.

The Annual Shareholders Meeting
approves and authorizes the award of
annual incentives of the Operations
Council on the basis of the actual results
achieved in the year prior to the Annual
Shareholders Meeting.

The Annual Shareholders Meeting
authorizes separately any long-term
incentive plans.

5.2.1. RULES ON PERFORMANCE-
RELATED PAY AND ALLOCATION
OF EQUITY-LINKED INSTRUMENTS

The Company’s Articles of Association
define the principles of the variable
remuneration and the allocation of
shares or equity-linked instruments to
the members of the Operations Council
(please refer to the Remuneration
Report on pages 104–129 of this
Annual Report for a description of the
Company’s rules in the matter).

5.2.2. RULES ON LOANS,
CREDIT FACILITIES AND
POST-EMPLOYMENT BENEFITS

Loans granted to members of the
governing bodies of the Company may
not exceed one year of remuneration
and must be granted at market
conditions. Neither as at 31 December
2019, nor as at 31 December 2018,
was any loan or advance granted
by the Group to members of the
Operations Council.

5.2.3. RULES ON VOTE ON PAY

The Annual General Meeting approves
the following matters related to the
compensation of the Board and
Operations Council:

• It approves the fixed fees payable to
the Board of Directors until the next
Annual General Meeting

• It approves in advance a prospective
maximum fixed remuneration to the
Operations Council during the next
financial year

WIM VAN LOON (1966)
Belgian

EVP, Industrial Services (since May 2018)

Engineering degree in Industrial Electro
Mechanic and master’s degree in
Business Management

Joined SGS in 1989

PREVIOUS RESPONSIBILITIES

2015–2018: Managing Director, Benelux

2011–2015: Executive Director,
Industrial Services, Benelux

2003–2015: Business Manager for
Industrial, Minerals and Consumer
Testing Services, Benelux

4.2. OTHER ACTIVITIES AND
VESTED INTERESTS

The following list presents all material
activities in governing and supervisory
boards, management positions and
consultancy functions, official tenures and
political positions held by each member of
the Operations Council outside the Group,
both in Switzerland and abroad.

DERICK GOVENDER

Member of IPMI (International Precious
Metal Institute)

FRED HERREN

Member of the Board of Delen SA,
Geneva since 2018

Member of the Council, Geneva
Chamber of Commerce and Industry

4.3. CHANGES IN THE
OPERATIONS COUNCIL

During 2019, Carla De Geyseleer,
CFO, Pauline Earl, COO for Western
Europe and François Marti, COO for
North America left the Group. Thomas
Klukas, EVP of Transportation left
the Operations Council. Biographical
information on former members of
the Operations Council may be found
in prior years Corporate Governance
reports, including pages 85 to 88 of
the 2018 Integrated Annual Report.

4.4. LIMITS ON EXTERNAL MANDATES

The Articles of Association of the
Company, in compliance with
the Ordinance against Excessive
Compensation at Listed Joint-Stock
Companies (OaEC), limit the number
of mandates permissible to members
of the Operations Council, to no more
than four board memberships in entities
outside the Group, out of which a
maximum of one membership in the
board of companies whose shares are

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• It approves the total aggregate

6.2. STATUTORY QUORUMS

The General Meeting of Shareholders
can validly deliberate regardless of
the number of shares represented at
the meeting. Resolutions are adopted
by the absolute majority of votes cast.
If a second ballot is necessary, a relative
majority is sufficient, unless Swiss
company law mandates a special majority.

6.3. CONVOCATION OF GENERAL
MEETINGS OF SHAREHOLDERS

The rules regarding the convocation of
General Meetings of Shareholders are
in accordance with Swiss company law.

6.4. INCLUSION OF ITEMS ON THE AGENDA

The Agenda of the General Meeting of
the Shareholders is issued by the Board
of Directors. Shareholders representing
shares with a minimum par value of
CHF 50 000 may request the inclusion
of an item on the agenda of the General
Meetings, provided that such a request
reaches the Company at least 40 days
prior to the General Meeting.

6.5. REGISTRATION IN
THE SHARE REGISTER

The Company does not impose any
deadline for registering shares prior to
a General Meeting. However, a technical
notice of two business days is required
to process the registration.

7. CHANGE OF
CONTROL AND
DEFENSE MEASURES

No restriction on changes in control
is included in the Company’s Articles
of Association.

7.1. DUTY TO MAKE AN OFFER

In the absence of any specific rules in
the Company’s Articles of Association,
any investor or group of investors
acquiring more than 33.3% of the
shares and voting rights of the Company
has the duty to make a public offer in
compliance with the applicable Swiss
takeover rules.

7.2. CLAUSES ON CHANGE OF CONTROL

There are no general plans or standard
agreements offering specific protection
to Board Members, Senior Management
or employees of the Group in the event
of a change of control, subject to the
standard rules regarding termination
of employment.

amount payable to the Operations
Council for the performance-related
annual bonus related to the prior year

• It approves the maximum amount

payable under Long-Term Incentive
plans to be introduced by the Company

Resolutions of such matters are binding
to the Board of Directors. In addition, the
Annual General Meeting is invited to cast
a non-binding vote on the Remuneration
Report that describes the Company’s
remunerations policies. This allows
shareholders to express a view on the
overall policies of the Group in relation
to remuneration.

6. SHAREHOLDERS’
PARTICIPATION RIGHTS

All registered shareholders receive a
copy of the half-year and full-year results
upon the publication of such results by
the Company. They can request a copy
of the Company’s Annual Report and are
personally invited to attend the Annual
General Meeting of Shareholders.

6.1. VOTING RIGHTS AND
REPRESENTATION RESTRICTIONS

All registered shareholders can
attend the General Meetings of
Shareholders and exercise their right
to vote. A shareholder may also
elect to grant power of attorney to
an independent proxy appointed
by the Company or to any other
registered shareholder.

There are no voting restrictions,
subject to the exclusion of nominee
shareholders representing undisclosed
principals, as detailed in section 2.6.

6.1.2. RULES ON INSTRUCTIONS
TO THE INDEPENDENT PROXY AND
ELECTRONIC PARTICIPATION IN
THE ANNUAL SHAREHOLDERS MEETING

Shareholders have the opportunity to give
general or specific voting instructions to
the independent proxy, who is elected
by the General Meeting of Shareholders.
Shareholders can give specific or generic
voting instructions to the independent
proxy on all matters on the agenda of
the General Meeting of Shareholders.
These instructions can be issued
in written form, or by electronic
transmission. The voting of resolutions
by electronic votes is authorized by
the Articles of Association, within
the modalities defined by the Board
of Directors.

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8. AUDITORS
8.1. DURATION OF THE MANDATE
AND TERM OF OFFICE OF THE
LEAD AUDITOR

Following a competitive process in 2000,
Deloitte SA was appointed auditor of
the Company and the SGS Group by the
Annual General Meeting of Shareholders
upon recommendation of the Board of
Directors. The auditors of the Company
are subject to re-election at the Annual
General Meeting every year. The current
lead auditor, Matthew Sheerin, was
appointed in 2017, after agreement by
the Company’s Audit Committee. The
Company requires the Lead Auditor to be
changed at the latest after completion of
five annual audit cycles, whereas Swiss
company law imposes a maximum period
of seven years. When designated in 2017
as Lead Auditor, Matt Sheerin replaced
James Baird, Lead Auditor for the
financial years 2012 to 2016 inclusively.

The Audit Committee reviews annually
the desirability to renew the annual
mandate of its external auditors before
proposing to the Board and the Annual
General Meeting the re-election of
the auditors.

8.2. AUDIT FEES

Total audit fees paid to Deloitte for the
audit of the Company and the Group
financial statements in 2019 amounted
to CHF 7.2 million (2018: CHF 6.8 million).

8.3. ADDITIONAL FEES

An aggregate amount of CHF 1 million
(2018: CHF 0.9 million) was paid to
Deloitte for other professional services,
unrelated to the statutory audit activity,
mainly composed of tax compliance
services, non-statutory and other
assurance services.

8.4. INFORMATION INSTRUMENTS
PERTAINING TO THE EXTERNAL AUDIT

The Audit Committee is responsible
for evaluating the external auditor on
behalf of the Board of Directors and
conducts assessments of the audit
services provided to the Group during
its regular meetings. It meets with
the auditor at least three times per year,
including private sessions without the
presence of Management. In 2019,
the Audit Committee met five times
with the external auditors. In addition,
the Chairman of the Board and the
Chairman of the audit committees have
met privately twice the lead partner
outside the presence of management.

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The Committee considers and approves
the proposed audit plan, conducts
assessment of the performance of
the auditor and approves audit fees on
the basis of the amount of work required
in order to perform the audit.

The Audit Committee reviews with the
Group auditors the significant financial
statement risk areas arising from the audit,
including the key audit matters referred to
in the statutory auditor’s report.

When evaluating the performance of the
auditors, the Audit Committee assesses
the effectiveness of the audit based on
Swiss Law, their understanding of the
business of the Group and how matters
of significant importance for the Group
internal control and financial reporting
are identified, reported and resolved.
The Audit Committee reviews also
how the Group auditors interact with
the component audit firms in charge
of auditing the main subsidiaries of the
Group, and the relevance and timeliness
of issuance of statutory audits and
management letters.

The Audit Committee places a great
emphasis on the independence of the
external auditors, and on the absence
of conflict of interests, both at the
Group level and at the level of individual
subsidiaries. It reviews carefully the
type of other services which are
provided by the auditors, in addition to
the audit, to ensure that such ancillary
services could not endanger the
independence of the audits. Permitted
other services include assistance with
tax compliance matters, and limited
assistance in due diligence or advisory
services for prospective acquisitions.

The audit fees are approved on the basis
of a negotiated budget agreed with the
Group auditors taking into account the
complexity of the audit, the structure of
the Group and its internal control systems
and the responsibility of the auditors.

The duties of the Committee include
consideration of the audit plan, regular
assessment of the performance of the
auditor and approval of audit fees on
the basis of the amount of work required
in order to perform the audit.

The auditor regularly presents its findings,
both during the deliberations of the Audit
Committee and in written reports, to
the attention of the Board of Directors
that summarize key findings. The Group
strives to safeguard and support the
independence of the auditor by avoiding
conflicts of interests. In applying this
policy, the attribution of other consultancy
assignments is carefully reviewed to
ensure that such assignments do not
endanger the auditor’s independence.

9. INFORMATION POLICY

The policy of the Group is to provide
individual and institutional investors,
directly or through financial analysts,
business journalists, investment
consultants (financial community) and
employees with financial and business
information in a consistent, broad, timely
and transparent manner.

The Group website has a section
fully dedicated to investor relations,
where all financial information and
presentations are available. This includes
an updated version of the Articles of
Association, current information on
share buyback programs and minutes
of shareholders’ meetings. SGS meets
regularly with institutional investors,
holds results presentations, road shows
and presentations at broker-sponsored
country or industry conferences, and
attends one-on-one meetings.

The Group publishes consolidated
half- year unaudited and yearly audited
results in print and online formats.
The Annual Report is published in
English and is available upon order
from the Group’s website. The current
list of publication dates is available
on the Group’s website.

The Group acknowledges the directives
on the independence of financial
research issued by the Swiss Bankers
Association, particularly articles 26 and
29–32. In addition, the Group complies
with rules regarding information and
reporting of the federal act on stock
exchange and securities trading, and
the ordinance on stock exchanges and
securities trading.

The address of the main SGS registered
office and its contact details (phone and
email) can be found on page 202 of the
Annual Report.

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REMUNERATION
REPORT

—

Introduction by the Nomination
and Remuneration Committee

Remuneration Policy and Principles

Remuneration Model

Remuneration Awarded to
the Board of Directors

Remuneration Awarded to
the Operations Council Members

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The SGS Remuneration Report provides an overview of the SGS remuneration model, its principles and
programs and the related governance framework. The report also includes details on the remuneration
of the Board of Directors and of the Operations Council related to the 2019 business year.

The SGS Remuneration Report has been prepared in compliance with the Ordinance against Excessive
Remuneration in Listed Companies Limited by Shares, in effect as of 1 January 2014, the Swiss Code of Best
Practice for Corporate Governance of Economiesuisse, approved on 28 August 2014, and the Swiss Exchange
(SIX) Directive on Information relating to Corporate Governance, revised on 13 December 2016, and according
to the Articles of Association of SGS SA, as approved by the shareholders at the Annual General Meeting in 2015.

3. REMUNERATION
MODEL

110

3.1. Structure of remuneration

of the Board of Directors

3.2. Structure of remuneration
of the Operations Council

3.2.1. Fixed remuneration:

annual base salary

3.2.2. Fixed remuneration:

benefits

3.2.3. Short-term variable
remuneration

3.2.4. Long-term variable
remuneration

3.2.5. Remuneration mix

3.2.6. Shareholding

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111

112

115

117

4. REMUNERATION
AWARDED TO THE
BOARD OF DIRECTORS 119

5. REMUNERATION
AWARDED TO
THE OPERATIONS
COUNCIL MEMBERS

5.1. Fixed remuneration

5.2. Short-term variable
remuneration

5.3. Long-term variable
remuneration

5.4. Total remuneration

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ownership guidelines

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5.5. Remuneration mix

3.2.7. Employment contracts 118

5.6. Other compensation elements 128

3.2.8. Timeline of remuneration 119

5.6.1. Severance payments

128

5.6.2. Other compensation
to members or former
members of the
governing bodies

5.6.3. Loans to members
or former members
of the governing bodies

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1. INTRODUCTION
BY THE NOMINATION
AND REMUNERATION
COMMITTEE

2. REMUNERATION
POLICY AND
PRINCIPLES

2.1. Remuneration

general principles

2.2. Remuneration policy for

the Executive Management

2.3. Remuneration governance

2.3.1. Nomination

and Remuneration
Committee

2.3.2. Shareholders’

engagement

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1. INTRODUCTION BY THE NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee is pleased to present its 2019 Remuneration Report.

During 2019, the Committee attended its statutory duties, and worked on two other main topics: the review of the remuneration
settlement vehicles for the members of the Board of Directors, and the review of the Short-Term Incentive scheme for the CEO.

The table below summarizes the outcome of the statutory duties in remuneration matters.

SUBJECT MATTER

DECISION POWER

MAIN ACTIVITIES

Individual remuneration of
the members of the Board
of Directors including
the Chairman of the Board

Recommendation
to the Board
of Directors

• Update of the remuneration of the Chairman of the Board, in line with prevalent

market practices for listed companies in Switzerland

• Adjustment of the Audit Committee fee, to account for the required

commitment and exposure

Individual remuneration
of the CEO

Recommendation
to the Board
of Directors

• Review of the remuneration of the CEO, based on the benchmark of his

remuneration and pay mix against Swiss SMI companies and other competitors
in the Testing, Inspection and Certification and in the Business to Business
Services sectors1

Individual remuneration
of the Operations
Council members

Remuneration Report

Approval
(based on the
recommendation
of the CEO)

Recommendation
to the Board
of Directors

• Review of the remuneration of the OC members, based on the benchmark
of their remuneration and pay mix against similar positions in Swiss SMI
companies and other competitors in the Testing, Inspection and Certification
and in the Business to Business Services sectors1

• Adjustment of the pay mix, with increased emphasis on the variable

remuneration vs fixed remuneration

• Confirmation of the changes in the structure of the Report introduced in

previous year

• Continuous effort towards clarity and transparency

1. Details of the relevant benchmarks are described on page 108, section 2.2.

The settlement vehicles of the remuneration of the members of the Board of Directors have been reviewed: Directors can have
up to 50% of their remuneration settled in shares that may be restricted. This is in accordance with the Group’s Article of
Association (Art. 28).

As anticipated in the 2018 Annual Report (page 101), the Short-Term Incentive scheme for the CEO has been reviewed, with
the objective to have better alignment between the plans in place for the CEO and for the other Operations Council members.
The pay-out curves have been harmonized, and a leadership multiplier has been introduced also for the CEO. The key performance
indicators have been reviewed as well, with the objective to have better alignment between the Operations Council incentive
drivers and the short and long-term strategic objectives of the Group.

On the nomination matters, following the changes in the composition of the Operations Council (disclosed in Governance (page 99),
the Committee worked on the appointment of two new members, and approved their contractual terms and conditions, including
remuneration, based on the recommendation of the CEO.

Since 2015, the Board of Directors has implemented the consultative vote on the Remuneration Report and the binding vote on
compensation amounts at the Annual General Meeting. The Committee received significant support in its activities and direction
through positive votes at the Annual General Meeting 2019, and will continue with the same “say-on-pay” vote structure at the
forthcoming Annual General Meeting 2020:

• Consultative vote on the Remuneration Report;

• Binding vote on the prospective maximum remuneration amount of the Board of Directors until the next Annual General Meeting;

• Binding vote on the retrospective short-term variable remuneration amount of the Operations Council members for the business

year 2019;

• Binding vote on the prospective maximum fixed remuneration amount of the Operations Council members for 2021.

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The table below summarises the votes of the Annual General Meeting on the remuneration matters since 2015.

(% of votes for)

2015

2016

2017

2018

2019

Consulative vote on the Remuneration Report

93.69

82.79

92.44

89.79

94.50

Binding vote on the prospective maximum remuneration
amount of the Board of Directors

Binding vote on the prospective maximum fixed remuneration
amount of the Operations Council members

Binding vote on the retrospective short-term variable
remuneration amount of the Operations Council members

Binding vote on the value of the grants awarded under the
Long-Term Incentive plan to the Operations Council members1

95.41

97.26

98.24

98.72

98.09

95.29

98.27

80.11

75.61

80.28

94.00

95.94

96.87

95.97

97.17

90.26

96.63

1. The SGS Long-Term Incentive plan provides a grant every three years; the last grant was done in 2018.

On the following pages, you will find detailed information about our remuneration model, its principles and programs, and the
remuneration awarded to the Board of Directors and the Operations Council related to the business year 2019. We hope that you
find this report informative. We are confident that our approach to executive pay is fully aligned with the strategy, wider competitive
market benchmarks, the performance of the Company and the interests of our shareholders.

Shelby du Pasquier

Chairman of the Nomination and Remuneration Committee

2. REMUNERATION POLICY AND PRINCIPLES
2.1. REMUNERATION GENERAL PRINCIPLES

The general principles of remuneration of the members of the Board of Directors and the members of the Operations Council
are defined in the Articles of Association (Art. 28 and 29).

The remuneration of the members of the Board of Directors is defined with two main objectives: (i) to compensate their
activities and responsibilities as the highest governing body of the Group and their participation in the Committees established
within the Board of Directors, and (ii) to guarantee their independence in exercising their supervisory duties towards the
Executive Management.

The remuneration of the members of the Operations Council is defined with two main objectives: (i) to attract and retain the best
talents available in the industry, and (ii) to motivate them to create and protect value for our shareholders by driving long-term
sustainable financial success.

The members of the Board of Directors receive a fixed remuneration only.

The members of the Operations Council receive a fixed remuneration and a variable remuneration linked to short-term and
long-term results.

REMUNERATION COMPONENT

BOARD OF DIRECTORS (NON-EXECUTIVE)

OPERATIONS COUNCIL (EXECUTIVE)

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Fixed remuneration

Short-term variable remuneration

Long-term variable remuneration

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2.2. REMUNERATION POLICY FOR THE EXECUTIVE MANAGEMENT

The Company’s remuneration policy applicable to the Executive Management (Operations Council members) is defined by
the Board of Directors in line with the Company’s business strategy of profitable growth and with the aim to drive and support
the Company’s core values of passion, integrity, entrepreneurialism and innovative spirit.

The remuneration system for the Operations Council members operates according to four main principles:

• Market competitiveness

– Remuneration levels are in line with competitive market practices

• Internal equity

– Remuneration programs link remuneration to the level of responsibility and the skill-set required to perform the role

• Pay for performance

– A substantial portion of remuneration is directly linked to business and individual performance

– Differentiation is based on individual contributions

• Long-term value creation and alignment to shareholders’ interests

– Part of remuneration is delivered in equity subject to a multi-year vesting period

METHOD OF DETERMINATION OF REMUNERATION LEVELS – BENCHMARKING

SGS is a global company, operating in a broad range of sectors; the determination of the remuneration levels of the Operations
Council members must consider both global and local practices. We periodically compare our compensation practices with those
of other similar global organizations:

• Competitors in the Testing, Inspection and Certification industry and internationally active companies within and outside

Switzerland that operate in the business-to-business services sector: Adecco, ALS, Applus+, Bureau Veritas, Eurofins, Intertek,
ISS, Mistras, Rentokil, Securitas, Sodexo, Team (the peer group of companies considered for the performance conditions of
the Long-Term Incentive plan, see section 3.2.4.);

• All SMI-listed companies.

The elements of executive remuneration benchmarked include annual base salary, other fixed remuneration elements, short-term
and long-term incentives, and benefits. To ensure proper benchmarking, we use a proprietary job evaluation methodology. Since
more than one-third of our Operations Council members are based outside Switzerland, we use information published by reputable
data providers, including Mercer and Willis Towers Watson, related to both the Swiss market and the other markets where the
Operations Council members are based.

As a reference point, SGS targets the median compensation level of the peer group.

The most recent executive compensation benchmark supported by a third-party services provider (Mercer) was performed in 2015.
No third-party services provider was engaged to perform such benchmark in 2019.

2.3. REMUNERATION GOVERNANCE

The Board of Directors is responsible for determining the remuneration of the Chairman and the Directors of the Board, within
the limit of the aggregate amount approved by the Annual General Meeting of Shareholders. It also decides on the remuneration
and terms of employment of the Chief Executive Officer. In addition, the Board of Directors defines general executive remuneration
policies, including the implementation and terms and conditions of Long-Term Incentive plans, as well as the financial targets
relevant to any incentive plan.

2.3.1. NOMINATION AND REMUNERATION COMMITTEE

The Board of Directors is assisted in its work by a Nomination and Remuneration Committee (“the Committee”), which consists
of non-executive Directors. The Committee acts in part in an advisory capacity to the Board of Directors, and in part as a
decision-making body on matters that the Board of Directors has delegated to the Committee. The Committee reviews regularly,
at least once a year, the compensation of each member of the Operations Council (including the Chief Executive Officer) and
decides on all matters relating to the remuneration of these executives.

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The following chart summarizes the authorization levels for the main decisions relating to the compensation of the Board of
Directors and the Operations Council members. When reviewing and deciding on executive remuneration policies, the Committee
and the Board of Directors have access to Group Human Resources staff and may use third-party consultants that specialize
in compensation matters. In 2019, neither the Committee nor the Board of Directors had recourse to such external advisors.

SUBJECT MATTER

CEO

NOMINATION AND
REMUNERATION
COMMITTEE

BOARD
OF DIRECTORS

AGM

Aggregate remuneration amount
of the Board of Directors

Individual remuneration of the members
of the Board of Directors including
the Chairman of the Board

Aggregate fixed remuneration
amount of the Operations Council

Aggregate short-term variable
remuneration amount of
the Operations Council

Setting of annual financial targets
for short-term variable remuneration
of Operations Council members

Establishment of Long-Term
Incentive plans

Aggregate value of the grants awarded
under the Long-Term Incentive plan
for Operations Council members

Recommendation

Binding vote

Recommendation

Approval

Recommendation

Binding vote

Recommendation

Binding vote

Recommendation

Approval

Recommendation

Approval

Recommendation

Binding vote

Individual remuneration of the CEO

Recommendation

Approval

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Individual remuneration of
the Operations Council

Remuneration Report

Recommendation

Approval

Recommendation

Approval

Consultative vote

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The following Directors served on the Committee during their mandate from AGM 2019 to AGM 2020:

• Shelby du Pasquier (Chairman)

• Ian Gallienne

• August François von Finck

• Calvin Grieder

In 2019, the Committee met in two meetings, attended by all members, and handled several matters pertaining to nominations
and remunerations outside scheduled meetings. The Chairman of the Nomination and Remuneration Committee reports to the
Board of Directors after each meeting on the activities of the Committee. The minutes of the Committee meetings are available
to the members of the Board of Directors. Generally, the Chairman of the Board attends the meetings of the Committee, except
when matters pertaining to his own compensation are being discussed.

Selected members of the Operations Council, the CEO and the Senior VP for HR may be asked to attend the meetings in an
advisory capacity. They do not attend the meeting when their own compensation and/or performance are being discussed.

2.3.2. SHAREHOLDERS’ ENGAGEMENT

As has been the case since the 2015 Annual General Meeting, we will continue to submit the Remuneration Report to a consultative
shareholders’ vote at the Annual General Meeting, so that shareholders have an opportunity to express their opinion about our
remuneration model.

In addition, as required by the Ordinance, the aggregate amounts of remuneration to be paid to members of the Board of Directors
and the Operations Council are subject to the approval of the shareholders in form of a binding vote on remuneration. The procedure
on the vote is defined in the Articles of Association and foresees separate votes on (i) the maximum remuneration of the Board of
Directors for the period until the next Annual General Meeting, (ii) the maximum fixed remuneration of the Operations Council for the
next calendar year, (iii) the variable remuneration awarded to the Operations Council in respect to the previous calendar year, and (iv)
the maximum amount to be granted to the Operations Council under any Long-Term Incentive plan during the current calendar year.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

A summary of the shareholders’ votes on remuneration is described in the chart below:

2019

2020

2021

Remuneration Report

Remuneration

Fixed remuneration

Variable remuneration

SHAREHOLDERS’ VOTE
AT THE 2020 AGM

Consultative vote on
Remuneration Report

Binding vote on maximum
remuneration of the Board
of Directors

Binding vote on maximum
fixed remuneration of
the Operations Council

Binding vote on variable
remuneration of the
Operations Council

Binding vote on maximum
value of the grants awarded
under any Long-Term Incentive
plan to the Operations Council
(none in 2020)

The binding votes on the aggregate compensation amounts combined with a consultative vote on the Remuneration Report reflect
our true commitment to provide our shareholders with a far-reaching “say-on-pay”.

AGM 2020

AGM 2021

3. REMUNERATION MODEL
3.1. STRUCTURE OF REMUNERATION OF THE BOARD OF DIRECTORS

The members of the Board of Directors receive a fixed remuneration only. They are entitled to a fixed annual board membership
fee (annual board retainer) and additional annual fees for the participation in board committees (committee fees). The annual
board retainer of the Chairman of the Board includes his or her attendance to any committee of the Board, whether as a voting
member or as an advisory capacity. By agreement with the relevant tax authorities, the remuneration of the Chairman of the
Board may include representation fees. Directors do not receive additional compensation for attending meetings and do not
receive any variable remuneration.

The amounts of the remuneration elements for the Chairman and the other Board members are defined by the Board of
Directors every year. The maximum total amount is subject to the binding vote of the Annual General Meeting of Shareholders.

In determining the amounts of the compensation elements, the Board of Directors considers the prevailing practices of the
Swiss SMI-listed companies.

The table below summarizes the remuneration elements of the members of the Board of Directors.

ANNUAL BOARD RETAINER

COMMITTEE FEES
(PER COMMITTEE)

REPRESENTATION FEES
(SUBJECT TO AGREEMENT WITH
RELEVANT TAX AUTHORITIES)

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The remuneration to the members of the Board of Directors is subject to employer social charges according to Swiss legislation.

Each Board member can choose to receive up to 50% of the remuneration settled in shares that may be restricted. Shares will be
awarded after the publication of the Group’s annual results. The number of shares to be allocated is determined by dividing the portion
of remuneration settled in shares by the closing share price on the day of the publication of the Group’s annual results; fractions are
rounded up to the nearest integer. Shares granted may be restricted at the option of each Board member for a period of three years
ending on the third anniversary of their award. If a Board member has elected to receive restricted shares, such restricted shares may
not be sold, donated, pledged or otherwise disposed off to third parties during the three years restriction period. In case of change of
control or liquidation, or in case a member of the Board ceases to exercise his or her mandate following death or permanent disability,
the restriction period of the shares lapses. The shares remain restricted in all other instances.

The portion of remuneration settled in cash is paid in two instalments, in June and December of the calendar year.

Members of the Board of Directors do not hold service contracts and are not entitled to any termination or severance payments.

They do not participate in the Company’s benefit schemes and the Company does not make any contributions to any pension scheme
on their behalf.

3.2. STRUCTURE OF REMUNERATION OF THE OPERATIONS COUNCIL

The members of the Operations Council receive a fixed remuneration and a variable remuneration linked to short-term and
long-term results.

The fixed remuneration includes an annual base salary and benefits, in the form of employer’s contributions into pension funds,
health insurances, life and disability insurances, other contributions and allowances according to local practices in their country
of employment, and in the form of benefits in kind.

The variable remuneration consists of a short-term incentive, settled partly in cash and partly in equity, and a long-term incentive,
settled in equity.

The table below summarizes the various components of the remuneration of the Operations Council members.

REMUNERATION
ELEMENT

REMUNERATION
VEHICLE

DRIVERS

PERFORMANCE
MEASURES

PURPOSE

PLAN PERIOD

FIXED REMUNERATION

Annual base salary

Cash

Contributions to
pension plans and
insurances, other
contributions,
allowances,
benefits in kind

Benefits

VARIABLE REMUNERATION

Position and
experience,
market practice
(benchmarking)

n/a

Market practice

n/a

Short-Term Incentive

50% cash

50% restricted
shares

Annual financial
performance,
individual
performance
against leadership
behavioral model

Group revenue,
Group NPAT 1,
Group ROIC2,
Group free cash
flow, regional and
business line profit,
regional NWC 3,
business operating
free cash flow,
leadership multiplier

Long-Term Incentive

Performance
Share Units
(PSUs)

Long-term
financial
performance

Relative TSR 4,
adjusted operating
income margin

Attract and retain
key executives

Continuous

Protect executives
against risks, attract
and retain

Continuous

Pay for performance

1-year
performance
period

3-year deferral
period

Reward for long-term
performance, align
compensation with
the interests of the
shareholders

3-year
performance
period

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1. NPAT: Net Profit After Tax.

2. ROIC: Return On Invested Capital.

3. NWC: Net Working Capital.

4. TSR: Total Shareholder Return.

The remuneration of the members of the Operations Council is subject to employer social charges, according to the legislation
in force in their country of employment.

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3.2.1. FIXED REMUNERATION: ANNUAL BASE SALARY

The base salaries of the Chief Executive Officer and each Operations Council member are reviewed annually based on market data for
similar positions in those companies and geographies against which the Group benchmarks itself. In addition to individual performance
and contribution and business performance and results, the deciding body considers the scope and complexity of the areas of
responsibility of the position, skill sets, experience required to perform the role, and relevant market practice in the industry.

3.2.2. FIXED REMUNERATION: BENEFITS

Benefits include the employer’s contributions to pension plans, the employer’s contributions to insurances for health, life, disability
and other risks, other cash contributions and allowances, and benefits in kind. They are awarded in accordance with prevailing
practices in the country of employment of the members of the Operations Council.

Swiss-based Operations Council members participate, on the same basis as other Swiss employees of the Group, in the
Company’s pension scheme. Employees contribute 8% of their base salary and the Company contributes an amount equal to one
and a half times the contributions paid by all employees to the scheme. Employees have the possibility to voluntarily increase their
contribution rate by 2% above the standard rate. More flexibility has also been granted to employees who wish to fund a potential
retirement before the normal age, or for those who wish to continue working after the age of 65.

3.2.3. SHORT-TERM VARIABLE REMUNERATION

The Chief Executive Officer and the other members of the Operations Council are eligible to a performance-related annual incentive
(the “Short-Term Incentive”). The Short-Term Incentive is designed to reward the CEO and the other members of the Operations
Council for the annual financial performance of the Group and its businesses, and for the demonstration of leadership behaviours
in line with the SGS competency model.

The table below summarizes the Short-Term Incentive components for the CEO and the other members of the Operations Council.

SHORT-TERM INCENTIVE COMPONENT

CEO

OTHER OPERATIONS
COUNCIL MEMBERS

Annual financial performance

Leadership behavior

The target incentive is expressed as a percentage of the annual base salary and varies depending on the role. For the CEO,
the target incentive amounts to 100% of annual base salary, while the target incentive for the other members of the Operations
Council varies between 65% and 90% of annual base salary.

The table below summarizes the annual incentive opportunity for the CEO and the other members of the Operations Council.

Incentive frequency

Minimum incentive opportunity

as % of base salary

as % of target incentive opportunity

Target incentive opportunity

as % of base salary

Maximum incentive opportunity

as % of target incentive opportunity

as % of base salary

CEO

Annual

100%

250%

OTHER OPERATIONS
COUNCIL MEMBERS

Annual

65%-90%

250%

162.5%-225%

ANNUAL FINANCIAL PERFORMANCE

Each year, an annual business plan is derived from the long-term strategic plan and sets the business objectives to be achieved
during the year.

The key performance indicators used in the Short-Term Incentive to measure the annual financial performance of the Group and
its businesses include measurements of growth (top-line contribution), profitability (bottom-line contribution), cash generation and
efficient use of capital, and thus reflect the financial performance of the Company in a balanced manner. Those financial metrics are
cascaded consistently throughout the organization to ensure collective alignment. The CEO and the heads of corporate functions
(SVPs) are measured on the financial performance of the Group, while the other members of the Operations Council are measured
on the financial performance of the Group and on the financial performance of their own business line (EVPs) or region (COOs).

At the beginning of each year, based on a recommendation by the CEO, the Board of Directors sets the target values of the key
performance indicators used in the Short-Term Incentive, in line with the annual business objectives.

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The table below summarizes the key performance indicators applicable to the CEO and the other members of the Operations Council.

Profitability
(bottom-line)

Growth
(top-line)

Efficient use
of capital

Cash
generation

Profitability
(bottom-line)

Cash
generation

Profitability
(bottom-line)

Cash
generation

CEO

HEADS OF CORPORATE
FUNCTIONS (SVPs)

HEADS OF BUSINESS
LINES (EVPs)

HEADS OF REGIONS
(COOs)

Group NPAT
25%

Group revenue
25%

Group ROIC
(organic)
25%

Group free cash
flow (organic)
25%

Business-line profit
40%

Business operating
free cash flow
(organic)
10%

Regional profit
40%

Regional NWC
10%

Group
results

Business lines
results

Regions
results

For each key performance indicator, a pay-out curve is defined according to the following principles:

• A threshold (minimum level of performance to trigger a pay-out, and below which the pay-out is zero), a target (expected level
of performance that triggers a pay-out equivalent to the target incentive), and a maximum (level of performance that triggers
the highest pay-out, and above which the pay-out is capped) are defined;

• The lowest pay-out (triggered by the threshold performance) and the highest pay-out (triggered by the maximum performance)

are defined;

• The pay-out for performances between threshold and target and between target and maximum are calculated by linear interpolation.

The chart below shows the pay-out curves for the Group NPAT, Group revenue, Group ROIC, Group free cash flow, business-line
profit, regional profit and business operating free cash flow.

BOTTOM LINE, TOP LINE, ROIC AND FCF PERFORMANCEE (PAYOUT CURVE)

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%
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Y
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P

250%

200%

150%

100%

50%

80%

100%

133.3%

200%

PERFORMANCE %

The pay-out curve for regional NWC is defined by the CEO at the beginning of the performance year together with the objectives
for each performance metric.

At the end of the performance period, the results for each key performance indicator are assessed against the pre-defined target
and the pay-out curve to determine a pay-out factor. The weighted average of the pay-out factors of each key performance
indicator corresponds to the overall financial performance pay-out factor.

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An example of the calculation of the financial performance pay-out factor for an Executive Vice President is described in the chart below.

GROUP NPAT
WEIGHT 25%

GROUP REVENUE
WEIGHT 25%

BUSINESS
OPERATING FREE
CASH FLOW
WEIGHT 10%

BUSINESS PROFIT
WEIGHT 40%

FINANCIAL
PERFORMANCE
PAYOUT

PERFORMANCE
96%

PERFORMANCE
120%

PERFORMANCE
100%

PERFORMANCE
110%

PAYOUT
80%

80%
x 0.25

PAYOUT
160%

160%
x 0.25

PAYOUT
100%

100%
x 0.1

PAYOUT
130%

130%
x 0.4

122%

LEADERSHIP MULTIPLIER

The members of the Operations Council are also rewarded for the demonstration of leadership behaviours in line with the
SGS competency model. Their final incentive amount is calculated by multiplying the financial performance pay-out factor by
a leadership multiplier.

The leadership multiplier is determined for each executive based on an assessment of their behaviours against the leadership
competency model of SGS in the areas of change management and people management. The assessment of the CEO is
conducted at year end by the Board of Directors, while the assessment of the other members of the Operations Council is
conducted by the CEO. The assessment leads to a leadership multiplier that can range between 70% and 125%.

An example of the calculation of the final incentive amount for an OC member is described in the chart below.

TARGET INCENTIVE

FINANCIAL
PERFORMANCE PAY-
OUT FACTOR

LEADERSHIP
MULTIPLIER

FINAL
INCENTIVE AMOUNT

100 000

122%

125%

152 500

SETTLEMENT OF THE SHORT-TERM INCENTIVE

Once the final incentive amount is determined, it is settled 50% in cash and 50% in restricted shares, to strengthen the link
between the compensation of executives and the interests of the shareholders.

The cash component is paid and the restricted shares are allocated after the shareholders’ approval at the Annual General Meeting
of the following year.

The number of restricted shares to be allocated is determined by dividing 50% of the final incentive amount by the average closing
share price during the 20-day period following the payment of the dividends after the Annual General Meeting, and the result is
rounded up to the nearest integer. They are restricted for a period of three years during which they may not be sold, transferred
or pledged. In case of change of control or liquidation or termination of employment following retirement, death or disability,
the restriction period of the shares lapses. The shares remain restricted in all other instances.

The Group does not issue new shares to be allocated to employees for equity-based compensation plans, but uses treasury shares
instead, acquired through share buyback programs. Detailed information on the overhang and burn rate are disclosed in note 28.

TERMINATION OF EMPLOYMENT

In case of termination of employment for any reason except for cause, if the last day of employment is on or after 31 December
of the respective business year, the executive is eligible to the full annual incentive payment. The annual incentive is paid fully
in cash after the approval of the Annual general Meeting of shareholders.

In case of termination for cause before the date of payment, irrespective of whether the last day of employment is before or
after 31 December of the respective business year, the executive has no entitlement to receive any annual incentive payment.

In case of resignation, and if the last day of employment is before 31 December of the respective business year, the Participant
has no entitlement to receive any annual incentive payment.

In case of termination for death or disability before 31 december of the respective business year, the annual incentive payment is
calculated pro-rata (calendar days) based on the Board of Directors’ best estimate of the performance on the last day of employment.
The annual incentive is paid fully in cash shortly after the last day of employment, as soon as administratively possible.

In case of retirement or termination not for cause before 31 December of the respective business year, the annual incentive payment
is calculated pro-rata (calendar days) based on actual performance at the end of the performance year, and it is paid fully in cash after
the approval of the Annual General Meeting of shareholders.

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The table below summarizes the rules in case of termination of employment.

LAST DAY OF EMPLOYMENT
BEFORE 31 DECEMBER

LAST DAY OF EMPLOYMENT
BETWEEN 31 DECEMBER AND AGM

INCENTIVE
OPPORTUNITY
(TARGET
INCENTIVE)

INCENTIVE
PAYOUT

PAYMENT
DATE

PAYMENT
VEHICLE

INCENTIVE
OPPORTUNITY
(TARGET
INCENTIVE)

INCENTIVE
PAYOUT

PAYMENT
DATE

PAYMENT
VEHICLE

TERMINATION
REASON

Termination
for cause

Zero

Resignation

Zero

Death or
disability

Prorated
on calendar
days

Based on
estimated
performance

Shortly
after the
termination
date

Retirement,
termination
not for cause

Prorated
on calendar
days

Based
on actual
performance

After
the AGM
approval

100%
cash

Zero

Full

Based
on actual
performance

After
the AGM
approval

Based
on actual
performance

Shortly
after the
termination
date

Based
on actual
performance

After
the AGM
approval

100%
cash

CLAWBACK PROVISIONS

A clawback policy applies to any variable remuneration awarded to the members of the Operations Council. Under this policy,
the Company may reclaim the value of any variable incentives paid, in cash or shares, in the following cases: i) any fraud,
negligence or intentional misconduct was a significant contributing factor to the Company having to restate all or a portion of its
financial statements; ii) a serious violation of the SGS internal regulations and/or Code of Integrity; iii) any violation of law within
the scope of employment at the Company.

3.2.4. LONG-TERM VARIABLE REMUNERATION

The Chief Executive Officer and the other members of the Operations Council are eligible to a performance-related long-term
incentive (the “Long-Term Incentive”). The Long-Term Incentive is designed to motivate the leadership team to achieve the
long-term objectives of the Group and to align their remuneration with the interests of the shareholders.

The Long-Term Incentive consists of a grant of Performance Share Units (PSUs), done once every three years. The last grant under
the Long-Term Incentive was done in 2018; the previous one was done in 2015.

The value of the grants, defined as the number of PSUs granted multiplied by the average share price of the 20 trading days
preceding the grant date, covering a three-year period, is expressed as a percentage of the annual base salary and varies depending
on the role. For the CEO, the value of the grant is 500% of the annual base salary; for the other members of the Operations Council
it is 300% of the annual base salary.

The table below summarizes the value of the incentive opportunity over a three-year period and annualized for the CEO and
the other Operations Council members.

Incentive frequency

Minimum incentive
opportunity value

Target incentive
opportunity value

Maximum incentive
opportunity value

CEO

OTHER OPERATIONS
COUNCIL MEMBERS

Once every three years

Three-year
period

Annualized

Three-year
period

Annualized

as % of base salary

as % of target incentive opportunity

as % of base salary

as % of target incentive opportunity

as % of base salary

500%

150%

750%

167%

150%

250%

300%

150%

450%

100%

150%

The PSUs granted under the Long-Term Incentive vest after a performance period of three years (for the grant of 2018,
the performance period is 2018-2020), conditionally upon the achievement of pre-defined performance objectives and subject
to continuity of employment of the beneficiaries during the vesting period.

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PERFORMANCE CONDITIONS

The performance conditions of the Long-Term Incentive consist of two financial key performance indicators, equally weighted at 50%:

• Total Shareholder Return (TSR1) (relative SGS performance compared with the peer group)

• Adjusted Operating Income Margin (AOIM2) (absolute SGS performance against an internal target)

The TSR of the Group will be compared to the TSR of a group of twelve peer companies, selected by the Board of Directors
because they have a comparable range of services, technology, customers, suppliers or investors and thus are exposed to similar
market cycles. The intention of indexing performance against a peer group of companies is to reward the relative performance of
the Company, where market factors that are outside the control of the executives are neutralized.

The list of the peer group companies is illustrated in the table below.

Adecco

ISS

ALS

Mistras

Applus+

Rentokil

Bureau Veritas

Securitas

Eurofins

Sodexo

Intertek

Team

The vesting levels for the TSR are defined as follows: 150% vesting if SGS is ranked first among the thirteen companies composing
the peer group, 100% vesting if SGS is ranked fifth, and zero vesting if SGS is ranked eight or worse; in between, a linear
interpolation applies.

The AOIM will be assessed against a pre-defined internal target.

The vesting levels for the AOIM are defined as follows: a threshold performance is set at 90% of target, and a maximum
performance is set at 110% of target; if the AOIM performance is at or below threshold, the vesting is zero; if the AOIM is at target,
the vesting is 110%; if the AOIM is at or above maximum, the vesting is 150%; in between, a linear interpolation applies.

The graphics below summarize the key performance indicators of the Long-Term Incentive and their vesting levels.

TOTAL SHAREHOLDER RETURN (TSR)
Relative ranking against peer companies
WEIGHT 50%

200%

150%

100%

50%

13TH

12TH

11TH

10 TH

9 TH

8TH

7TH

6 TH

5 TH

4TH

3RD

2ND

1ST

PERFORMANCE

110%

ADJUSTED OPERATING INCOME MARGIN (AOIM)
Performance against internal target
WEIGHT 50%

200%

150%

100%

50%

%
G
N

I
T
S
E
V

%
G
N

I
T
S
E
V

THRESHOLD

TARGET

PERFORMANCE

MAXIMUM

The overall vesting level of the PSUs granted will be calculated as a weighted average of each of the respective vesting levels
for TSR (50%) and AOIM (50%), and ranges between 0% and 150%.

1. Total shareholder return: (Ending stock price - Beginning stock price) + Sum of all dividends received during the measurement period.

2. See note 4 to the SGS Group Results (page 145) for details on the calculation of the adjusted operating income.

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SETTLEMENT OF THE LONG-TERM INCENTIVE

At the end of the vesting period, the PSUs vest, subject to the performance conditions and the continuity of employment condition,
and shares are allocated to the participants based on the overall vesting level.

The number of shares to be allocated at vesting is calculated by multiplying the number of PSUs granted by the overall vesting
level, the result being rounded up to the nearest integer.

Number of PSUs granted

Overall vesting level (0-150%)

X Number of shares allocated at vesting

TERMINATION OF EMPLOYMENT

In case of termination of employment, all unvested PSUs are immediately forfeited without value and without any compensation,
except in the following cases:

• In case of termination of employment as a result of disability or retirement, unvested PSUs vest on a pro rata basis, based on the
number of full months of the vesting period that have expired until the termination date. The shares are allocated after the regular
vesting date and the vesting level is determined based on the performance during the entire regular performance period. There is no
early allocation of the shares.

• Upon termination of employment as a result of death, unvested PSUs will vest immediately on a pro rata basis, based on the

number of full months of the vesting period that have expired until the termination date. The vesting level is based on an estimation
of performance by the Board of Directors.

• In the event of a corporate transaction or liquidation, unvested PSUs vest immediately. The vesting level is based on an estimation

of performance by the Board of Directors.

The table below summarizes the vesting rules in case of termination of employment.

TERMINATION REASON

VESTING RULE

VESTING TIME AND
SHARES ALLOCATION

VESTING LEVEL

Retirement or disability

Vesting on a pro rata basis

At regular vesting date

Based on actual performance

Death

Vesting on a pro rata basis

Immediate

Corporate transaction
or liquidation

Full vesting

Immediate

Based on an estimation of performance
by the Board of Directors

Based on an estimate of performance
by the Board of Directors

Other reasons

Forfeiture

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MALUS AND CLAWBACK PROVISIONS

A malus and clawback policy applies to any Long-Term Incentive grant awarded to the members of the Operations Council.
Under this policy, the Company may forfeit any unvested equity compensation and/or reclaim the value of any vested equity
compensation granted under a Long-Term Incentive plan, in the following cases: i) any fraud, negligence or intentional misconduct
was a significant contributing factor to the Company having to restate all or a portion of its financial statements; ii) a serious
violation of the SGS internal regulations and/or Code of Integrity; iii) any violation of law within the scope of employment at
the Company.

3.2.5. REMUNERATION MIX

The part of remuneration at risk (Short-Term Incentive and Long-Term Incentive) for the CEO represents, at target, 73% of his
total remuneration. The part of remuneration settled in equity instruments (Restricted Shares and PSUs) represents, at target,
59% of his total remuneration.

For the other members of the Operations Council, the part or remuneration at risk represents, on average, 64% of their total
remuneration. The part of remuneration settled in equity instruments represents, on average, 50% of their total remuneration.

The Long-Term Incentive is considered at its annualized value.

The part of the fixed remuneration linked to benefits is not considered in this analysis.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

The charts below show the remuneration mix for the CEO and the other members of the Operations Council in three cases:
at minimum (both Short-Term and Long-Term Incentives at zero pay-out), at target (both Short-Term and Long-Term Incentives
at 100% pay-out) and at maximum (both Short-Term and Long-Term Incentives at maximum pay-out).

CEO

OTHER OC MEMBERS

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Minimum

Target

Maximum

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Minimum

Target

Maximum

Long-Term Incentive (PSUs) Short-Term Incentive (restricted shares)
Short-Term Incentive (cash) Base salary (cash)

3.2.6. SHAREHOLDING OWNERSHIP GUIDELINES

A shareholding ownership guideline (SOG) is in force since 2015, requiring the members of the Operations Council to own at least
a certain multiple of their annual base salary in SGS shares, as follows:

• CEO: three times the annual base salary

• Other members of the Operations Council: two times the annual base salary

In the event of a substantial drop in the share price, the Board of Directors has the discretion to modify the SOG.

The determination of equity amounts against the SOG is defined to include vested shares allocated under the Short-Term and
Long-Term Incentive plans, shares underlying vested and unvested warrants granted under the discontinued warrants plans and
other shares that are owned by the Operations Council member directly or indirectly (by “closely related persons”).

The Nomination and Remuneration Committee reviews compliance with the SOG on an annual basis. Until the minimum
requirement is met, 25% of the shares allocated under the Short-Term Incentive plan and all shares allocated upon vesting of
the PSUs under the Long-Term Incentive plan will be blocked.

3.2.7. EMPLOYMENT CONTRACTS

Employment contracts of the Operations Council members have no fixed term and can be terminated at any time by either party,
provided a notice period of six months is respected. For the Chief Executive Officer, the notice period is 12 months. The executive
contracts do not provide for any severance payments (beyond the minimum legally required in the country of employment) and are
subject to applicable legislation in the country of employment.

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3.2.8. TIMELINE OF REMUNERATION

The following outlines the timeline of payment of each remuneration element that was earned in 2019:

• The annual base salary is paid during 2019

• The cash portion of the Short-Term Incentive is paid in March 2020, shortly after the Annual General Meeting

• The share portion of the Short-Term Incentive is allocated in April 2020 and will be unblocked in April 2023

The PSUs granted under the Long-Term Incentive in 2018 will be earned over the performance period from 2018 to 2020 and
will vest, subject to performance conditions and continuity of employment, in February 2021

TIMELINE (PERFORMANCE PERIOD, TIME OF PAYMENT)

PERFORMANCE KPIs

LONG-TERM
INCENTIVE
2018 GRANT

g
n
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e
V

n
o
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l
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e
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a
h
S

SHORT-TERM
INCENTIVE

%
0
5

d
e
t
c

i
r
t
s
e
r

s
e
r
a
h
s

%
0
5

h
s
a
c

ANNUAL
BASE
SALARY
AND
BENEFITS

-
n
U

g
n
k
c
o
b

2018

2019

2020

2021

2022

2023

SHAREHOLDING OWNERSHIP GUIDELINE

Relative TSR (50%)

Adjusted operating income margin (50%)

Group revenue (25%)

Group NPAT (25%)

Role specific profit, cash generation,
efficient use of capital (50%)

Multiplied by leadership multiplier

Fixed remuneration

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4. REMUNERATION AWARDED TO THE BOARD OF DIRECTORS

For the mandate from AGM 2019 to AGM 2020, the annual board retainer was CHF 500 000 for the Chairman of the Board
(AGM 2018 to AGM 2019: CHF 300 000) and CHF 150 000 for the other Board of Directors members (AGM 2018 to AGM
2019: CHF 150 000). Members of the Board of Directors serving on the Audit Committee were entitled to an additional fee
of CHF 50 000; Directors serving on the other committees were entitled to an additional fee of CHF 30 000 per committee
(AGM 2018 to AGM 2019: for all the committees, additional fee of CHF 30 000 per committee).

(CHF)

Chairman

Board members

BOARD RETAINER

AUDIT COMMITTEE FEE

OTHER COMMITTEES FEE

500 000

150 000

50 000

30 000

The total remuneration of the Board of Directors for the mandate from AGM 2019 to AGM 2020 is equal to CHF 2 260 000,
in line with the amount approved by the AGM 2019.

Each Board member can choose to receive up to 50% of her/his remuneration settled in shares that may be restricted;
the remaining portion is settled in cash. The cash part is paid partly in the current fiscal year and partly in the next fiscal year,
on a prorata temporis basis. The shares or restricted shares are granted in the next fiscal year, after the publication of the
Group’s results.

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The table below details the remuneration elements and the settlement vehicle of the Directors for the mandate AGM 2019
to AGM 2020.

CHAIR-
MANSHIP

BOARD
MEMBERSHIP

AUDIT
COMMITTEE
MEMBERSHIP

NOMINATION
AND REMUNE-
RATION
COMMITTEE
MEMBERSHIP

PROFES-
SIONAL
CONDUCT
COMMITTEE
MEMBERSHIP

TOTAL
REMUNE-
RATION

PROPORTION
TO BE
SETTLED
IN CASH

PROPORTION
TO BE
SETTLED
IN SHARES1

PROPORTION
TO BE
SETTLED IN
RESTRICTED
SHARES1

P. Kalantzis

P. Desmarais

A. F. von Finck

L. von Finck

I. Gallienne

C. Grieder

C. Grupp

G. Lamarche

S.R. du Pasquier

K. Sorenson

TOTAL

500 000

150 000

500 000

1 350 000

50 000

30 000

50 000

30 000

500 000

150 000

230 000

150 000

180 000

260 000

180 000

200 000

30 000

210 000

50 000

200 000

120 000

90 000

2 260 000

100%

50%

100%

50%

1. Shares and restricted shares will be granted during fiscal year 2020.

The table below details the remuneration elements and the settlement vehicle of the Directors for the mandate AGM 2018
to AGM 2019.

CHAIR-
MANSHIP

BOARD
MEMBERSHIP

AUDIT
COMMITTEE
MEMBERSHIP

NOMINATION
AND REMUNE-
RATION
COMMITTEE
MEMBERSHIP

PROFES-
SIONAL
CONDUCT
COMMITTEE
MEMBERSHIP

TOTAL
REMUNE-
RATION

PROPORTION
TO BE
SETTLED
IN CASH

PROPORTION
TO BE
SETTLED
IN SHARES

PROPORTION
TO BE
SETTLED IN
RESTRICTED
SHARES

P. Kalantzis1

S. Marchionne2

P. Desmarais

A. von Finck

A. F. von Finck

I. Gallienne

C. Grupp

G. Lamarche

S.R. du Pasquier

C. Kirk

TOTAL

198 000

110 000

51 000

150 000

30 000

10 000

30 000

20 000

299 000

10 000

130 000

150 000

180 000

30 000

180 000

30 000

210 000

150 000

308 000

1 251 000

100 000

90 000

1 839 000

100%

1. Mr. Kalantzis was appointed Acting Chairman of the Board and member of the Professional Conduct Committee effective 22 July 2018.
His remuneration has been prorated, considering chairmanship (no representation fees) CHF 300 000 and one committee membership
CHF 30 000 from 22 July 2018 to AGM 2019.

2. Mr. Marchionne was the Chairman of the Board and member of two committees until 21 July 2018. The remuneration from AGM 2018

to AGM 2019 (CHF 325 000 chairmanship including representation fees and CHF 60 000 committee fees) are for the period from AGM 2018
to 21 July 2018.

The remuneration of the Board of Directors is subject to employer social charges according to Swiss legislation.

The remuneration of the Board of Directors is disclosed on a fiscal year basis.

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The following table details the remuneration elements granted to each of the Directors for their tenure in fiscal year 2019. It includes
both prorata temporis elements of remuneration for the mandate AGM 2018 to AGM 2019 and prorata temporis elements or
remuneration for the mandate AGM 2019 to AGM 2020.

(CHF thousand)

P. Kalantzis

P. Desmarais

A. von Finck1

A. F. von Finck

L. von Finck2

I. Gallienne

C. Grieder2

C. Grupp

C. Kirk1

G. Lamarche

S.R. du Pasquier

K. Sorenson2

TOTAL

BOARD
RETAINER

REPRESEN-
TATION FEES

COMMITTEE
FEES

TOTAL
REMUNE-
RATION

CASH

SHARES
VALUE

SHARES
NB

RESTRICTED
SHARES
VALUE

RESTRICTED
SHARES NB

EMPLOYER
SOCAIL
CHARGES

463

113

154

116

154

116

154

1 727

478

113

223

116

185

201

185

200

215

100

478

113

223

116

185

201

185

200

215

100

371

2 098

170

1. Until the AGM 2019.

2. As of the AGM 2019.

The following table details the remuneration elements granted to each of the Directors for their tenure in fiscal year 2018. It includes
both prorata temporis elements of remuneration for the mandate AGM 2017 to AGM 2018 and prorata temporis elements or
remuneration for the mandate AGM 2018 to AGM 2019.

(CHF thousand)

P. Kalantzis1

S. Marchionne2

P. Desmarais

A. von Finck

A.F. von Finck

I. Gallienne

C. Grupp

G. Lamarche

S.R. du Pasquier

C. Kirk

TOTAL

BOARD
RETAINER

REPRESENTATION
FEES

COMMITTEE
FEES

TOTAL
REMUNERATION

EMPLOYER SOCIAL
CHARGES

216

168

150

1 584

287

259

216

150

180

210

150

1 885

150

1. Mr. Kalantzis was appointed Acting Chairman of the Board and member of the Professional Conduct Committee effective 22 July 2018.

2. Mr. Marchionne was the Chairman of the Board and member of two committees until 21 July 2018.

The overall remuneration paid to the Board of Directors in 2019 is higher than the overall remuneration paid in 2018, due to the
increase of the board retainer for the Chairman, the increase of the committee fee for the members of the Audit Committee,
and the change in the composition of the Board.

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5. REMUNERATION AWARDED TO THE OPERATIONS COUNCIL MEMBERS

This section sets out the remuneration that was paid to the Operations Council as a whole, to the three Operations Council
members who make up Senior Management and to the Chief Executive Officer in 2019. All amounts disclosed in this section
include the Short-Term Incentive cash amount and restricted shares that will be granted in April 2020 with respect to performance
in 2019 (disclosure according to the accrual principle).

5.1. FIXED REMUNERATION

The table below summarizes the fixed remuneration paid to the Operations Council, Senior Management and the Chief Executive
Officer in 2019.

(CHF thousand)

BASE SALARY

OTHER CASH
ALLOWANCES

CONTRIBUTIONS
TO PENSION PLANS

OTHER
CONTRIBUTIONS AND
BENEFITS IN KIND

TOTAL FIXED
REMUNERATION

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)

Cash (including allowances)

8 748

1 385

Contributions and benefits in kind

Equity

TOTAL

8 748

1 385

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

2 337

1 000

187

1 121

280

101

394

10 133

1 515

11 648

2 524

309

2 833

1 074

110

1 184

The aggregate base salary of the members of the Operations Council did not exceed the maximum amount approved by the Annual
General Meeting of shareholders in 2018 (CHF 9 400 000). For 2020, the 2019 Annual General Meeting of shareholders already
approved a maximum aggregate total fixed remuneration for the members of the Operations Council (CHF 14 000 000).

The table below summarizes the fixed remuneration paid to the Operations Council, Senior Management and the Chief Executive
Officer in 2018.

(CHF thousand)

BASE SALARY

OTHER CASH
ALLOWANCES

CONTRIBUTIONS
TO PENSION PLANS

OTHER
CONTRIBUTIONS AND
BENEFITS IN KIND

TOTAL FIXED
REMUNERATION

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)

Cash (including allowances)

8 314

2 859

Contributions and benefits in kind

Equity

TOTAL

8 314

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

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900

2 859

503

392

1 168

212

100

525

11 173

1 693

12 866

2 220

279

2 499

1 292

145

1 437

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The increase in fixed remuneration compared with 2018 reflects the change in the composition of the Operations Council,
and the annual remuneration review decided by the Board of Directors.

5.2. SHORT-TERM VARIABLE REMUNERATION

The short-term variable remuneration of the members of the Operations Council is determined by the achievement of financial
targets and by their leadership behaviours.

In 2019, the achievement of financial targets at Group level, in the businesses and in the regions ranged from 61.1% to 114.6%
(2018: 49.5% to 133.9%).

The chart below summarizes the 2019 performance achievements against targets for the financial objectives (revenue, profitability,
cash generation and capital efficiency) used in the Short-Term Incentive.

Threshold

Target

Maximum

PERFORMANCE LEVEL

GROUP REVENUE

GROUP NPAT

GROUP ROIC

GROUP FREE CASH FLOW

REGION AND BUSINESS PROFIT

BUSINESS OPER. FREE CASH FLOW

REGION NWC

Achievement Median achievement Performance range

The overall Short-Term Incentive pay-out amounts to 108.9% of the target incentive opportunity for the CEO (2018: 98.3%) and ranges
from 45.6% to 129.1% of the target incentive opportunity for the other members of the Operations Council (2018: 56.3% to 159.3%).
For the purpose of the Short-Term Incentive, targets and performance achievement are measured at constant currency exchange rates.

In settlement of the equity portion of the Short-Term Incentive 2019, SGS restricted shares will be allocated to the members of
the Operations Council in April 2020, after the approval of the total Short-Term Incentive amount by the Annual General Meeting
of Shareholders (in April 2019, 1 020 restricted shares were granted in settlement of the equity portion of the Short-Term Incentive
2018). The number of restricted shares to be allocated is calculated by dividing the equity portion of the Short-Term Incentive
by the average closing price of the share during a 20-trading day period following the payment of the dividends after the Annual
General Meeting of Shareholders, rounded up to the nearest integer, and are restricted for a period of three years.

The table below summarizes the short-term variable remuneration awarded to the Operations Council, Senior Management and
the Chief Executive Officer for the performance year 2019, and its comparison with the incentive opportunity.

(CHF thousand)

MINIMUM

TARGET

MAXIMUM

ACTUAL SHORT-TERM
VARIABLE REMUNERATION

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

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3 645

3 353

6 998

1 139

931

2 070

500

1 000

9 133

8 383

17 496

2 848

2 328

5 176

1 250

2 500

3 646

3 356

7 002

1 273

1 047

2 320

545

1090

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

The total short-term remuneration amount will be submitted for approval to the Annual General Meeting of Shareholders of 2020,
and the settlement for both the cash and the equity part will be implemented shortly after.

The table below summarizes the short-term variable remuneration awarded to the Operations Council, Senior Management and
the Chief Executive Officer for the performance year 2018, and its comparison with the incentive opportunity.

(CHF thousand)

MINIMUM

TARGET

MAXIMIM

ACTUAL SHORT-TERM
VARIABLE REMUNERATION

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

2 641

5 282

707

1 414

450

900

6 602

13 204

1 767

3 534

1 125

2 250

2 613

5 226

681

1 362

442

884

The total 2018 short-term remuneration amount was approved by the Annual General Meeting of Shareholders of 2019, and
the settlement for both the cash and the equity part were implemented shortly after.

The increase in short-term variable remuneration compared to 2018 reflects the change in the pay-mix of the Operations Council
members, with an increased portion of remuneration at risk, and the change in the composition of the Operations Council.

5.3. LONG-TERM VARIABLE REMUNERATION

In 2019, the Group implemented a cash Long-Term Incentive for the two Operations Council members who were newly appointed.
This incentive mirrors the current Long-Term Incentive 2018–2020, with exact same vesting and performance conditions, from
the date of their respective appointment to 31 December 2020.

In 2018, under the Long-Term Incentive 2018–2020, a total of 10 617 Performance Share Units (PSUs) were awarded to the
members of the Operations Council. This includes 2 905 PSUs awarded to Senior Management, of which 1 881 awarded to
the Chief Executive Officer.

The PSUs awarded under the Long-Term Incentive 2018–2020 vest after the three-year performance period 2018–2020, in early
2021, subject to the performance conditions (relative total shareholder return and adjusted operating income margin, equally
weighted at 50%) and to continuity of employment of the beneficiaries during the vesting period.

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The table below summarizes the 2019 annualized value of the long-term variable remuneration awarded to the Operations Council,
Senior Management and the Chief Executive Officer in 2018 and 2019.

NUMBER OF
PSUS GRANTED

TOTAL VALUE
OF THE GRANT
(CHF THOUSAND)1

ANNUALIZED VALUE
OF THE GRANT
(CHF THOUSAND)2

2018 ANNUALIZED
VALUE OF THE GRANT
(CHF THOUSAND)3

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

2 214

1 878

1 042

8 469

9 511

898

2 317

3 215

1 500

8 469

2 317

1 500

1. Two members of the Operations Council (of whom one member of Senior Management), who were appointed in 2019, were granted a LTI in cash
for the period betweeen their appointment and December 31, 2020 (the end of the performance period of the LTI PSUs 2018-2020). Vesting and
performance conditions of the cash LTI are exactly the same as the LTI PSUs 2018-2020.

2. The annualized value of the grant for the year 2019 is: i) for the equity part, one third of the total value of the 2018 grant at grant date, and ii) for

the cash part, a fraction of the total value of the grant corresponding to the period from the OC appointment to December 31, 2019.

3. The annualized value of the grant for the year 2018 is one third of the total value of the 2018 grant at grant date.

The table below summarizes the 2018 long-term variable remuneration awards, its total value and its 2018 annualized value.

NUMBER OF
PSUS GRANTED1

TOTAL VALUE
OF THE GRANT
(CHF THOUSAND)2

ANNUALIZED VALUE
OF THE GRANT
(CHF THOUSAND)3

2017 ANNUALIZED
VALUE OF THE GRANT
(CHF THOUSAND)4

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

10 617

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

2 905

1 881

25 406

6 952

4 501

8 469

2 317

1 500

8 302

2 149

1 337

1. The grant done in 2018 is for the performance period 2018-2020; the next PSUs grant is planned for 2021.

2. The total value of the grant is the number of PSUs granted multiplied by the average share price of the 20 trading days preceding the grant date.

3. The annualized value of the grant for the year 2018 is one third of the total value of the grant.

4. The annualized value of the grant for the year 2017 is one third of the total value of the 2015 grant at grant date.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

DISCONTINUED SHARE OPTION PLANS

The members of the Operations Council were entitled to a Share Option grant until 2014. As of the performance year 2015, the
Share Option plans have been discontinued and replaced by Restricted Shares for the settlement of the equity part of the Short-Term
Incentive and by Performance Share Units for the Long-Term Incentive.

The following table presents details of the options awarded to members of the Operations Council, Senior Management and the CEO,
active at 31 December 2019, and shows those options which have been granted, vested and became exercisable in 2019.

TYPE OF OPTIONS1
(YEAR OF ISSUE)

STRIKE PRICE
(CHF)

TOTAL NUMBER OF
OPTIONS GRANTED
UNDER EACH PLAN

MARKET VALUE
AT GRANT
(CHF THOUSAND)

NUMBER VESTED ON
31 DECEMBER 2019

NUMBER VESTED ON
31 DECEMBER 2018

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT AND CHIEF EXECUTIVE OFFICER)

SGSBB (2015)

1 798

681 444

1 513

681 444

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)

SGSBB (2015)

1 798

132 299

294

132 299

CHIEF EXECUTIVE OFFICER

SGSBB (2015)

1 798

82 727

184

82 727

1. One hundred options give the right to acquire one share.

5.4. TOTAL REMUNERATION

The tables below present all components of the remuneration earned in 2019 and 2018 by the Operations Council, Senior Management
and the Chief Executive Officer. The employer social charges are reported separately in the last column of the table.

TOTAL AND ANNUALIZED REMUNERATION 2019

(CHF thousand)

TOTAL FIXED
REMUNE-
RATION

TOTAL
SHORT-TERM
VARIABLE
REMUNE-
RATION

TOTAL 2019
REMUNERA-
TION BEFORE
LTI

TOTAL
LONGTERM
VARIABLE
REMUNE-
RATION1

ANNUALIZED
LONG-TERM
VARIABLE
REMUNE-
RATION2

TOTAL 2019
REMUNE-
RATION

2019
ANNUALIZED
REMUNE-
RATION

EMPLOYER
SOCIAL
CHARGES

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)3

3 646

13 779

2 214

1 042

15 993

14 821

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

10 133

1 515

11 648

3 356

7 002

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)4

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

2 524

309

2 833

1 074

110

1 184

1 273

1 047

2 320

545

1090

1 515

3 356

18 650

3 797

309

1 047

5 153

1 619

110

545

2 274

2 214

1 878

8 469

9 511

898

2 317

3 215

1 500

1 515

3 356

20 864

5 675

309

1 047

7 031

1 619

110

545

2 274

1 515

11 825

28 161

4 695

309

3 364

8 368

1 619

110

2 045

3 774

1 341

401

201

1. In 2019, the Group implemented a cash Long-Term Incentive for the Operations Council members who were appointed in 2019.

2. The annualized value of the grant for the year 2019 is: i) for the equity part, one third of the value of the 2018 grant at grant date, and ii) for the cash

part, a fraction of the total value of the grant corresponding to the period from the OC appointment to December 31, 2019.

3. 23 FTE (Full Time Equivalent).

4. 4 FTE.

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TOTAL AND ANNUALIZED REMUNERATION 2018

(CHF thousand)

TOTAL FIXED
REMUNE-
RATION

TOTAL
SHORT-TERM
VARIABLE
REMUNE-
RATION

TOTAL 2018
REMUNE-
RATION
BEFORE LTI

TOTAL
LONGTERM
VARIABLE
REMUNE-
RATION1

ANNUALIZED
LONG-TERM
VARIABLE
REMUNE-
RATION2

TOTAL 2018
REMUNE-
RATION

2018
ANNUALIZED
REMUNE-
RATION

EMPLOYER
SOCIAL
CHARGES3

OPERATIONS COUNCIL (INCLUDING SENIOR MANAGEMENT)4

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

11 172

1 693

12 865

2 613

5 226

2 613

13 785

SENIOR MANAGEMENT (INCLUDING CHIEF EXECUTIVE OFFICER)5

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

CHIEF EXECUTIVE OFFICER

Cash (including allowances)

Contributions and benefits in kind

Equity

TOTAL

2 220

279

2 499

1 292

145

1 437

681

1 362

442

884

13 785

1 693

3 683

25 406

8 469

28 019

11 082

43 497

26 560

3 683

6 952

4 501

2 317

1 500

2 901

279

7 633

10 813

1 734

145

4 943

6 822

2 901

279

2 998

6 178

1 734

145

1 942

3 821

1 187

739

1 693

2 613

18 091

2 901

279

681

3 861

1 734

145

442

2 321

1. In 2018, the Group implemented a Long-Term Incentive PSUs 2018-2020 plan for the Operations Council members.

2. The annualized value of the grant for the year 2018 is one third of the total value of the 2018 grant at grant date.

3. In 2018, employer social charges were significantly higher than 2019 because in 2018 the shares vested from the Long-Term Incentive

PSUs 2015-2017 plan were allocated to the OC members.

4. 23 FTE (Full Time Equivalent).

5. 3 FTE.

5.5. REMUNERATION MIX

In 2019, the part of remuneration at risk (Short-Term Incentive and Long-Term Incentive) for the CEO represents 72% of the total
remuneration (2018: 73%); the part of remuneration settled in equity instruments (Restricted Shares and PSUs) represents 57%
of the total remuneration (2018: 59%). For the other members of the Operations Council, the part or remuneration at risk
represents, on average, 62% of the total remuneration (2018: 60%); the part of remuneration settled in equity instruments
represents, on average, 47% of the total remuneration (2018: 49%).

The Long-Term Incentive is considered at his annualized value. For both 2019 and 2018, the annualized value at grant of the
Long-Term Incentive 2018-2020 has been considered.

The part of the fixed remuneration linked to benefits is not considered in this analysis.

The charts below show the remuneration mix for the CEO and for the other members of the Operations Council in 2019 and 2018.

CEO

OTHER OC MEMBERS (ON AVERAGE)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

2018

2019

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

2018

2019

Long-Term Incentive (PSUs) Short-Term Incentive (restricted shares)
Short-Term Incentive (cash) Base salary (cash)

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

5.6. OTHER COMPENSATION ELEMENTS

5.6.1. SEVERANCE PAYMENTS

No severance payments were made in 2019 to members of the Operations Council (2018: severance payments for a total amount
of CHF 263 078 were made to members of the Operations Council who left the Group in 2018, according to the legislation in force
in their country of employment).

5.6.2. OTHER COMPENSATION TO MEMBERS OR FORMER MEMBERS OF THE GOVERNING BODIES

No additional compensation or fees were paid to any member of the governing bodies (unchanged from prior year).

5.6.3. LOANS TO MEMBERS OR FORMER MEMBERS OF THE GOVERNING BODIES

As at 31 December 2019, no loan, credit or outstanding advance was due to the Group from members or former members of its
governing bodies (unchanged from prior year).

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Deloitte SA
Rue du Pré-de-la-Bichette 1
1202 Geneva
Switzerland

Phone: +41 (0)58 279 8000
Fax: +41 (0)58 279 8800
www.deloitte.ch

Report of the statutory auditor

To the General Meeting of
SGS SA, Geneva

Report of the Statutory Auditor in relation to sections 4 and 5 of the remuneration
Statutory Auditor’s Report
report in accordance with the Ordinance against Excessive compensation in Stock
Exchange Listed Companies (Ordinance)
To the General Meeting of
SGS SA, Geneva
We have audited sections 4 and 5 of the Remuneration Report of SGS SA for the year ended
31 December 2019, presented on pages 119 to 128.
Report on the Audit of the Consolidated Financial Statements

Responsibility of the Board of Directors
Opinion
The Board of Directors is responsible for the preparation and overall fair presentation of the
We have audited the consolidated financial statements of SGS SA and its subsidiaries
Remuneration Report in accordance with Swiss law and the Ordinance against Excessive
(the Group), which comprise the consolidated balance sheet as at 31 December 2019, and
compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also
the consolidated income statement, consolidated statement of comprehensive income,
responsible for designing the remuneration system and defining individual remuneration
consolidated statement of cash flows, consolidated statement of changes in equity for the
packages.
year then ended and notes to the consolidated financial statements, including a summary of
significant accounting policies.
Auditor's Responsibility
In our opinion the consolidated financial statements (presented on pages 132 to 173) give a
Our responsibility is to express an opinion on the Remuneration Report. We conducted our
true and fair view of the consolidated financial position of the Group as at 31 December
audit in accordance with Swiss Auditing Standards. Those standards require that we comply
2019, its consolidated financial performance and its consolidated cash flows for the year
with ethical requirements and plan and perform the audit to obtain reasonable assurance about
then ended in accordance with International Financial Reporting Standards (IFRS) and
whether sections 4 and 5 of the Remuneration Report comply with Swiss law and articles
comply with Swiss law.
14 – 16 of the Ordinance.

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An audit involves performing procedures to obtain audit evidence on the disclosures made in
Basis for Opinion
the Remuneration Report with regard to compensation, loans and credits in accordance with
We conducted our audit in accordance with Swiss law, International Standards on Auditing
articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment,
(ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and
including the assessment of the risks of material misstatements in the Remuneration Report,
standards are further described in the Auditor’s Responsibilities for the Audit of the
whether due to fraud or error. This audit also includes evaluating the reasonableness of the
Consolidated Financial Statements section of our report. We are independent of the Group
methods applied to value components of remuneration, as well as assessing the overall
in accordance with the provisions of Swiss law and the requirements of the Swiss audit
presentation of the Remuneration Report.
profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Opinion
In our opinion, sections 4 and 5 of the Remuneration Report of SGS SA for the year ended
31 December 2019 comply with Swiss law and articles 14 – 16 of the Ordinance.

Deloitte SA

128

Matthew Sheerin
Licensed Audit Expert
Auditor in Charge

Joëlle Herbette
Licensed Audit Expert

Geneva, 20 February 2020

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

2019 RESULTS

—

SGS Group

SGS SA

Historical Data

Material Operating Companies
and Ultimate Parent

132

182

193

197

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1. SGS GROUP

132

2. SGS SA

182

3. HISTORICAL DATA

193

1.1. Consolidated income statement 132

2.1. Income statement

182

3.1. SGS Group – five-year

statistical data consolidated
income statements

193

3.2. SGS Group – five-year

statistical data consolidated
statements of financial position 194

3.3. SGS Group – five-year
statistical share data

3.4. SGS Group share information

3.5. Closing prices for SGS
and the SMI 2018-2019

195

196

4. MATERIAL OPERATING
COMPANIES AND
ULTIMATE PARENT

197

183

184

185

186

187

188

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1.2. Consolidated statement

2.2. Statement of financial position

of comprehensive income

132

at 31 December

2.3. Notes to financial statements

1. Significant

accounting policies

2. Subsidiaries

3. Corporate bonds

4. Total equity

5. Share capital

6. Financial income and
financial expenses

7. Guarantees and

comfort letters

8. Remuneration

9. Shares and options
held by members of
governing bodies

10. Significant shareholders

11. Approval of financial
statements and
subsequent events

1.3. Consolidated statement
of financial position

1.4. Consolidated statement

of cash flows

1.5. Statement of changes in
consolidated equity

1.6. Notes to consolidated
financial statements

1. Activities of the Group

2. Significant accounting

133

134

135

136

policies and exchange rates 136

3. Business combinations

144

Information by business
and geographical segment 145

5. Revenues from contracts

with customers

147

6. Other operating expenses 148

7. Financial income

8. Financial expenses

9. Taxes

10. Earnings per share

11. Property, plant
and equipment

12. Right-of-use assets

and lease liabilities

13. Goodwill

14. Other intangible assets

148

150

151

152

153

154

15. Other non-current assets 155

16. Trade receivables

17. Other receivables
and prepayments

155

156

18. Cash and cash equivalents 156

19. Cash flow statement

20. Acquisitions

156

157

21. Financial risk management 157

22. Share capital and
treasury shares

23. Loans and other
financial liabilities

162

24. Defined benefit obligations 163

25. Provisions

26. Trade and other payables

27. Contingent liabilities

169

170

28. Equity compensation plans 170

29. Related-party transactions 172

30. Significant shareholders

173

31. Approval of financial
statements and
subsequent events

173

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

1. SGS GROUP

—

1.1. CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER

(CHF million)

REVENUE

Salaries and wages

Subcontractors’ expenses

NOTES

Depreciation, amortization and impairment

11 to 14

Gain on business disposals

Other operating expenses

OPERATING INCOME (EBIT)1

Financial income

Financial expenses

Share of profit/(losses) of associates and joint ventures

PROFIT BEFORE TAXES

Taxes

PROFIT FOR THE YEAR

Profit attributable to:

Equity holders of SGS SA

Non-controlling interests

BASIC EARNINGS PER SHARE (IN CHF)

DILUTED EARNINGS PER SHARE (IN CHF)

1. Refer to note 4 for analysis of non-recurring items.

1.2. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 DECEMBER

(CHF million)

Actuarial (losses)/gains on defined benefit plans

Income tax benefit on actuarial (losses)/gains

Items that will not be subsequently reclassified to income statement

Exchange differences and other1

Items that may be subsequently reclassified to income statement

NOTES

OTHER COMPREHENSIVE LOSS FOR THE YEAR

Profit for the year

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Attributable to:

Equity holders of SGS SA

Non-controlling interests

2019

6 600

(3 357)

(386)

(548)

268

(1 495)

1 082

(79)

(4)

1 017

(315)

702

660

87.45

87.18

2019

(18)

(12)

(68)

(80)

702

622

584

2018

6 706

(3 422)

(387)

(317)

(1 634)

946

(58)

908

(218)

690

643

84.54

84.32

2018

(153)

(146)

690

544

501

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1
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2

1. In 2019, exchange differences and other include net exchange loss of CHF 6 million on long-term loans treated as net investment in a foreign

entity according to IAS 21 (2018: loss of CHF 20 million).

< BACK TO CONTENTS

1.3. CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER

(CHF million)

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

Right-of-use assets

Goodwill

Other intangible assets

Investments in joint ventures, associates and other companies

Deferred tax assets

Other non-current assets

TOTAL NON-CURRENT ASSETS

CURRENT ASSETS

Inventories

Unbilled revenues and work in progress

Trade receivables

Other receivables and prepayments

Current tax assets

Marketable securities

Cash and cash equivalents

TOTAL CURRENT ASSETS

TOTAL ASSETS

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Share capital

Reserves

Treasury shares

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF SGS SA

Non-controlling interests

TOTAL EQUITY

NON-CURRENT LIABILITIES

Loans and other financial liabilities

Lease liabilities

Deferred tax liabilities

Defined benefit obligations

Provisions

TOTAL NON-CURRENT LIABILITIES

CURRENT LIABILITIES

Loans and other financial liabilities

Lease liabilities

Trade and other payables

Provisions

Current tax liabilities

Contract liabilities

Other creditors and accruals

TOTAL CURRENT LIABILITIES

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

1. Reclassification of 2018 figures (see note 2)

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132

NOTES

2019

20181

926

611

1 281

187

174

149

3 363

195

953

219

1 466

2 964

6 327

1 536

(30)

1 514

1 595

2 199

490

151

2 954

154

638

145

155

574

1 778

4 732

6 327

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133

969

1 224

202

203

133

2 767

226

969

214

1 743

3 301

6 068

1 851

(191)

1 668

1 743

2 110

119

2 350

412

685

127

112

618

1 975

4 325

6 068

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

1.4. CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED 31 DECEMBER

(CHF million)

Profit for the year

Non-cash and non-operating items

(Increase)/decrease in working capital

Taxes paid

CASH FLOW FROM OPERATING ACTIVITIES

Purchase of property, plant and equipment and other intangible assets

Acquisition of businesses

Proceeds from disposal of businesses

Increase in other non-current assets

Increase in investments in joint ventures, associates and other companies

Interest received

Disposal of property, plant and equipment and other intangible assets

CASH FLOW USED BY INVESTING ACTIVITIES

Dividends paid to equity holders of SGS SA

Dividends paid to non-controlling interests

Transaction with non-controlling interests

Cash received on treasury shares

Cash paid on treasury shares

(Payment)/proceeds of corporate bonds

Interest paid

Payment of lease liabilities

CASH FLOW USED BY FINANCING ACTIVITIES

Currency translation

(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

(Decrease)/increase in cash and cash equivalents

CASH AND CASH EQUIVALENTS AT END OF YEAR

NOTES

19.1

19.2

2019

702

756

(3)

(306)

1 149

(290)

(169)

333

(2)

(4)

(100)

(589)

(43)

(12)

(23)

(375)

(87)

(174)

(1 303)

(23)

(277)

1 743

(277)

1 466

2018

690

554

(265)

1 074

(304)

(45)

(9)

(314)

(573)

(43)

(2)

(183)

401

(60)

(370)

(30)

360

1 383

360

1 743

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N
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1.5. STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
FOR THE YEARS ENDED 31 DECEMBER

(CHF million)

SHARE
CAPITAL

TREASURY
SHARES

CAPITAL
RESERVE

CUMULATIVE
TRANSLATION
ADJUSTMENTS

ATTRIBUTABLE TO

CUMULATIVE
GAINS/LOSSES
ON DEFINED
BENEFIT
PLANS 1

RETAINED
EARNINGS
AND
GROUP
RESERVES

EQUITY
HOLDERS
OF SGS SA

NON-
CONTROLLING
INTERESTS

TOTAL
EQUITY

BALANCE AT 1 JANUARY 2018

(125)

161

Profit for the year

Other comprehensive income
for the year

Total comprehensive income
for the year

Dividends paid

Share-based payments

Movement in
non-controlling interests

Movement on treasury shares

BALANCE AT 31 DECEMBER 2018

BALANCE AT 1 JANUARY 2019

IFRS 16 adjustments2

IFRIC 23 adjustments2

BALANCE AT 1 JANUARY 2019
RESTATED

Profit for the year

Other comprehensive income
for the year

Total comprehensive income
for the year

Dividends paid

Share-based payments

Movement in
non-controlling interests

Movement on
treasury shares

(66)

(191)

(45)

129

2 949

643

1 832

643

1 914

690

(142)

(4)

(146)

643

501

544

(573)

(43)

(616)

(915)

(149)

(246)

(2)

(113)

1 668

(1 064)

(239)

3 025

(191)

129

(1 064)

(239)

3 025

1 668

(27)

(40)

(27)

(40)

(191)

129

(1 064)

(239)

2 958

1 601

1 675

161

(64)

660

702

(12)

(76)

(4)

(80)

(12)

660

584

622

(589)

(43)

(632)

(102)

(90)

(158)

(7)

(113)

1 743

(1)

1 743

(28)

(40)

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BALANCE AT 31 DECEMBER 2019

(30)

146

(1 128)

(251)

2 769

1 514

1 595

1. Net of tax.

2. See note 2

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

1.6. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACTIVITIES OF THE GROUP

SGS SA and its subsidiaries (the “Group”) operate around the world under the name SGS. The head office of the Group is located
in Geneva, Switzerland.

SGS is the global leader in inspection, verification, testing and certification services supporting international trade in agriculture,
minerals, petroleum and consumer products. It also provides these services to governments, international institutions and customers
engaged in the industrial, environmental and life science sectors.

2. SIGNIFICANT ACCOUNTING POLICIES AND EXCHANGE RATES

BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The consolidated financial statements of the Group are stated in millions of Swiss Francs (CHF million). They are prepared
from the financial statements of the individual companies within the Group with all significant companies having a year-end
of 31 December 2019. The consolidated financial statements comply with the accounting and reporting requirements of the
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and Swiss law.

The accounting conventions and accounting policies are the same as those applied in the 2018 consolidated financial statements,
except for the Group’s adoption of new IFRSs effective 1 January 2019.

The financial statements are prepared on an accruals basis and under the historical cost convention, modified as required for
the revaluation of certain financial instruments.

STATEMENT OF FINANCIAL POSITION RECLASSIFICATION

December 2018 figures published have been changed to reclassify CHF 34 million from trade and other payables (CHF 24 million)
and Provisions and other current liabilities (CHF 10 million) to Loans, lease liabilities and other financial liabilities to align with
the 2019 presentation.

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS

The following standards have been adopted as of 1 January 2019.

• IFRS 16 Leases sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires

lessees to account for most leases under a single on-balance sheet model. The Group has adopted IFRS 16 retrospectively with
the cumulative effect in the opening equity as of 1 January 2019. Therefore comparative information has not been restated and
is presented under IAS 17. The Group elected to use the practical expedient that permits an entity not to reassess whether a
contract is, or contains, a lease at the date of initial application (grandfathering). The Group also elected to use the recognition
exemptions for lease contracts, which at the commencement date, have a lease term of 12 months or less and do not contain
a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value.

• IFRIC 23 Interpretation on uncertainty over income tax treatment addresses the accounting for income taxes when tax

treatments involve uncertainty that affects the application of IAS 12 Income Taxes. The Group reviewed uncertain tax positions
applying the requirements of the interpretation to assume that a taxation authority will examine amounts it has a right to
examine and have full knowledge of all related information when making those examinations. The Group elected to apply this
interpretation restrospectively with the cumulative effect of initially applying the interpretation as an adjustment to the opening
equity as of 1 January 2019.

The following table summarizes the impact of the adoption of IFRS 16 and IFRIC 23 as of 1 January 2019 on the statement of
financial position (increase/(decrease)).

(CHF million)

Right-of-use assets

Deferred tax assets

Other receivables and prepayments

TOTAL ASSETS

Equity holders of SGS SA

Non-controlling interests

TOTAL EQUITY

Lease liabilities (non-current)

Provisions (non-current)

Lease liabilities (current)

Loans and other financial liabilities (current)

Current tax liabilities

TOTAL LIABILITIES

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NOTES

IFRS 16 ADJUSTMENT

IFRIC 23 ADJUSTMENT

685

(8)

686

(27)

(1)

(28)

551

162

(1)

714

(40)

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The following table reconciles the operating lease for the year ended 31 December 2018 and the lease liabilities recognized as of
1 January 2019.

(CHF million)

FUTURE MINIMUM LEASE PAYMENTS AT 31 DECEMBER 2018

Optional extension periods not disclosed and termination options considered at 31 December 2018

Exemption of commitments for short-term leases

Exemption of commitments for leases of low value assets

Undiscounted future lease payments from operating leases

Effect of discounting at a weighted average incremental borrowing rate of 3.53%

Addition of lease liabilities at 1 January 2019

Former IAS 17 finance lease liabilities

LEASE LIABILITIES AT 1 JANUARY 2019

573

173

(5)

(2)

739

(26)

713

715

There are no other IFRS standards or interpretations which are not yet effective and which would be expected to have a material
impact on the Group.

BASIS OF CONSOLIDATION

SUBSIDIARIES

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The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Group.
Control is achieved when the Group:

• has power over the investee;

• is exposed, or has the right, to variable return from its involvement with the investee; and

• has the ability to use its power to affect its return.

The Company reassesses whether or not the Group controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary.

The principal operating companies of the Group are listed on pages 197–200.

NON-CONTROLLING INTERESTS

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Initally they are measured
at the non-contolling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. Subsequently
to the acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus
the non-controlling interests’ share of subsequent changes in equity.

ASSOCIATES

Associates are entities over which the Group has significant influence but no control or joint control over the financial and operating
policies. The consolidated financial statements include the Group’s share of the earnings of associates on an equity accounting
basis from the date that significant influence commences until the date that significant influence ceases.

JOINT VENTURES

A joint venture is a contractual arrangement over which the Group exercises joint control with partners and where the parties
have rights to the net assets of the arrangement. The consolidated financial statements include the Group’s share of the earnings
and net assets on an equity accounting basis of joint ventures that it does not control, effective from the date that joint control
commences until the date that joint control ceases.

JOINT OPERATIONS

A joint operation is an arrangement whereby the parties that have joint control have separable specific rights to the assets and
the liabilities within the arrangement. When a Group entity undertakes its activities under joint operations, the Group as a joint
operator recognizes in relation to its interest in a joint operation:

• its assets, including its share of any assets held jointly;

• its liabilities, including its share of any liabilities incurred jointly;

• its revenue from the sale of its share of the output arising from the joint operation;

• its share of the revenue from the sale of the output by the joint operation; and

• its expenses, including its share of any expenses incurred jointly.

INVESTMENTS IN COMPANIES NOT ACCOUNTED FOR AS SUBSIDIARIES, ASSOCIATES OR JOINTLY CONTROLLED ENTITIES

Investments in companies not accounted for as subsidiaries, associates or jointly controlled entities (normally below 20% shareholding
levels) are stated at fair value through profit and loss. Dividends received from these investments are included in financial income.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

TRANSACTIONS ELIMINATED ON CONSOLIDATION

All intra-Group balances and transactions, and any unrealized gains and losses arising from intra-Group transactions, are eliminated
in preparing the consolidated financial statements. Unrealized gains and losses arising from transactions with associates and jointly
controlled entities are eliminated to the extent of the Group’s interest in those entities.

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate prevailing at that
date. Exchange differences arising on the settlement of monetary items or on reporting monetary items at rates different from those
at which they were initially recorded during the period or in previous financial statements, are recognized in the income statement.

CONSOLIDATION OF FOREIGN COMPANIES

All assets and liabilities of foreign companies that are consolidated are translated using the exchange rates in effect at the balance
sheet date. Income and expenses are translated at the average exchange rate for the year. Translation differences resulting from
the application of this method are recognized in other comprehensive income and reclassified to profit or loss on disposal. Average
exchange rates are used to translate the cash flows of foreign subsidiaries in preparing the consolidated statement of cash flows.

REVENUE RECOGNITION

IFRS 15 Revenue from Contracts with Customers establishes a five-step model to account for revenue arising from contracts with
customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled
in exchange for transferring services to a customer. The standard requires entities to exercise judgement, taking into consideration all
of the relevant facts and circumstances when applying each step of the model to contracts with their customers.

The Group recognizes revenue based on two main models: services transferred at a point in time and services transferred over time.

• The majority of SGS’ revenue is transferred at a point in time and recognized upon completion of performance obligations and

measured according to the transaction price agreed in the contract. Once services are rendered, e.g. a report issued, the client
is invoiced and payment is due.

• Services transferred over time mainly concern long-term contracts, where revenue is recognized based on the measure of

progress. When the Group has a right to consideration from a customer at the amount corresponding directly to the customer’s
value of the performance completed to date, the Group recognizes revenue in the amount to which it has a right to invoice.
In all other situations, the measure of progress is either based on observable output methods (usually the number of tests
or inspection performed) or based on input methods such as the time incurred to date relative to the total expected hours
to the satisfaction of the performance obligation. These contracts invoices are usually issued per contractually agreed
instalments and prices. Payments are due upon invoicing.

SEGMENT INFORMATION

The Group reports its operations by business segment, according to the nature of the services provided.

The Group operates in nine business segments. The Chief Operating Decision Maker evaluates segment performance and allocates
resources based on several factors, of which revenue, adjusted operating income and return on capital are the main criteria.

For the Group, the Chief Operating Decision Maker is the Senior Management, which is composed of the Chief Executive Officer,
the Chief Financial Officer and the General Counsel.

All segment revenues reported are from external customers. Segment revenue and operating income are attributed to countries based
on the location in which the services are rendered.

Capital additions represent the total cost incurred to acquire land, buildings and equipment as well as other intangible assets.

PROPERTY, PLANT AND EQUIPMENT

Land is stated at historical cost and is not depreciated. Buildings and equipment are stated at historical cost less accumulated
depreciation. Subsequent expenditures are capitalized only if they increase the future economic benefits embodied in the related
item of property and equipment. All other expenditures are expensed as incurred. Depreciation is calculated on a straight-line basis
over the estimated useful life of the assets as follows:

• Buildings 12–40 years

• Machinery and equipment 3–10 years

• Other tangible assets 3–10 years

RIGHT-OF USE ASSETS

The Group recognizes right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses. They are adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred and lease payments made at or
before the commencement date, less any lease incentives received. Unless the Group is reasonably certain to obtain ownership
of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over
the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

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N
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A
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LEASE LIABILITIES

At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The Group elected
to use the practical expedient to account for each lease component and any non-lease components as a single lease component.
The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate.

In the case that the implicit rate cannot be readily determined, the Group uses an incremental borrowing rate considering the country and
the lease duration. The rate is estimated by the combination of the reference rate, the financing spread and any asset specific adjustment
when required.

After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. Subsequently, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease
term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The Group
applies the short-term lease and low value recognition exemptions. Lease payments on short-term leases and leases of low-value
assets are recognized as expenses on a straight-line basis over the lease term.

OPERATING LEASES POLICY APPLICABLE PRIOR 1 JANUARY 2019

Previously to the adoption of IFRS 16 leases, the Group was applying IAS 17 Leases.

Lease contracts where the lessor was retaining substantially all the risks and rewards of ownership of the assets were classified
as operating leases and were expensed on a straight-line basis over the lease term.

GOODWILL

In the case of acquisitions of businesses, the acquired identifiable assets, liabilities and contingent liabilities are recorded at fair value.
The difference between the purchase price and the fair value is classified as goodwill and recorded in the statement of financial
position as an intangible asset.

Goodwill arising from business combinations is measured at cost less any accumulated impairment losses.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are
adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about
facts and circumstances that existed at the acquisition date that, if known, would have affected amounts recognized at that date.

Goodwill arising on the acquisition of a foreign entity is recorded in the relevant foreign currency and is translated using the end
of period exchange rate.

On disposal of part or all of a business that was previously acquired and which gave rise to the recording of acquisition goodwill,
the relevant amount of goodwill is included in the determination of the gain or loss on disposal.

Goodwill and other intangible assets with indefinite useful lives acquired as part of business combinations are tested for possible
impairment annually and whenever events or changes in circumstances indicate their value may not be fully recoverable.

For the purpose of impairment testing, the Group has adopted a uniform method for assessing goodwill and other intangible assets
recognized under the acquisition method of accounting. These assets are allocated to a cash generating unit or a group of cash
generating units (CGU) which are expected to benefit from the business combination. The recoverable amount of a CGU or the
group of CGUs is determined through a value-in-use calculation.

If the value-in-use of the CGU or the group of CGUs is less than the carrying amount of its net operating assets, then a fair value
less costs to sell valuation is also performed with the recoverable amount of the CGU or the group of CGU being the higher of its
value-in-use and the fair value less costs to sell.

The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates, operating margins
and expected changes to selling prices or direct costs during the period. Pre-tax discount rates used are based on the Group’s
weighted average cost of capital, adjusted for specific risks associated with the CGU’s or the group of CGU’s cash flow projections.
The growth rates are based on industry growth forecasts.

Expected changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

For all CGU’s or groups of CGU’s, a value-in-use calculation is performed using cash flow projections covering the next five years.
These cash flows projections take into account the most recent financial results and outlook approved by Management, while the
subsequent five years are extrapolated based on the estimated long-term growth rate for the relevant activity.

If the recoverable amount of the CGU or of the group of CGU is less than the carrying amount of the unit's net operating assets,
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.

Even if the initial accounting for an intangible asset acquired in the reporting period is only provisional, this asset is tested
for impairment in the year of acquisition.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

OTHER INTANGIBLE ASSETS

Intangible assets, including software, licences, trademarks and customer relationships are capitalized and amortized on a straight-line
basis over their estimated useful lives, normally not exceeding 20 years. Indefinite life intangible assets are not amortized but are
subject to an annual impairment test. The following useful lives are used in the calculation of amortization:

• Trademarks 5–20 years

• Customer relationships 2–20 years

• Computer software 1–5 years

Other intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if their fair value can
be measured reliably. Internally generated intangible assets are recognized if the asset created can be identified, it is probable that
future economic benefits will be generated from it, the related development costs can be measured reliably and sufficient financial
resources are available to complete the development. These assets are amortized on a straight-line basis over their useful lives,
which usually do not exceed five years. All other development costs are expensed as incurred.

IMPAIRMENT OF ASSETS EXCLUDING GOODWILL

At each balance sheet date, or whenever there is an indication that an asset may be impaired, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether they have suffered an impairment loss. If indications of
impairment are present, the assets are tested for impairment. If impaired, the carrying value of the asset is reduced to its
recoverable value. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the CGU to which the asset belongs.

The recoverable amount of an asset is the greater of the net realizable value and its value-in-use. In assessing its value-in-use,
the pre-tax estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time-value of money and the risks specific to the asset.

REVERSAL OF IMPAIRMENT LOSSES

Where an impairment loss on assets other than goodwill subsequently reverses, the carrying amount of the asset or CGU is
increased to the revised estimate of its recoverable amount, but not in excess of the carrying amount that would have been
recorded had no impairment loss been recognized. A reversal of an impairment loss is recognized as income immediately.

TRADE RECEIVABLES

Trade receivables are recognized and carried at original invoice amount less an allowance for any non-collectible amounts.
An expected credit loss allowance is made in compliance with the simplified approach using a provision matrix (expected credit
loss model). This provision matrix has been developed to reflect the country risk, the credit risk profile, as well as available historical
data. The Group considers a trade receivable to be credit impaired when one or more detrimental events have occurred such as:

• Significant financial difficulty of the customer; or

• it is becoming probable that the customer will enter bankruptcy or other financial reorganization.

UNBILLED REVENUES AND WORK IN PROGRESS

Unbilled revenues are recognized for services completed but not yet invoiced and are valued at net selling price.

Work in progress is recognized for the partially finished performance obligations under a contract. The measure of progress is
either based on observable output methods or based on input methods. A margin is recognized based on actual costs incurred,
provided that the project is expected to be profitable once completed. Similarly to receivables, an allowance for unbilled revenues
and work in progress is made in compliance with the simplified approach using a provision matrix (expected credit loss model).

MARKETABLE SECURITIES

Marketable securities are recorded in the statement of financial position at fair value through the statement of comprehensive
income and recognized in the income statement at the time of disposal.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash, deposits held with banks and investments in money-market instruments with an original
maturity of three months or less and are subject to an insignificant risk of changes in value. Bank overdrafts are included within
current loans.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from
operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative
financial instruments for trading purposes. Derivatives are accounted for on a mark-to-market basis.

Derivative financial instruments are initially recognized at fair value and subsequently re-measured at fair value at each balance
sheet date. The gains and losses resulting from the fair value re-measurement are recognized in the income statement. The fair
value of forward exchange contracts is determined with reference to market prices at the balance sheet date.

The Group designates and documents certain derivatives as hedging instruments against changes in fair value of recognized assets
and liabilities.

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CORPORATE BONDS

The corporate bonds issued by the Group are measured at amortized cost using the effective interest method, with interest
expense recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through
the expected life of the financial liability to the net carrying amount on initial recognition.

The Group uses financial instruments to economically hedge interest rate risks relating to its corporate bonds. The changes in fair
value of finance instruments are recognized in the income statement.

LIABILITIES RELATED TO PUT OPTIONS GRANTED TO HOLDERS OF NON-CONTROLLING INTERESTS

Written put options in favor of holders of non-controlling interests give rise to the recognition of a financial liability recognized
initially at the present value of the expected cash outflow. The present value is determined by Management’s best estimate of the
cash outflow required to settle the obligation on exercise of the option, discounted by the Group’s cost of debt. The financial liability
is initially recorded with the corresponding entry within equity and in the absence of specific guidance in IFRS, subsequent changes
in the valuation of the liability shall be recognized directly in equity attributable to owners, including the unwinding of the discount.

FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

• Level 1 fair value measurements are those derived from the quoted price in active markets.

• Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset and

liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques as it cannot be derived from publicly available
information. The assumptions and inputs used in the model take into account externally verifiable inputs. However, such
information is by nature subject to uncertainty, particularly where comparable market-based transactions often do not exist.
External valuers are involved for valuation for significant assets and liabilities.

EMPLOYEE BENEFITS

PENSION PLANS

The Group maintains several defined benefit and defined contribution pension plans in accordance with local conditions and
practices in the countries in which it operates. Defined benefit pension plans are based on an employee’s years of service and
remuneration earned during a pre-determined period. Contributions to these plans are normally paid into funds, which are managed
independently of the Group, except in rare cases where there is no legal obligation to fund.

In such cases, the liability is recorded in the Group’s consolidated statement of financial position.

The Group’s obligations towards defined benefit pension plans and the annual cost recognized in the income statement are
determined by independent actuaries using the projected unit credit method. Remeasurement gains and losses are immediately
recognized in the consolidated statement of financial position with the corresponding movement being recorded in the consolidated
statement of comprehensive income.

Past service costs are immediately recognized as an expense. Net interest expense is calculated by applying the discount rate at
the beginning of the period to the net defined benefit liability or asset. The retirement benefit obligation recognized in the statement
of financial position represents the present value of the defined benefit obligation reduced by the fair value of plan assets. Any
asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the
plan. Payments to defined contribution plans are recognized as an expense in the income statement as incurred.

POST-EMPLOYMENT PLANS OTHER THAN PENSIONS

The Group operates some non-pension post-employment defined benefit schemes, mainly healthcare plans. The method of
accounting and the frequency of valuations are similar to those used for defined benefit pension plans.

EQUITY COMPENSATION PLANS

The Group provides additional benefits to certain senior executives and employees through equity compensation plans. An expense
is recognized in the income statement for shares and equity-linked instruments granted to senior executives and employees under
these plans.

TRADE PAYABLES

Trade payables are recognized at amortized cost that approximates the fair value.

PROVISIONS

The Group records provisions when: it has an obligation, legal or constructive, to satisfy a claim; it is probable that an outflow
of Group resources will be required to satisfy the obligation; and a reliable estimate of the amount can be made.

In the case of litigation and claims relating to services rendered, the amount that is ultimately recorded is the result of a complex
process of assessment of a number of variables, and relies on Management’s informed judgement about the circumstances
surrounding the past provision of services. It also relies on expert legal advice and actuarial assessments.

Changes in provisions are reflected in the income statement in the period in which the change occurs.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

CONTRACT LIABILITIES

Contract liabilities arise upon advance payments from clients and issuance of upfront invoices.

RESTRUCTURING COSTS

The Group recognizes costs of restructuring against operating income in the period in which Management has committed to
a formal plan, the costs of which can be reliably estimated, and has raised a valid expectation in those affected that the plan
will be implemented and the related costs incurred. Where appropriate, restructuring costs include impairment charges arising
from the implementation of the formal plan.

CAPITAL MANAGEMENT

Capital comprises equity attributable to equity holders, loans and other financial liabilities, lease liabilities and cash and cash
equivalents.

The Board of Directors’ policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence,
and to sustain the future development of the business. The Board also recommends the level of dividends to be distributed
to ordinary shareholders on an annual basis. The Group maintains sufficient liquidity at the Group and subsidiary level to meet its
working capital requirements, fund capital purchases and small and medium-sized acquisitions.

Treasury shares are intended to be used to cover the Group’s employee equity participation plan, convertible bonds and/or
cancellation of shares. Decisions to buy or sell are made on an individual transaction basis by Management.

There were no changes in the Group’s approach to capital management during the year.

The Group is not subject to any externally imposed capital requirements.

TAXES

Income taxes include all taxes based upon the taxable profits of the Group, including withholding taxes payable on the transfer
of income from Group companies and tax adjustments from prior years. Taxes on income are recognized in the income statement
except to the extent that they relate to items directly charged or credited to equity or other comprehensive income, in which case
the related income tax effect is recognized in equity or other comprehensive income. Provisions of income and withholding taxes
that could arise on the remittance of subsidiary retained earnings are only made where there is a current intention to remit such
earnings. Other taxes not based on income, such as property taxes and capital taxes, are included within operating expenses.

Deferred taxes are provided using the full liability method. They are calculated on all temporary differences that arise between
the tax base of an asset or liability and the carrying values in the consolidated financial statements except for non-tax-deductible
goodwill and for those differences related to investments in subsidiaries where their reversal will not take place in the foreseeable
future. Deferred income tax assets relating to the carry-forward of unused tax losses and tax credits are recognized to the extent
that it is probable that future taxable profits will be available against which they can be used.

Current income tax assets and liabilities are offset when the income taxes are levied by the same taxing authority and where there
is a legally enforceable right of offset. Deferred tax assets and liabilities are determined based on enacted or substantively enacted
tax rates in the respective jurisdictions in which the Group operates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.

EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the Group’s profit by the weighted average number of shares outstanding during
the year, excluding treasury shares. For diluted earnings per share, the weighted average number of shares outstanding is adjusted
assuming conversion of all potential dilutive shares. Group profit is also adjusted to reflect the after-tax impact of conversion.

DIVIDENDS

Dividends are reported as a movement in equity in the period in which they are approved by the shareholders.

TREASURY SHARES

Treasury shares are reported as a deduction to equity. The original cost of treasury shares and the proceeds of any subsequent
sale are recorded as movements in equity.

SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

JUDGEMENTS

In the process of applying the entity’s accounting policies described above, Management has made the following judgements
that have a significant effect on the amounts recognized in the financial statements.

LEGAL AND WARRANTY CLAIMS ON SERVICES RENDERED

The Group is subject to litigation and other claims. Management bases its judgement on the circumstances relating to each
specific event, internal and external legal advice, knowledge of the industries and markets, prevailing commercial terms and legal
precedent, and evaluation of applicable insurance cover where appropriate. The process of estimation is complex, dealing with
uncertainty, requiring the use of informed estimates, actuarial assessment, evaluation of the insurance cover where appropriate
and the judgement of Management. The timing of cash outflows from pending litigation and claims is uncertain since it depends,
in the majority of cases, on the outcome of administrative and legal proceedings. The Group’s legal and warranty claims are
reviewed, at a minimum, on a quarterly basis by a cross-functional representation of Management. Any changes in these estimates
are reflected in the income statement in the period in which the estimates change.

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LEASE TERMINATION OF CONTRACTS WITH RENEWAL AND EXIT OPTIONS

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option
to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.

The Group has the option, for some of its leases to lease the assets for additional terms. The Group applies judgement in evaluating
whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic
incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant
event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew.

USE OF ESTIMATES

The key assumptions concerning the future, and other key sources of estimation at the balance sheet date that may have a risk of
causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

VALUATION OF TRADE RECEIVABLES, UNBILLED REVENUE AND WORK IN PROGRESS

The balances are presented net of expected credit loss allowance. These allowances for potential uncollected amounts are
estimated in compliance with the simplified approach using a provision matrix (expected credit loss model), which has been
developed to reflect the country risk, the credit risk profile, as well as available historical data. In addition, an allowance is estimated
based on individual client analysis when the collection is no longer probable.

IMPAIRMENT OF GOODWILL

The Group determines whether goodwill is impaired at a minimum on an annual basis. This requires identification of CGUs and
an estimation of the value-in-use of the CGUs to which the goodwill is allocated. Estimating the value-in-use requires the Group
to make an estimate of the expected future cash flows from the CGU or group of CGUs that holds the goodwill at a determined
discount rate in order to calculate the present value of those cash flows.

ESTIMATIONS OF EMPLOYEE POST-EMPLOYMENT BENEFITS OBLIGATIONS

The Group maintains several defined benefit pension plans in accordance with local conditions and practices in the countries in
which it operates. The related obligations recognized in the statement of financial position represent the present value of the
defined benefit obligations calculated annually by independent actuaries. These actuarial valuations include assumptions such
as discount rates, salary progression rates and mortality rates. These actuarial assumptions vary according to the local prevailing
economic and social conditions.

INCOME TAXES

The Group is subject to income taxes in numerous jurisdictions. There are many transactions and calculations for which the ultimate
tax determination is uncertain.

In assessing how an uncertain tax treatment may affect the determination of the taxable profit (tax loss), the Group assumes that
a taxation authority will examine amounts and have full knowledge of all related information.

If the Group concludes it is not probable that a taxation authority will accept a particular tax treatment, the Group reflects the effect
of each uncertainty in determining the taxable profit (tax loss) by using one of the following methods:

• the single most likely amount

• the sum of probability-weighted amount in a range of possible outcomes.

The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due,
including estimated interest and penalties where appropriate. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities
in the period in which such determination is made.

EXCHANGE RATES

The most significant currencies for the Group were translated at the following exchange rates into Swiss Francs:

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STATEMENT OF FINANCIAL POSITION
YEAR-END RATES

INCOME STATEMENT
ANNUAL AVERAGE RATES

2019

68.02

24.07

74.47

0.13

13.93

109.03

127.49

1.58

3.24

97.35

2018

69.51

25.44

72.41

0.14

14.35

112.91

124.67

1.42

3.22

98.55

2019

69.11

25.24

74.89

0.14

14.40

111.29

126.88

1.54

3.22

99.38

2018

73.14

26.94

75.53

0.15

14.81

115.54

130.61

1.57

3.25

97.84

100

Australia

Brazil

Canada

Chile

China

Eurozone

AUD

BRL

CAD

CLP

CNY

EUR

United Kingdom GBP

Russia

Taiwan

USA

RUB

TWD

USD

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

3. BUSINESS COMBINATIONS

The following business combinations occurred during 2019 and 2018:

BUSINESS COMBINATIONS 2019

In 2019, the Group completed 11 business combinations for a total purchase price of CHF 185 million (note 20).

• 60% of LeanSis Productividad, a company providing operational and manufacturing training as well as capacity building services

in Spain (effective 21 January 2019).

• 100% of Floriaan B.V., providing fire safety services to industrial and real estate companies in the Netherlands (effective

5 February 2019).

• 100% of Testing, Engineering and Consulting Services, Inc., a leading independent testing, engineering and consulting services

laboratory in the USA (effective 4 April 2019).

• 97.54% of PT WLN Indonesia, a leading provider of water, soil and air testing services in Indonesia (effective 12 April 2019).

• 100% of Chemical Solutions Ltd, a nationally recognized testing laboratory specializing in element and heavy metal testing for food,

nutraceuticals, pharmaceutical and cosmetic products in the USA (effective 3 May 2019).

• 100% of i2i Infinity Ltd, a company providing customs compliance services to exporters and chambers of commerce with the help

of innovative proprietary software solutions in the United Kingdom (effective 12 June 2019).

• 60% of Maine Pointe LLC, a supply chain and operations consulting firm delivering business process optimization and

improvement in the USA (effective 28 June 2019).

• 100% of DMW Environmental Safety LTD, a leading provider of health and safety solutions, including asbestos, building compliance

and water hygiene services amongst others, based in the United Kingdom (effective 22 July 2019).

• 100% of Forensic Analytical Laboratoris, Inc., one of the leading providers of industrial hygiene, mold, bacteria, metals, particles,

contamination control and asbestos testing, based in USA (effective 16 July 2019).

• 70% of ARGUS International a provider of data-driven inspection, audit, safety and compliance solution to the global aviation market,

based in USA (effective 24 September 2019).

• 100% of Personal protective equipment testing and certification activities of the Finnish Institute of Occupational Health, based in

Finland (effective 1 October 2019).

These companies were acquired for an equivalent of CHF 185 million and the total goodwill generated on these transactions
amounted to CHF 142 million (note 20).

All the above transactions contributed in total CHF 66 million in revenues and CHF 12 million in operating income. Had all acquisitions
been effective 1 January 2019, the revenues for the period would have been CHF 116 million and the Group operating income for
the period would have been CHF 20 million.

Maine Pointe LLC has contributed to the diversification of Certification and Business Enhancement (CBE) business portfolio and
contributed CHF 32 million in revenues and CHF 6 million in operating income. Had Maine Pointe LLC been acquired effective
1 January 2019, the revenue would have been CHF 64 million and the operating income would have been CHF 12 million.

None of the goodwill arising on these acquisitions except Maine Pointe LLC is expected to be tax deductible.

DIVESTMENTS 2019

The Group disposed of Petroleum Services Corporation (PSC), a provider of downstream Plant and Termination Operations for
a total cash consideration of CHF 333 million, generating a gain on disposal of CHF 268 million.

BUSINESS COMBINATIONS 2018

In 2018, the Group completed 8 business combinations for a total purchase price of CHF 61 million.

• 100% of Vanguard Science Inc., a leading provider of food safety testing services in the areas of product testing, research

and development and food safety consultation, based in the USA (effective 9 January 2018).

• 100% of Laboratoire de Contrôle et d’Analyse, offering chemical and microbiological testing and consultancy services

to pharmaceutical companies, based in Belgium (effective 11 January 2018).

• 100% of TraitGenetics GmbH, providing services across a wide variety of crops to international clients in the plant breeding

industry and for academic research, based in Germany (effective 2 February 2018).

• 100% of SIT Skin Investigation and Technology Hamburg GmbH, based in Germany, providing applied dermatological research

and studies for the cosmetics and personal care industries (effective 12 February 2018).

• 100% of Oleotest NV a Belgium based company, providing chemical testing services in food, feed and agricultural commodities

(effective 5 April 2018).

• 100% of Polymer Solutions Inc., an independent materials testing laboratory specializing in polymer science, based in the USA

(effective 5 June 2018).

• 60% of Advanced Metrology Solutions S.L., a Spain-based company specializing in 3D metrology precision services and highly

technical inspection measurement processes (effective 11 June 2018).

• 100% of Inter-Basic Resources, Inc., a leading provider of testing and verification of air and fluid filtration performance based

in the USA and the UK (effective 18 October 2018).

These companies were acquired for an equivalent of CHF 61 million and the total goodwill generated on these transactions amounted
to CHF 38 million (note 20).

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All the above transactions contributed in total CHF 27 million in revenues and CHF 4 million in operating income. Had all acquisitions
been effective 1 January 2018, the revenues for the period would have been CHF 35 million and the Group operating income for
the period would have been CHF 5 million. None of the goodwill arising on these acquisitions is expected to be tax deductible.

There were no significant disposals in 2018.

4. INFORMATION BY BUSINESS AND GEOGRAPHICAL SEGMENT

The information presented is disclosed by business line and focuses on revenue, operating income, capital expenditures and employee
numbers because these are the performance measures used by the Chief Operating Decision Maker to assess segment performance.

ANALYSIS OF OPERATING INCOME

(CHF million)

ADJUSTED OPERATING INCOME

Amortization and impairment of acquired intangibles
Restructuring costs
Goodwill impairment
Other non-recurring items1

OPERATING INCOME

2019

1 063
(36)
(89)
(21)
165
1 082

2018

1 050
(30)
(19)
-
(55)
946

1. 2019 includes a gain of CHF 259 million, net of transaction costs, on the disposal of Petroleum Service Corporation (PSC) business in the USA,
partially offset by tax provisions of CHF 33 million, impairment of fixed and intangible assets of CHF 24 million and the remeasurement of the
defined benefit obligation of the Swiss pension fund of CHF 10 million. 2018 includes the provision for cumulative overstated revenues in Brazil
reported prior to 2018 of CHF 47 million.

ANALYSIS OF REVENUE AND OPERATING INCOME

(CHF million)

2019
AFL
MIN
OGC
CRS
CBE
IND
EHS
TRP
GIS
TOTAL

ADJUSTED
OPERATING
INCOME

AMORTIZATION
OF ACQUISITION
INTANGIBLES

REVENUE

RESTRUCTURING
COSTS

GOODWILL
IMPAIRMENT

OTHER NON-
RECURRING
ITEMS

OPERATING
INCOME
BY BUSINESS

1 074
753
1 075
1 021
447
930
540
500
260
6 600

172
128
120
262
91
112
67
66
45
1 063

(3)
(1)
(4)
(3)
(6)
(10)
(4)
(5)
-
(36)

(13)
(14)
(15)
(8)
(5)
(15)
(5)
(11)
(3)
(89)

-
-
-
-
-
(21)
-
-
-
(21)

(13)
(8)
236
(10)
(8)
(12)
(6)
(9)
(5)
165

143
105
337
241
72
54
52
41
37
1 082

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SEGMENT INFORMATION RESTATEMENT

The social Audit was transferred effective as of 1 January 2019, from Consumer and Retail Service (CRS) to Certification and
Business Enhancement (CBE). The previously reported 2018 segment disclosures have therefore been restated to reflect this
change in organizational structures, impacting revenue and adjusted operating income by an amount of CHF 38 million and
CHF 10 million respectively.

(CHF million)

REVENUE

ADJUSTED
OPERATING
INCOME

AMORTIZATION
OF ACQUISITION
INTANGIBLES

RESTRUCTURING
COSTS

OTHER NON-
RECURRING
ITEMS

OPERATING
INCOME
BY BUSINESS

2018
AFL
MIN
OGC
CRS
CBE
IND
EHS
TRP
GIS
TOTAL

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1 063
750
1 220
987
404
940
517
541
284
6 706

171
121
116
257
80
84
57
83
81
1 050

(4)
(1)
(2)
(3)
-
(8)
(4)
(7)
(1)
(30)

(2)
(2)
(3)
(1)
(1)
(8)
(1)
(1)
-
(19)

(3)
-
-
(2)
-
(46)
(2)
(2)
-
(55)

162
118
111
251
79
22
50
73
80
946

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

RESTRUCTURING COSTS

The Group incurred a pre-tax restructuring charge of CHF 89 million (2018: CHF 19 million). This comprised personnel
reorganization of CHF 67 million (2018: CHF 15 million) as well as fixed asset impairment and other charges of CHF 22 million
(2018: CHF 4 million).

REVENUE FROM EXTERNAL CUSTOMERS BY GEOGRAPHICAL SEGMENT

(CHF million)

Europe/Africa/Middle East

Americas

Asia Pacific

TOTAL

2019

2 894

1 579

2 127

6 600

43.9

23.9

32.2

100.0

2018

2 949

1 692

2 065

6 706

44.0

25.2

30.8

100.0

Revenue in Switzerland from external customers for 2019 amounted to CHF 177 million (2018: CHF 189 million). No country
represented more than 15% of revenues from external customers in 2019 or 2018.

MAJOR CUSTOMER INFORMATION

In 2019 and 2018, no external customer represented 5% or more of the Group’s total revenue.

SPECIFIC NON-CURRENT ASSETS BY GEOGRAPHICAL SEGMENT

Specific non-current assets directly attributable to geographical segment mainly include property, land and equipment, right-of-use
assets, goodwill and other intangible assets:

(CHF million)

Europe/Africa/Middle East

Americas

Asia Pacific

TOTAL SPECIFIC NON-CURRENT ASSETS

2019

1 494

945

656

3 095

48.3

30.5

21.2

100.0

2018

1 259

754

470

2 483

Specific non-current assets in Switzerland for 2019 amounted to CHF 131 million (2018: CHF 140 million).

RECONCILIATION WITH TOTAL NON-CURRENT ASSETS

(CHF million)

Specific non-current assets as above

Deferred tax assets

Retirement benefit assets

Non-current loans to third parties

TOTAL

CAPITAL ADDITIONS BY BUSINESS SEGMENT

(CHF million)

AFL

MIN

OGC

CRS

CBE

IND

EHS

TRP

GIS

TOTAL

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2019

3 095

174

3 363

2018

304

2019

290

15.9%

12.4%

16.6%

22.4%

1.7%

8.6%

7.9%

10.7%

3.8%

100.0%

50.7

30.4

18.9

100.0

2018

2 483

203

2 767

16.0

12.9

16.0

19.6

1.6

10.0

7.3

12.2

4.4

100.0

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AVERAGE NUMBER OF EMPLOYEES BY GEOGRAPHICAL SEGMENT

(Average number of employees)

Europe/Africa/Middle East

Americas

Asia Pacific

TOTAL

Number of employees at year end

2019

37 946

21 863

34 685

94 494

92 661

5. REVENUES FROM CONTRACTS WITH CUSTOMERS

TIMING OF REVENUE RECOGNITION

(CHF million)

SERVICES
TRANSFERRED AT
A POINT IN TIME

SERVICES
TRANSFERRED
OVER TIME

SERVICES
TRANSFERRED AT
A POINT IN TIME

SERVICES
TRANSFERRED
OVER TIME

2019

2018

AFL

MIN

OGC

CRS

CBE

IND

EHS

TRP

GIS

TOTAL

85%

69%

68%

85%

97%

56%

77%

83%

94%

77%

15%

31%

32%

15%

44%

23%

17%

23%

100%

85%

65%

62%

86%

96%

55%

77%

81%

89%

74%

ASSETS AND LIABILITIES RELATED TO CONTRACTS WITH CUSTOMERS

(CHF million)

Unbilled revenue and work in progress

Trade receivables

Contract liabilities

15%

35%

38%

14%

45%

23%

19%

11%

26%

2019

195

953

155

2018

39 334

24 003

33 155

96 492

97 368

100%

2018

226

969

112

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147

Revenue evolution, timing and project maturity are the main factors impacting assets and liabilities related to contracts with
customers. In 2019, SGS recognized revenue of CHF 81 million related to contract liabilities at 31 December 2018. In 2018,
the revenue recognized from contract liabilities at 31 December 2017 amounted to CHF 80 million. Revenue recognized from
performance obligations satisfied in previous periods were immaterial in 2019 and 2018.

The remaining performance obligations (unsatisfied or partially satisfied) expected to be recognized in more than a year is
CHF 853 million at 31 December 2019 of which CHF 441 million are expected to be recognized in revenue within one year.

SGS is applying the practical expedient IFRS 15.121 and does not disclose unsatisfied or partially unsatisfied performance
obligations from contracts with an original duration of one year or less or where SGS may recognize revenue from the satisfaction
of the performance obligation in accordance with IFRS 15.B16. This paragraph permits as a practical expedient to exclude contracts
where SGS has a right to payment for performance completed to date.

Assets recognized from costs to fulfill a contract in 2019 were not significant, while amortization and impairment losses were nil.

146

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

6. OTHER OPERATING EXPENSES

(CHF million)

Consumables, repairs and maintenance

Travel costs

Rental expense, insurance, utilities and sundry supplies

External consultancy fees

IT expenses

Communication costs

Allowance for expected credit losses

(Gain)/losses on disposal of property, plant and equipment

Miscellaneous operating expenses

TOTAL

2019

490

362

161

104

(2)

162

1 495

2018

496

414

308

105

(16)

157

1 634

The Group adopted IFRS 16 retrospectively with the cumulative effect in the opening equity as of 1 January 2019. Previoulsy
the Group was appyling IAS 17. Therefore, 2018 lease expenses were included in travel costs and rental expense.

7. FINANCIAL INCOME

(CHF million)

Interest income

Foreign exchange gains/(losses)

Other financial income

TOTAL

8. FINANCIAL EXPENSES

(CHF million)

Interest expense1

Loss on derivatives at fair value

Other financial expenses

Net financial expenses on defined benefit plans

TOTAL

1. Includes for 2019 CHF 25 million of lease liabilities interest expense (see Note 12)

9. TAXES

MAJOR COMPONENTS OF TAX EXPENSE

(CHF million)

Current taxes

Deferred tax (credit)/expense relating to the origination and reversal
of temporary differences

TOTAL

2019

299

315

S
T
L
U
S
E
R
9
1
0
2

148

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

2018

251

(33)

218

The Group has operations in various countries that have different tax laws and rates. Consequently, the effective tax rate on
consolidated income varies from year to year. A reconciliation between the reported income tax expense and the amount that
would arise using the weighted average statutory tax rate of the Group is as follows:

< BACK TO CONTENTS

RECONCILIATION OF TAX EXPENSE

(CHF million)

Profit before taxes
Tax at statutory rates applicable to the profits earned in the country concerned
Tax effect of non-deductible or non-taxable items
Tax charge from/(usage of) unrecognized tax losses
Non-creditable foreign withholding taxes
Other
TAX CHARGE

DEFERRED TAX AFTER NETTING

(CHF million)

Deferred tax assets
Deferred tax liabilities
TOTAL

2019

1 017
205
21
34
34
21
315

2019

174
(23)
151

2018

908
154
19
2
34
9
218

2018

203
(30)
173

COMPONENTS OF DEFERRED INCOME TAX BALANCES

(CHF million)

ASSETS

LIABILITIES

ASSETS

LIABILITIES

2019

2018

Right of use assets
Fixed assets
Trade receivable, unbilled revenues and work in progress
Defined benefit obligation
Provisions and other
Lease liabilities
Intangible assets
Tax losses carried forward
DEFERRED INCOME TAXES

-
45
29
22
50
137
2
39
324

131
6
7
7
-
-
22
-
173

-
43
37
12
25
-
9
77
203

NET CHANGE IN DEFERRED TAX ASSETS/(LIABILITIES)

(CHF million)

NET DEFERRED INCOME TAX ASSET (LIABILITY) AT 1 JANUARY 2018
IFRS 9 adjustment
Acquisition of subsidiairies
(Charged)/credited to the income statement
(Charged)/credited to other comprehensive income
Exchange differences and other
NET DEFERRED INCOME TAX ASSET (LIABILITY) AT 31 DECEMBER 2018
IFRS 16 adjustment
Acquisition of subsidiairies
(Charged)/credited to the income statement
(Charged)/credited to other comprehensive income
Exchange differences and other
NET DEFERRED INCOME TAX ASSET (LIABILITY) AT 31 DECEMBER 2019

-
7
9
-
-
-
14
-
30

TOTAL

123
30
(4)
33
1
(10)
173
9
(2)
(16)
6
(19)
151

The Group has unrecognized tax losses carried forward amounting to CHF 139 million (2018: CHF 38 million), of which none will
expire within the next five years. No tax losses carried forward expired in 2019.

At 31 December 2019, the retained earnings of subsidiaries and foreign incorporated joint ventures consolidated by the Group
include approximately CHF 2 929 million (2018: CHF 2 712 million) of undistributed earnings that may be subject to tax if remitted

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1
0
2

149

148

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

to the parent company. As set out in note 21, the nature of the Group's business requires keeping a significant part of the cash
reserves in the operating units. As a Group policy, no deferred tax is recognized in respect of undistributed earnings until the point
at which the distributable earnings are determined and foreign statutory requirements, allowing the distribution, are fulfilled.
Until that time, the Group takes the view that it is probable that they will not reverse in the foreseeable future.

10. EARNINGS PER SHARE

Basic earnings per share are calculated as follows:

Profit attributable to equity holders of SGS SA (CHF million)

Weighted average number of shares ('000)

BASIC EARNINGS PER SHARE (CHF)

2019

660

7 552

87.45

2018

643

7 607

84.54

Diluted earnings per share are calculated as basic earnings per share except that the weighted average number of shares includes
the dilutive effect of the Group’s equity compensation plans (see note 28):

2019

660

7 575

87.18

2019

660

(115)

666

88.17

87.91

2018

643

7 626

84.32

2018

643

724

95.17

94.92

S
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9
1
0
2

150

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

Profit attributable to equity holders of SGS SA (CHF million)

Diluted weighted average number of shares ('000)

DILUTED EARNINGS PER SHARE (CHF)

Adjusted earnings per share are calculated as follows:

(CHF million)

Profit attributable to equity holders of SGS SA

Amortization of acquired intangibles

Restructuring costs net of tax

Goodwill impairment

Other non-recurring items net of tax

ADJUSTED PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF SGS SA

ADJUSTED BASIC EARNINGS PER SHARE (CHF)

ADJUSTED DILUTED EARNINGS PER SHARE (CHF)

< BACK TO CONTENTS

11. PROPERTY, PLANT AND EQUIPMENT

(CHF million)

2019

COST

At 1 January

Additions

Acquisition of subsidiaries

Disposals

Exchange differences and other

At 31 December

ACCUMULATED DEPRECIATION AND IMPAIRMENT

At 1 January

Depreciation

Impairment

Acquisition of subsidiaries

Disposals

Exchange differences and other

At 31 December

NET BOOK VALUE AT 31 DECEMBER 2019

(CHF million)

2018

COST

At 1 January

Additions

Acquisition of subsidiaries

Disposals

Exchange differences and other

At 31 December

ACCUMULATED DEPRECIATION AND IMPAIRMENT

At 1 January

Depreciation

Impairment

Acquisition of subsidiaries

Disposals

Exchange differences and other

At 31 December

NET BOOK VALUE AT 31 DECEMBER 2018

LAND AND
BUILDINGS

MACHINERY
AND EQUIPMENT

OTHER TANGIBLE
ASSETS

TOTAL

482

(6)

(5)

478

246

(3)

(6)

256

222

2 116

146

(97)

(14)

2 154

1 613

174

(91)

(35)

1 677

477

739

103

(48)

(55)

743

509

(45)

(14)

516

227

3 337

256

(151)

(74)

3 375

2 368

252

(139)

(55)

2 449

926

LAND AND
BUILDINGS

MACHINERY
AND EQUIPMENT

OTHER TANGIBLE
ASSETS

TOTAL

492

(11)

(6)

482

245

(9)

(7)

246

236

2 059

164

(59)

(58)

2 116

1 549

177

(55)

(64)

1 613

503

736

103

(28)

(75)

739

491

(25)

(23)

509

230

3 287

273

(98)

(139)

3 337

2 285

258

(89)

(94)

2 368

969

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151

Included in the other tangible assets are leasehold improvements, office furniture and IT hardware as well as construction-in-
progress assets amounting to CHF 27 million (2018: CHF 18 million).

At 31 December 2019, the Group had commitments of CHF 5 million (2018: CHF 8 million) for the acquisition of land, buildings
and equipment.

150

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

12. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

RIGHT-OF-USE ASSETS

TOTAL

LANDS AND
BUILDING

MACHINERY AND
EQUIPMENT

OTHER TANGIBLE
ASSETS

TOTAL LEASE
LIABILITIES

(CHF million)

AT 1 JANUARY

Additions

Acquisition

Disposal

Depreciation expense

Interest expense

Payment of lease liabilities and interests

Exchange difference and other

AT 31 DECEMBER 2019

Analysed as:

Current liabilities

Non-current liabilities

TOTAL

585

(2)

(133)

(12)

539

(7)

(2)

(3)

(45)

(3)

685

130

(12)

(178)

(17)

611

The following table summarizes the main foreign currencies of the lease liabilities.

(CHF million)

Euro (EUR)

US Dollar (USD)

Renminbi Yuan (CNY)

Taiwan Dollar (TWD)

Australian Dollar (AUD)

Canadian Dollar (CAD)

Indian Rupee (INR)

Morocco Dirham (MAD)

New Zealand dollar (NZD)

Russian Ruble (RUB)

Hong Kong Dollar (HKD)

British Pound Sterling (GBP)

Brazilian Real (BRL)

Korean Won (KRW)

Other

TOTAL

The Group leases mainly offices, laboratory spaces and vehicles. During the year ended 31 December 2019, an additional
CHF 8 million was recognized as an expense in the income statement.

(CHF million)

IFRS 16 OTHER QUANTITATIVE INFORMATION

Expense relating to short-term leases

Expense relating to leases of low value assets

Expense relating to variable lease payments

TOTAL EXPENSE RECOGNIZED IN INCOME STATEMENT

< BACK TO CONTENTS

713

127

(12)

(195)

(14)

644

2019

154

490

644

2019

208

120

102

644

2019

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152

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

13. GOODWILL

(CHF million)

COST

At 1 January

Additions

Consideration on prior years’ acquisitions

Disposal

Impairment

Exchange differences

AT 31 DECEMBER

2019

2018

1 224

142

(5)

(32)

(21)

(27)

1 281

1 238

(52)

1 224

Goodwill recognized by the Group is allocated to Cash Generating Units (CGU) or groups of CGUs for impairment testing purposes
and is annually tested for impairment at the end of each reporting period.

• For the following four business lines, the CGU covers the entire worldwide operations since customer activities executed
by the local entities, the clients and customers that they serve and the drivers of cash inflows are largely interdependent
on a worldwide basis across each business line:

– Consumer and Retail

– Oil, Gas and Chemicals

– Environment, Health and Safety

– Minerals

• The Industrial business line continues to be driven primarily by regional and local customer activities and therefore to have cash
inflows, which are largely independent from each other. Consequently, a CGU organization by region or by country has been
maintained and goodwill has been allocated to six CGUs.

• The Transportation business is split into two CGUs since customer activities in this business (especially in testing and

engineering activities) are globally interdependent, except for Spain, where regulated activities and related cash inflows represent
almost entirely the whole business and therefore are assessed as a distinct CGU.

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• The Agriculture, Food and Life business is split into three worldwide CGUs to reflect the global nature of customer activities and

153

drivers of cash inflows in each of Agriculture and Food, Clinical Research and Life Science Laboratories.

• One global CGU has been established for the Certification and Business and Enhancement business line regrouping Performance

assessment and Training activities for which drivers of cash inflows are globally interdependent.

ALLOCATION OF GOODWILL TO CGUS OR GROUP OF CGUS

Goodwill allocated to the main CGUs or groups of CGUs, as of 31 December, is broken down as follows:

(CHF million)

AFL

TRP

IND

EHS

MIN

CBE

OGC

CRS

GIS

TOTAL

2019

251

239

191

167

113

104

105

106

1 281

2018

243

247

218

151

113

140

107

1 224

Goodwill impairment reviews have been conducted for all goodwill balances allocated to the CGUs as described above.

The recoverable amount of each of the CGUs, determined based upon a value-in-use calculation, is higher than its carrying
amount. Cash flow projections were used in this calculation, discounted at a pre- tax rate depending on the business activities
and geographic profile of each of the respective CGUs.

In 2019, the Group restructured parts of the Industrial USA business. Consequently, the CGU was reduced to its recoverable
amount, resulting in an impairment charge of CHF 21 million

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152

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

DISCOUNT RATE USED IN 2019 FOR THE MAIN CGUS OR GROUP OF CGUS IMPAIRMENT TESTING

TRP

AFL

IND

EHS

OGC

MIN

CRS

CBE

2019

4.5%–7.7%

5.1%–6.6%

5.2%–8.8%

6.2%

6.6%

8.2%

6.8%

6.2%

The cash flow projections for the first five years were based upon financial plans approved by Group Management, while the
subsequent years assume a long-term growth rate of 1.0% and stable operating margins. The overall assumptions used in
the calculations are consistent with the expected average growth rates of the segments served by the Group.

For all impairment tests, the key assumptions used in the sensitivity analyses were the following:

• Reducing the expected annual revenue growth rates for the first five years by 2.0%

• Reducing the operating margin by 0.25%

• Increasing the discount rate assumption by 1.0%

For all impairment tests, changing the key assumptions retained in the scenario using the sensitivity analyses described above
would not result in any of the carrying amounts exceeding the recoverable amount.

S
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TRADEMARKS
AND OTHER

CUSTOMER
RELATIONSHIPS

INTERNALLY
GENERATED

PURCHASED

TOTAL

154

COMPUTER SOFTWARE
AND OTHER ASSETS

(2)

(4)

(2)

(3)

251

(25)

(5)

238

136

(25)

(2)

137

101

137

158

109

137

313

(19)

(8)

302

266

(12)

(16)

262

778

(46)

(14)

791

576

(39)

(10)

604

187

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

14. OTHER INTANGIBLE ASSETS

(CHF million)

2019

COST

At 1 January

Additions

Acquisition of subsidiaries

Disposals

Exchange differences and other

At 31 December

ACCUMULATED AMORTIZATION AND IMPAIRMENT

At 1 January

Amortization

Impairment

Disposals

Exchange differences and other

At 31 December

NET BOOK VALUE AT 31 DECEMBER 2019

< BACK TO CONTENTS

TRADEMARKS
AND OTHER

CUSTOMER
RELATIONSHIPS

INTERNALLY
GENERATED

PURCHASED

TOTAL

COMPUTER SOFTWARE
AND OTHER ASSETS

(CHF million)

2018

COST

At 1 January

Additions

Acquisition of subsidiaries

Disposals

Exchange differences and other

At 31 December

ACCUMULATED AMORTIZATION AND IMPAIRMENT

At 1 January

Amortization

Impairment

Exchange differences and other

At 31 December

NET BOOK VALUE AT 31 DECEMBER 2018

(4)

(3)

246

(9)

251

117

(5)

136

115

117

137

109

15. OTHER NON-CURRENT ASSETS

(CHF million)

Non-current loans or amounts receivable from third parties

Retirement benefit asset

Other non-current assets

TOTAL

313

(6)

(12)

313

259

(5)

(4)

266

2019

149

757

(6)

(18)

778

535

(5)

(12)

576

202

2018

133

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155

Depending on the nature of the balances, currency and date of maturity, interest rates on long-term balances or loans to third
parties range between 0.0% and 12.97%.

In 2019, other non-current assets included deposits for guarantees and CHF 35 million (2018: CHF 36 million) of restricted cash.
Typical examples of restricted cash are cash deposits for performance bonds, rentals and other operating obligations.

At 31 December 2019 and 2018, the fair value of the Group's other non-current assets approximates their carrying value.

16. TRADE RECEIVABLES

(CHF million)

Trade receivables

Allowance for expected credit losses

TOTAL

The movement of allowance for expected credit losses is analyzed as follows:

(CHF million)

At 1 January

Acquisition of subsidiaries

Increase in allowance recognized in the income statement

Utilizations

Exchange differences

TOTAL AT 31 DECEMBER

< BACK TO CONTENTS

2019

1 162

(209)

953

2019

(196)

(1)

(36)

(209)

2018

1 165

(196)

969

2018

(205)

(11)

(196)

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

17. OTHER RECEIVABLES AND PREPAYMENTS

(CHF million)

Accrued income, prepayments

Derivative assets

Other receivables

TOTAL

2019

138

219

2018

129

214

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties. Other
receivables consist mainly of sales taxes and other taxes recoverable as well as advances to suppliers.

18. CASH AND CASH EQUIVALENTS

(CHF million)

Cash and short-term deposits

Deposits on demand

Short-term loans

TOTAL

19. CASH FLOW STATEMENT

19.1. NON-CASH AND NON-OPERATING ITEMS

(CHF million)

Depreciation of property, land and equipment

Impairment of property, plant and equipment and
other intangible assets

Depreciation/impairment right-of-use asset

Amortization of intangible assets

Impairment of goodwill

Net financial expenses

Increase/(Decrease) in provisions and employee benefits

Share-based payment expenses

Gain on disposals

Share of results from associates and other entities

Taxes

NON-CASH AND NON-OPERATING ITEMS

19.2. (INCREASE)/DECREASE IN WORKING CAPITAL

(CHF million)

Decrease in unbilled revenues and inventories

Increase in trade receivables

(Increase)/Decrease in other receivables and prepayments

(Decrease)/Increase in trade and other payables

Increase in other creditors and accruals

Increase/(Decrease) in other provisions

(INCREASE)/DECREASE IN WORKING CAPITAL

< BACK TO CONTENTS

NOTES

11 and 14

7 and 8

2019

1 425

1 466

2019

252

178

(268)

315

756

2019

(66)

(17)

(5)

(3)

2018

1 702

1 743

S
T
L
U
S
E
R
9
1
0
2

2018

258

156

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

(17)

(15)

218

554

2018

(35)

(3)

20. ACQUISITIONS

ASSETS AND LIABILITIES ARISING FROM ACQUISITIONS

(CHF million)

Property, plant and equipment

Right-of-use assets

Intangible assets

Other long-term assets

Trade receivable

Other current assets

Cash and cash equivalents

Current liabilities

Non-current liabilities

Non-controlling interests

NET ASSETS ACQUIRED

Goodwill

TOTAL PURCHASE PRICE

Acquired cash and cash equivalents

Consideration payable

Payment on prior year acquisitions

NET CASH OUTFLOW ON ACQUISITIONS

FAIR VALUE ON MAINE
POINTE

FAIR VALUE ON OTHER
ACQUISITIONS 2019

TOTAL FAIR VALUE ON
ACQUISITIONS 2019

TOTAL FAIR VALUE ON
ACQUISITIONS 2018

(7)

(20)

116

(14)

102

(12)

(5)

(1)

(10)

(1)

(19)

(5)

(21)

142

185

(24)

(1)

169

(4)

(5)

(4)

(14)

The goodwill arising on these acquisitions relates mainly to the value of expected synergies and the value of the qualified workforce
that do not meet the criteria for recognition as separable intangible assets. Consideration payable relates mainly to environmental
and commercial warranty clauses and the fair value of contingent future earn-out payments.

The Group incurred transaction-related costs of CHF 13 million (2018: CHF 5 million) related to external legal fees, due diligence
expenses and the costs of maintaining an internal acquisition department. These expenses are reported within Other Operating
Expenses in the consolidated income statement.

21. FINANCIAL RISK MANAGEMENT

RISK MANAGEMENT POLICIES AND OBJECTIVES

The Group’s activities expose it primarily to market, credit and liquidity risk. Market risk includes foreign exchange, interest rate
and equity price risks.

The risk management policies and objectives are governed by the Group’s policies approved by the Board of Directors.

The Group’s risk management policies are designed to identify and analyze these risks, to set appropriate risk limits and controls
and to monitor the risk and limits continually by means of reliable and up-to-date administrative and information systems.

The Audit Committee oversees how Management monitors compliance with the Group’s risk management policies. The Audit
Committee is assisted in its oversight role by Internal Audit.

RISK MANAGEMENT ACTIVITIES

The Group uses foreign exchange contracts to manage the Group’s exposure to fluctuations in foreign currency exchange rates.
These activities are carried out in accordance with the Group’s risk management policies and objectives in areas such as
counterparty exposure and economic hedging practices. Counterparties to these agreements are major international financial
institutions with high credit ratings and positions are monitored using market value and sensitivity analyses. The associated credit
risk is therefore limited. These agreements generally include the exchange of one currency for a second currency at a future date.

The following table summarizes foreign exchange contracts outstanding at year end. The notional amount of derivatives
summarized below represents the gross amount of the contracts and includes transactions, which have not yet matured.
Therefore the figures do not reflect the Group’s net exposure at year end. The market value approximates the costs to settle
the outstanding contracts. These market values should not be viewed in isolation but in relation to the market values of the
underlying hedged transactions and the overall reduction in the Group’s exposure to adverse fluctuations in foreign exchange rates.

Currently, the Group has certain exposure to interest and credit risks and no exposure to equity price risk.

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E
R
9
1
0
2

157

156

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

(CHF million)

2019

2018

2019

2018

2019

2018

NOTIONAL AMOUNT

BOOK VALUE

MARKET VALUE

FOREIGN EXCHANGE FORWARD
CONTRACTS

Currency:

Australian Dollar (AUD)

Brazilian Real (BRL)

Canadian Dollar (CAD)

Chilean Peso (CLP)

Chinese Renminbi (CNY)

Colombian Peso (COP)

Euro (EUR)

British Pound Sterling (GBP)

Hong Kong Dollar (HKD)

Indian Rupee (INR)

Japanese Yen (JPY)

Kenyan Shilling (KES)

Korean Won (KRW)

New Zealand Dollar (NZD)

Philippines Peso (PHP)

Polish Zloty (PLN)

Russian Ruble (RUB)

Turkish New Lira (TRY)

US Dollar (USD)

South African Rand (ZAR)

Other

TOTAL

CREDIT RISK MANAGEMENT

(12)

(42)

(36)

(5)

(187)

(2)

(4)

(3)

(8)

(5)

(501)

(21)

(11)

(726)

(14)

(42)

(48)

(7)

(200)

(98)

(2)

(4)

(3)

(7)

(8)

(642)

(27)

(18)

(1 071)

(1)

(2)

(1)

(2)

Credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. It arises principally from
the Group’s commercial activities. Trade receivable, unbilled revenues and work in progress are subject to a policy of active risk
management which focuses on the assessment of country risk, credit limits and approval procedures. Due to its large geographic
base and number of customers, the Group is not exposed to material concentrations of credit risk on its trade receivable, unbilled
revenue and work in progress.

As at 31 December 2019, the Group has unbilled revenue and work in progress of CHF 195 million (2018: CHF 226 million) which is
net of an allowance for expected credit losses of CHF 19 million (2018: CHF 25 million).

Receivables are recognized and carried at original invoice amount less an allowance for any non-collectible amounts. A credit loss
allowance is made in compliance with the simplified approach using a provision matrix (expected credit loss model). This provision
matrix has been developed to reflect the country risk, the credit risk profile and available historical data. Similarly to receivables an
allowance for unbilled revenues and work in progress is made using a provision matrix.

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix based on
ageing of trade receivables as of invoice date at 31 December 2019.

(CHF million)

0–60 days

61–90 days

91–120 days

121–180 days

181–240 days

241–300 days

301–360 days

> 360 days

TOTAL

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EXPECTED
CREDIT LOSS
RANGE

0.5%–5%

10%–25%

20%–50%

35%–75%

50%–75%

75%–100%

100%

GROSS
CARRYING
AMOUNT

EXPECTED
CREDIT
LOSS

762

105

132

1 162

132

209

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158

Y
T
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I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix based
on ageing of trade receivables as of invoice date at 31 December 2018:

(CHF million)

0–60 days

61–90 days

91–120 days

121–180 days

181–240 days

241–300 days

301–360 days

> 360 days

TOTAL

EXPECTED
CREDIT LOSS
RANGE

0.5%–5%

10%–25%

20%–50%

35%–75%

50%–75%

75%–100%

100%

GROSS
CARRYING
AMOUNT

EXPECTED
CREDIT
LOSS

787

114

111

1 165

111

196

As part of financial management activities, the Group enters into various types of transactions with international banks, usually
with a credit rating of at least A. Exposure to these risks is closely monitored and kept within predetermined parameters. The
Group does not expect any non-performance by these counterparties. The maximum credit risk to which the Group is theoretically
exposed at 31 December 2019 is the carrying amount of financial assets including derivatives.

Analysis of financial assets by class and category at 31 December 2019:

AMORTIZED
COST LOANS AND
RECEIVABLES

FAIR VALUE

AT FAIR VALUE
THROUGH EQUITY

AT FAIR VALUE
THROUGH P&L

TOTAL

(CHF million)

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

Cash and cash-equivalents

1 466

Trade receivables

Other receivables¹

Unbilled revenues and work in progress

Loans to third parties: non-current

Marketable securities

Derivatives

953

142

195

953

142

195

TOTAL FINANCIAL ASSETS

2 772

1 466

953

142

195

953

142

195

2 796

S
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159

1. Excluding VAT and other tax related items.

Analysis of financial assets by class and category at 31 December 2018:

AMORTIZED
COST LOANS AND
RECEIVABLES

FAIR VALUE

AT FAIR VALUE
THROUGH EQUITY

AT FAIR VALUE
THROUGH P&L

TOTAL

(CHF million)

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

Cash and cash-equivalents

1 743

Trade receivables

Other receivables¹

Unbilled revenues and work in progress

Loans to third parties: non-current

Marketable securities

Derivatives

969

132

226

969

132

226

TOTAL FINANCIAL ASSETS

3 089

1 743

969

132

226

969

132

226

3 115

1. Excluding VAT and other tax related items.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

In the fair value hierarchy, marketable securities, CHF 9 million (2018: CHF 9 million) qualify as Level 1, fair value measurement
category. Derivative assets (2019: CHF 15 million; 2018: CHF 17 million) qualify as Level 2 fair value measurement category in
accordance with the fair value hierarchy. Derivative assets consist of foreign currency forward contracts that are measured using
quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contract.

LIQUIDITY RISK MANAGEMENT

The objective of the Group's liquidity and funding management is to ensure that all its foreseeable financial commitments can
be met when due. Liquidity and funding are primarily managed by Group Treasury in accordance with practices and limits set
in the risk management policies and objectives approved by the Board of Directors.

The nature of the Group’s business requires keeping a significant part of the cash reserves in the operating units.

Due to the significant cash position, liquidity risk is limited. The Group has various committed and uncommitted bilateral credit
facilities with its banks.

Analysis of financial liabilities by class and category at 31 December 2019:

FAIR VALUE

AMORTIZED COST
OTHER LIABILITIES

AT FAIR VALUE
THROUGH EQUITY

AT FAIR VALUE
THROUGH P&L

TOTAL

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

336

133

336

133

2 132

2 236

644

3 245

644

3 349

336

133

336

133

2 237

2 341

644

3 350

644

3 454

(CHF million)

Trade payables

Other payables¹

Loans and other financial
liabilities

Lease liabilities

TOTAL FINANCIAL LIABILITIES

1. Excluding VAT and other tax related items.

The corporate bonds qualify as fair value Level 1 which amounts to CHF 2 209 million (2018: CHF 2 547 million).

Other financial liabilities include CHF 89 million qualifying as fair value Level 3, which represents the estimated present value
of the redemption amount to acquire the remaining non-controlling interests of acquisitions if the put/call option is exercised.
This includes the fair value of the redemption amount to acquire the remaining 40% of Maine Pointe LLC in June 2022, if the
put/call option is exercised. The fair value has been estimated at CHF 64 million by applying a discounted valuation method based
on weighted average revenue growth scenarios and a discount rate of 3%. The put option is sensitive to changes in revenue and
reaching an EBITDA target up to a maximum payout of CHF 111 million.

Subsequent changes in the valuation of the redemption amount to acquire the remaining non-controlling interests of acquistions if
the put/call option is exercised shall be recognized directly in equity attributable to owners, including the unwinding of the discount.

The remaining financial liabilities qualify as Level 2 determined in accordance with generally accepted pricing models.

Analysis of financial liabilities by class and category at 31 December 2018:

FAIR VALUE

AMORTIZED COST
OTHER LIABILITIES

AT FAIR VALUE
THROUGH EQUITY

AT FAIR VALUE
THROUGH P&L

TOTAL

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

CARRYING
AMOUNT

FAIR VALUE

362

149

362

149

2 512

2 574

362

149

362

149

2 522

2 584

3 035

3 097

(CHF million)

Trade payables

Other payables¹

Loans and other financial
liabilities

Lease liabilities

TOTAL FINANCIAL LIABILITIES

3 025

3 087

1. Excluding VAT and other tax related items.

In the fair value hierarchy, bonds qualify as Level 1 and the remaining financial liabilities qualify as Level 2 determined in accordance
with generally accepted pricing models.

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2

160

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

Contractual maturities of financial liabilities including interest payments at 31 December 2019:

(CHF million)

TRADE
PAYABLES

OTHER
PAYABLES¹

GROSS SETTLED
DERIVATIVE
FINANCIAL
INSTRUMENTS
OUTFLOWS

GROSS SETTLED
DERIVATIVE
FINANCIAL
INSTRUMENTS
INFLOWS

LOANS AND
OTHER
FINANCIAL
LIABILITIES

On demand or within one year

336

133

1 380

(1 376)

Within the second year

Within the third year

Within the fourth year

Within the fifth year

After five years

1. Excluding VAT and other tax related items.

Contractual maturities of financial liabilities including interest payments at 31 December 2018:

LEASE
LIABILITIES

TOTAL

172

130

683

447

446

412

318

317

351

338

262

1 027

191

1 218

160

(CHF million)

TRADE
PAYABLES

OTHER
PAYABLES¹

GROSS SETTLED
DERIVATIVE
FINANCIAL
INSTRUMENTS
OUTFLOWS

GROSS SETTLED
DERIVATIVE
FINANCIAL
INSTRUMENTS
INFLOWS

LOANS AND
OTHER
FINANCIAL
LIABILITIES

LEASE
LIABILITIES

TOTAL

On demand or within one year

362

136

1 480

(1 476)

Within the second year

Within the third year

Within the fourth year

Within the fifth year

After five years

1. Excluding VAT and other tax related items.

413

312

265

338

1 289

915

321

266

339

1 289

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161

The Group hedges its foreign exchange exposure on a net basis. The net position of the gross settled derivative financial
instruments of CHF 4 million (2018: CHF 4 million) represents the net nominal value expressed in CHF of the Group’s foreign
currency contracts outstanding at 31 December 2019.

SENSITIVITY ANALYSES

The estimated changes in the value of net foreign currency positions are based on an instantaneous 5% weakening of the Swiss
Franc against all other currencies from the level applicable at 31 December 2019 and 2018 with all other variables remaining constant.

Sensitivity analysis based on net hedged positions at 31 December 2019 and 2018:

(CHF million)

US Dollar (USD)

Euro (EUR)

CFA Franc BEAC (CFA)

New Cedi (GHS)

Taiwanese Dollar (TWD)

Australian Dollar (AUD)

Canadian Dollar (CAD)

Brazilian Real (BRL)

Colombian Peso (COP)

Chilean Peso (CLP)

2019

2018

INCOME STATEMENT
IMPACT INCOME/(EXPENSE)

EQUITY IMPACT
INCREASE/(DECREASE)

INCOME STATEMENT
IMPACT INCOME/(EXPENSE)

EQUITY IMPACT
INCREASE/(DECREASE)

(3)

(1)

(8)

(1)

(2)

(4)

(2)

(1)

(3)

INTEREST RATE RISK MANAGEMENT

The Group is exposed to fair value interest rate risk because the Group borrows funds at fixed interest rates. Where appropriate,
the risk is managed by the Group using Interest Rate Swap contracts. Hedging activities are evaluated regularly to align with
interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.

If interest rates were 50 basis points higher/lower, the profit for the year ended 31 December 2019 would increase/decrease
by CHF nil (2018: CHF nil).

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

22. SHARE CAPITAL AND TREASURY SHARES

SHARES IN CIRCULATION

TREASURY SHARES

TOTAL SHARES ISSUED

TOTAL SHARE CAPITAL
(CHF MILLION)

7 551 408

87 099

(19 800)

(68 000)

7 550 707

1 683

7 552 390

82 324

(87 099)

19 800

68 000

83 025

(1 683)

(68 000)

13 342

7 633 732

(68 000)

7 565 732

BALANCE AT 1 JANUARY 2018

Treasury shares released into circulation

Treasury shares purchased for equity
compensation plans

Treasury shares purchased for cancellation

BALANCE AT 31 DECEMBER 2018

Treasury shares released into circulation

Treasury shares cancelled

BALANCE AT 31 DECEMBER 2019

ISSUED SHARE CAPITAL

SGS SA has a share capital of CHF 7 565 732 (2018: CHF 7 633 732) fully paid in and divided into 7 565 732 (2018: 7 633 732)
registered shares of a par value of CHF 1. All shares, other than own shares, participate equally in the dividends declared by
the Company and have equal voting rights.

TREASURY SHARES

On 31 December 2019, SGS SA held 13 342 treasury shares. The shares purchased for cancellation are directly held by SGS SA,
while the shares to cover the equity compensation plans are held by a subsidiary company.

In 2019, 1 683 treasury shares were sold or given in relation with the equity compensation plans.

AUTHORIZED AND CONDITIONAL ISSUE OF SHARE CAPITAL

The Board has the authority to increase the share capital of SGS SA by a maximum of 500 000 registered shares of a par value
of CHF 1 each, corresponding to a maximum increase of CHF 500 000 in share capital. The Board is mandated to issue the new
shares at the market conditions at the time of issue. In the event that the new shares are issued for an acquisition, the Board is
authorized to waive the shareholders’ preferential right of subscription or to allocate such subscription right to third parties.

The authority delegated by the shareholders to the Board of Directors to increase the share capital is valid until 22 March 2021.

The shareholders have conditionally approved an increase of share capital in the amount of CHF 1 100 000, divided into
1 100 000 registered shares of a par value of CHF 1 each. This conditional share capital increase is intended to procure the
necessary shares to satisfy employee equity participation plans and option or conversion rights to be incorporated in convertible
bonds or similar equity-linked instruments that the Board is authorized to issue. The right to subscribe to such conditional capital is
reserved for beneficiaries of employee equity participation plans and holders of convertible bonds or similar debt instruments and
therefore excludes shareholders’ preferential rights of subscription. The Board is authorized to determine the timing and conditions
of such issues, provided that they reflect prevailing market conditions. The term of exercise of the options or conversion rights may
not exceed ten years from the date of issuance of the equity-linked instruments.

23. LOANS AND OTHER FINANCIAL LIABILITIES

CURRENT YEAR INFORMATION

(CHF million)

Bank loans

Corporate bonds

Other financial liabilities

Derivatives

TOTAL

Current

Non-current

2019

2 105

114

2 237

2 199

2018

2 484

2 522

412

2 110

Depending on the nature of the loan, currency and date of maturity, interest rates on long-term loans from third parties range
between 0.25% and 17.21% and on short-term loans from third parties range between 0% and 4.96%.

The loans from third parties exposed to fair value interest rate risk amounted to CHF 2 105 million (2018: CHF 2 488 million) and
the loans from third parties exposed to cash flow interest rate risk amounted to CHF 8 million (2018: CHF nil).

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O
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O
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E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

SGS SA issued the following corporate bonds listed on the SIX Swiss Exchange:

DATE OF ISSUE

27.05.2011

27.02.2014

25.04.2014

08.05.2015

03.03.2017

29.10.2018

FACE VALUE IN
CHF MILLION

COUPON IN %

YEAR OF
MATURITY

ISSUE
PRICE IN %

REDEMPTION
PRICE IN %

275

138

250

112

325

225

375

225

175

3.000

1.375

1.750

1.375

0.250

0.875

0.550

0.750

1.250

2021

2022

2024

2022

2023

2030

2026

2025

2028

100.480

100.517

101.019

101.533

100.079

100.245

100.153

100.068

101.157

100.000

The currency composition of bank loans, corporate bond and other financial liablities is as follows:

BANK LOANS AND CORPORATE BOND

OTHER FINANCIAL LIABILITIES

(CHF million)

Swiss Franc (CHF)

Euro (EUR)

Brazilian Real (BRL)

US Dollar (USD)

British Pound Sterling (GBP)

Other

TOTAL

2019

2 105

2018

2 485

2 113

2 488

2019

114

2018

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24. DEFINED BENEFIT OBLIGATIONS

The Group mainly operates defined benefit pension plans in Switzerland, the USA, the UK, the Netherlands, Germany, Italy, France,
South Korea and Taiwan. Contributions to most plans are paid to pension funds that are legally separate entities.

The Group also operates post-employment benefit plans, principally healthcare plans, in the USA and Switzerland. They represent
a defined benefit obligation at 31 December 2019 of CHF 14 million (2018: CHF 13 million). The method of accounting and the
frequency of valuation are similar to those used for defined benefit pension plans. Healthcare cost trend assumptions do not have
a significant effect on the amounts recognized in the income statement.

There is a risk to the Group that adverse experience could lead to a requirement for the Group to make additional contributions
to recover any deficit that arises.

The Group’s material defined benefit plans are in Switzerland, the USA and the UK.

SWITZERLAND

The Group jointly operates with the employees a retirement foundation in Switzerland. The assets and liabilities of the retirement
foundation are held separately from the Group. The foundation board is equally composed of representatives of the employees
and representatives of the employer. This foundation covers all the employees in Switzerland and provides benefits on a defined
contribution basis.

Each employee has a retirement account to which the employee and the Group contribute at a rate set out in the foundation rules
based on a percentage of salary. Every year, the foundation decides the level of interest, if any, to apply to retirement accounts
based on the agreed policy. At retirement, employees can elect either to withdraw all or part of the balance of their retirement
account or to convert it into annuities at pre-defined conversion rates.

As the foundation board is expected to eventually pay out all of the foundation’s assets as benefits to employees and former
employees, no surplus is deemed to be recoverable by the Group. Similarly, unless the assets are insufficient to cover minimum
benefits, the Group does not expect to make any deficit contribution to the foundation.

According to IFRS, the foundation has to be classified as a defined benefit plan due to underlying benefit guarantees and has to be
accounted for on this basis.

The weighted average duration of the expected benefit payment is approximately 14 years.

The Group expects to contribute CHF 6 million to this plan in 2020.

The Group also operates an employer fund. The assets are held separately from the Group. This foundation has unilateral power
to provide benefits and consequently has no obligations. Therefore, this foundation has no pension liabilities.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

UNITED STATES OF AMERICA

The Group operates a non-contributory defined benefit plan, which is subject to the provisions of the Employee Retirement
Income Security Act (ERISA).

The assets of the plan are held separately from the Group by the trustee-custodian and the plan’s third-party pension administrator
who disburses payments directly to retirees or beneficiaries under the plan. Both the trustee-custodian and the administrator
ensure adherence to ERISA rules.

Funding valuations are calculated on an actuarial basis and contributions are made as necessary. The funding target is to provide
the plan with sufficient assets to meet future plan obligations.

Effective 16 March 2004, non-exempt participants ceased accruing any additional benefits; only exempt employees of certain
SGS business units in the USA are eligible for annual benefit accrual. In addition, the pension benefit was changed and is defined
as a percentage of the current year’s pensionable compensation; the cost of additional benefit accrual is evaluated annually.
The Group reserves the right to make future changes to the benefit accrual structure of the plan.

Eligible employees become participants in the plan after the completion of one year of service and after reaching the age of 21.
Participants become fully vested in the plan after five years of service.

The weighted average of duration of the expected benefit payment is approximately 14 years.

The Group expects to contribute CHF 8 million to this plan in 2020.

UNITED KINGDOM

The Group operates two defined benefit plans through trusts, with the assets of the plans held separately from the Group and
trustees who ensure the plan’s rules are strictly adhered to. One plan (SGS UK Limited RBP) has been closed to new entrants since
2002. Since then, new employees have been offered membership of defined contribution plans, which have been operated by the
Group. The other (SGS Pension Schemes) plan’s liabilities were brought out in 2017, surplus assets were transferred to the SGS
RBP during the year and the SGS Pension Scheme is now in the final stages of being wound up. Under the defined benefit plans,
each member’s pension at retirement is related to their pensionable service and final salary.

Funding valuations of the defined benefit plans are carried out and agreed between the Group and the plan trustees at least once
every three years. The funding target is for the plans to hold assets equal in value to the accrued benefits based on projected
salaries. As part of the valuation process, if there is a shortfall against this target, then the Group and trustees will agree on deficit
contributions to meet this deficit over a specified period.

The weighted average of duration of the expected benefit payments from the combined plans is approximately 20 years.

The Group expects to contribute CHF 2 million to this plan in 2020.

OTHER COUNTRIES

The Group sponsors defined retirement benefits plans in other countries where the Group operates. No individual countries
other than those described above are considered material and need to be separately disclosed. The Group expects to contribute
CHF 6 million to those plans in 2020.

The assets and liabilities recognized in the statement of financial position at 31 December for defined benefit obligations and
for post-employment benefit plans are as follows:

(CHF million)

2019

Fair value of plan assets

Present value of funded defined benefit obligation

FUNDED/(UNFUNDED) STATUS

Present value of unfunded defined benefit obligation

NET ASSET/(LIABILITY) AT 31 DECEMBER

(CHF million)

2018

Fair value of plan assets

Present value of funded defined benefit obligation

FUNDED/(UNFUNDED) STATUS

Present value of unfunded defined benefit obligation

NET ASSET/(LIABILITY) AT 31 DECEMBER

USA

OTHER

TOTAL

444

(433)

(10)

245

(207)

194

(218)

(24)

(6)

(30)

(67)

(22)

(60)

(82)

928

(925)

(76)

(73)

USA

OTHER

TOTAL

414

(379)

(10)

206

(186)

172

(186)

(14)

(7)

(21)

(63)

(22)

(59)

(81)

833

(814)

(76)

(57)

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I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

The net liability of CHF 73 million (2018: CHF 57 million) includes CHF 78 million (2018: CHF 62 million) of pension fund assets
recognized in the item Other Non-Current Assets in note 14 and CHF 151 million (2018: CHF 119 million) of pension fund liability
recognized in the item Defined Benefit Obligation in statement of financial position.

< BACK TO CONTENTS

Amounts recognized in the income statement:

(CHF million)

2019

Service cost expense

Net interest expense on defined benefit plan

Administrative expenses

TOTAL EXPENSE DUE TO DEFINED BENEFIT OBLIGATION
AT 31 DECEMBER

Expense charged in:

Salaries and wages

Financial expenses

TOTAL EXPENSE DUE TO DEFINED BENEFIT OBLIGATION
AT 31 DECEMBER

(CHF million)

2018

Service cost expense

Net interest expense on defined benefit plan

Administrative expenses

TOTAL EXPENSE DUE TO DEFINED BENEFIT OBLIGATION
AT 31 DECEMBER

Expense charged in:

Salaries and wages

Financial expenses

TOTAL EXPENSE DUE TO DEFINED BENEFIT OBLIGATION
AT 31 DECEMBER

USA

OTHER

TOTAL

(1)

USA

OTHER

TOTAL

(1)

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165

Amounts recognized in the statement of other comprehensive income:

(CHF million)

2019

USA

OTHER

TOTAL

Remeasurement on net defined benefit liability

Change in demographic assumptions

Change in financial assumptions

Experience adjustments on benefit obligations

Actual return on plan assets excluding net interest expense

TOTAL RECOGNIZED IN THE STATEMENT OF OTHER COMPREHENSIVE
INCOME AT 31 DECEMBER

(7)

(32)

(3)

(35)

(15)

(23)

(1)

(5)

104

(91)

(CHF million)

2018

USA

OTHER

TOTAL

Remeasurement on net defined benefit liability

Change in demographic assumptions

Change in financial assumptions

Experience adjustments on benefit obligations

Actual return on plan assets excluding net interest expense

TOTAL RECOGNIZED IN THE STATEMENT OF OTHER COMPREHENSIVE
INCOME AT 31 DECEMBER

(17)

(1)

(2)

(20)

(11)

(1)

(17)

(1)

(44)

(6)

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164

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

Movements in the net asset/(liability) during the period:

(CHF million)

2019

NET ASSET/(LIABILITY) AT 1 JANUARY

Expense recognized in the income statement

Remeasurements recognized in other comprehensive income

Effect of acquisitions/disposals

Contributions paid by the Group

Employer benefit payments

Exchange differences

NET ASSET/(LIABILITY) AT 31 DECEMBER

USA

OTHER

TOTAL

(18)

(13)

(21)

(4)

(13)

(1)

(30)

(81)

(9)

(7)

(82)

(57)

(31)

(18)

(73)

(CHF million)

2018

NET ASSET/ (LIABILITY) AT 1 JANUARY

Expense recognized in the income statement

Remeasurements recognized in other comprehensive income

Contributions paid by the Group

Employer benefit payments

Exchange differences

NET ASSET/(LIABILITY) AT 31 DECEMBER

USA

OTHER

TOTAL

(9)

(1)

(8)

(2)

(24)

(4)

(2)

(83)

(8)

(4)

(21)

(81)

(70)

(22)

(57)

Change in the defined benefit obligation is as follows:

(CHF million)

2019

USA

OTHER

TOTAL

Opening present value of the defined benefit obligation

389

186

193

122

890

Current service cost

Interest cost

Plan participants’ contributions

Past service cost

Net increase/(decrease) in DBO from acquisitions/disposals

Actual net benefit payments

(Gains)/losses due to changes in demographic assumptions

(Gains)/losses due to changes in financial assumptions

Experience differences

Exchange rate (gains)/losses

DEFINED BENEFIT OBLIGATION AT 31 DECEMBER

(17)

(7)

443

(9)

(3)

207

(13)

(3)

224

(1)

(11)

(1)

127

(1)

(50)

(5)

104

1 001

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1
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166

Y
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I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
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A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

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(CHF million)

2018

USA

OTHER

TOTAL

Opening present value of the defined benefit obligation

402

208

233

126

969

Current service cost

Interest cost

Plan participants’ contributions

Settlements

Actual net benefit payments

(Gains)/losses due to changes in demographic assumptions

(Gains)/losses due to changes in financial assumptions

Experience differences

Exchange rate (gains)/losses

DEFINED BENEFIT OBLIGATION AT 31 DECEMBER

(12)

(17)

(1)

389

(11)

(10)

186

(27)

(13)

(1)

(17)

193

(3)

(8)

(6)

122

(30)

(44)

(1)

(44)

(13)

890

USA

OTHER

TOTAL

414

(17)

444

206

(9)

245

172

(13)

(1)

(4)

194

(11)

(1)

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1
0
2

167

833

(50)

(1)

928

USA

OTHER

TOTAL

409

238

(16)

(12)

(11)

414

(12)

206

209

(16)

(13)

(1)

(27)

172

(8)

(3)

(2)

899

(30)

(44)

(1)

(30)

(11)

833

Change in fair value of plan assets is as follows:

(CHF million)

2019

Opening fair value of plan assets

Interest income on plan assets

Return on plan assets excluding amounts included
in net interest expense

Actual employer contributions

Actual plan participants’ contributions

Actual net benefit payments

Actual admin expenses paid

Exchange differences

FAIR VALUE OF PLAN ASSETS AT 31 DECEMBER

(CHF million)

2018

Opening fair value of plan assets

Interest income on plan assets

Return on plan assets excluding amounts included
in net interest expense

Actual employer contributions

Actual plan participants’ contributions

Actual net benefit payments

Actual admin expenses paid

Settlements

Exchange differences

FAIR VALUE OF PLAN ASSETS AT 31 DECEMBER

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

There are no reimbursement rights included in plan assets. The actual return on plan assets was a gain of CHF 108 million
(2018: loss of CHF 13 million). The major categories of plan assets at the balance sheet date are as follows:

(CHF million)

2019

Cash and cash equivalents

Equity securities

Debt securities

Assets held by insurance company

Properties

Investment funds

Other

TOTAL PLAN ASSETS AT 31 DECEMBER

(CHF million)

2018

Cash and cash equivalents

Equity securities

Debt securities

Assets held by insurance company

Properties

Investment funds

Other

TOTAL PLAN ASSETS AT 31 DECEMBER

USA

OTHER

TOTAL

144

162

444

148

(1)

245

168

194

238

375

162

928

USA

OTHER

TOTAL

118

155

414

138

206

143

172

206

341

155

833

In 2019 and 2018, the Group did not occupy any property that was included in the plan assets.

Properties are rented at fair market rental rates. There are no SGS SA shares or any other financial securities used by the Group
included in plan assets.

The plan assets are primarily held within instruments with quoted market prices in an active market, with the exception of
the property and insurance policy holdings.

The investment strategy in Switzerland is to invest, within the statutory and legal requirements, in a diversified portfolio with
the aim of generating long-term returns, which will enable the Board of the foundation to grow the accounts of the members
of the pension fund, whilst taking on the lowest possible risk in order to do so.

In the USA, the Pension Plan Target Policy is determined by both quantitatively and qualitatively assessing the risk tolerance level
and return requirements of the Plan as determined by the Investment Committee. The investment portfolio asset allocation and
structure are developed based on the results of this process. In the UK, the Trustees review the investment strategy of the Scheme
and the Plan on a regular basis in order to ensure that they remain appropriate. The last review for both the Scheme and Plan was
recently undertaken and is in the process of being implemented.

Actuarial assumptions vary according to local prevailing economic and social conditions. The principal weighted average actuarial
assumptions used in determining the cost of benefits for both 2019 and 2018 are as follows:

(Weighted average %)

2019

Discount rate

Mortality assumption

Salary progression rate

Future increase for pension in payments

Healthcare cost trend assumed for the next year

Ultimate trend rate

Year that the rate reaches the ultimate trend rate

USA

OTHER

0.2

2.0

3.1

LPP 2015 CMI
2016

SNA02F/M CMI
2018 1.25%

PRI 2012 MP
2019

1.5

3.0

3.3

2.3

3.3

7.0

4.5

2025

1.2

2.6

0.3

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N
N
A
D
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A
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G
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N

9
1
0
2

(Weighted average %)

2018

Discount rate

Mortality assumption

Salary progression rate

Future increase for pension in payments

Healthcare cost trend assumed for the next year

Ultimate trend rate

Year that the rate reaches the ultimate trend rate

USA

OTHER

1.0

2.9

4.3

LPP 2015 CMI
2016

SNA02F/M CMI
2016

RP2014 MP
2018

1.5

0.2

3.0

3.5

3.2

3.3

7.5

4.5

2025

1.9

2.8

0.4

The weighted average rate for each assumption used to measure the benefits obligation is also shown. The assumptions used
to determine end-of-year benefits obligation are also used to calculate the following year’s cost.

In Switzerland, a decrease in the discount rate of 0.5% per annum would, all other things being equal, increase the obligation
by CHF 33 million; a 0.5% increase in assumed salary would increase the obligation by CHF 2 million; and a one-year increase
in members’ life expectancy would increase the obligation by approximately CHF 13 million.

In the USA, a decrease in the discount rate of 0.5% per annum would, all other things being equal, increase the obligation by
CHF 15 million; a 0.5% increase in assumed salary would not impact the obligation; and a one-year increase in members’ life
expectancy would increase the obligation by approximately CHF 9 million.

In the UK, a decrease in the discount rate of 0.5% per annum would, all other things being equal, increase the obligation by
CHF 22 million; a 0.5% increase in assumed salary would increase the obligation by CHF 3 million; and a one-year increase in
members’ life expectancy would increase the obligation by approximately CHF 9 million.

These sensitivities have been calculated to show the movement in the defined benefit obligation in isolation and assume no other
changes in market conditions at the accounting date. This is unlikely in practice; for example, a change in discount rate is unlikely
to occur without any movement in the value of the assets held by the plans.

The amount recognized as an expense in respect of defined contribution plans during 2019 was CHF 70 million (2018: CHF 78 million).

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25. PROVISIONS

(CHF million)

AT 1 JANUARY 2019

IFRS 16 adjustement

Charge to income statement

Release to income statement

Payments

Exchange differences

AT 31 DECEMBER 2019

Analysed as:

Current liabilities

Non-current liabilities

TOTAL

LEGAL AND WARRANTY
CLAIMS ON SERVICES
RENDERED

DEMOBILIZATION AND
REORGANIZATION

OTHER PROVISIONS

TOTAL

(4)

(9)

(1)

(4)

(25)

(2)

(5)

(15)

2019

165

110

117

(13)

(49)

(2)

165

2018

110

A number of Group companies are subject to litigation and other claims arising out of the normal conduct of their business that
can be best viewed as claims on services rendered. The claim provision represents the sum of estimates of amounts payable
on identified claims and of losses incurred but not yet reported. They therefore reflect estimates of the future payments required
to settle both reported and unreported claims. In the opinion of Management, based on all currently available information, the
provisions adequately reflect the Group’s exposure to legal and warranty claims on services rendered. The ultimate outcome of
these matters is not expected to materially affect the Group’s financial position, results of operations or cash flows.

168

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

Demobilization and reorganization provision relate to present legal or constructive obligations of the Group toward third parties,
such as termination payments to employees upon leaving the Group, which in some jurisdictions are a legal obligation. For specific
long-term contracts, typically with two to five years’ duration, the Group is required to dismantle infrastructure and terminate the
services of personnel upon completion of the contract. These demobilization costs are provided for during the life of the contract.
Experience has shown that these contracts may be either extended or terminated earlier than expected.

Other provisions include present legal or constructive obligations towards tax authorities for indirect tax exposure as well as other
provisions towards third parties.

26. TRADE AND OTHER PAYABLES

(CHF million)

Trade payables

Other payables

TOTAL

2019

336

302

638

2018

362

323

685

Trade accounts and other payables principally comprise amounts outstanding for trade purchases and ongoing operating costs.
At 31 December 2019 and 2018, the fair value of the Group’s trade accounts and other payables approximates the carrying value.

27. CONTINGENT LIABILITIES

In the normal course of business, the Group and its subsidiaries are parties to various lawsuits and claims. Management does not
expect that the outcome of any of these legal proceedings will have a material adverse effect on the Group’s financial position,
results of operations or cash flows.

GUARANTEES AND PERFORMANCE BONDS

(CHF million)

Guarantees

Performance bonds

TOTAL

2019

768

163

931

2018

520

227

747

The Group has issued unconditional guarantees of CHF 768 million, thereof CHF 212 million financial guarantees to certain financial
institutions that have provided credit facilities and foreign exchange lines to its subsidiaries. In addition, it has issued performance
bonds and bid bonds of CHF 163 million to commercial customers on behalf of its subsidiaries. Management believes the likelihood
that a material payment will be required under these guarantees is remote.

28. EQUITY COMPENSATION PLANS

Selected employees of the SGS Group are eligible to participate in equity compensation plans.

I) GRANTS TO MEMBERS OF THE OPERATIONS COUNCIL

In 2019, a total of 1 020 restricted shares were granted to members of the Operations Council, in settlement of 50% of the annual
incentive related to the 2018 performance. The restricted shares fully vest at grant date and are blocked for a period of three years
from the grant date, until April 2022. The value at grant date of the restricted shares granted, being defined as the average closing
price of the share during a 20-day period following the payment of the dividends after the 2019 Annual General Meeting, was
CHF 2 640 066.

50% of the annual incentive related to the 2019 performance will be settled in restricted shares. The grant of the restricted shares
will be done after the 2020 Annual General Meeting; the total number of restricted shares to be granted will be calculated dividing
50% of the annual incentive amount by the average closing price of the share during a 20-day period following the payment of
the dividends after the 2020 Annual General Meeting, rounded up to the nearest integer. The restricted shares will fully vest
at grant date and will be blocked for a period of three years from the grant date, until April 2023. The Shareholding Ownership
Guidelines apply to the Restricted Share Plans.

More information on the Short-Term Incentive for the members of the Operations Council is disclosed in the SGS Remuneration Report.

II) GRANTS TO OTHER EMPLOYEES

In 2019, a total of 2 011 Restricted Share Units (RSUs) were granted to selected key employees under the Restricted Share Units Plan
2019. The RSUs vest 3 years after the grant date. The value at grant date of the RSUs granted, being defined as the average closing
price of the share during a 20-day period preceding the grant date, was CHF 5 114 777.

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Y
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P
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A
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N
N
A
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A
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III) DISCONTINUED SHARE OPTION PLANS

Share options were granted to the members of the Operations Council, selected senior managers and key employees of the Group
until 2015 and have been discontinued since.

OPTION PLAN

DESCRIPTION

SGSPF-2014

SGSBB-2015

TOTAL

Of which exercisable at 31 December

Exercise period

FROM

STRIKE
PRICE 1

OPTIONS
OUTSTANDING AT
31 DECEMBER 2018

CANCELLED

EXERCISED
OR ADJUSTED

OPTIONS
OUTSTANDING AT
31 DECEMBER 2019

Jan.17

Jan.18

Jan.19

Jan.20

2 059.00

1 798.00

237 076

(41 493)

(195 583)

717 477

954 553

(677 269)

(41 493)

(872 852)

40 208

170

1. The strike price of the options has been adjusted in accordance with market practice for capital reductions and special dividends.

PERFORMANCE SHARE UNIT (PSU) AND RESTRICTED SHARE UNIT (RSU) PLANS

DESCRIPTION

SGS-RSU-16

SGS-RSU-17

SGS-PSU-18

SGS-RSU-18

SGS-RSU-19

TOTAL

EXERCISE
PERIOD FROM

UNITS
OUTSTANDING AT
31 DECEMBER 2018

GRANTED

CANCELLED

VESTED OR
ADJUSTED

UNITS
OUTSTANDING AT
31 DECEMBER 2019

Apr.19

Apr.20

Feb.21

Apr.21

Apr.22

562

2 182

28 344

2 169

33 257

2 011

(15)

(325)

(2 382)

(178)

(82)

(2 982)

(547)

(26)

(573)

1 857

25 936

1 991

1 929

31 713

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The Group does not issue new shares to grant employees in relation to the equity-based compensation plans but uses treasury
shares, acquired through share buyback programs.

In total, as of 31 December 2019, the equity overhang, defined as the total number of share units, restricted shares and shares
underlying options outstanding (32 115 units) divided by the total number of outstanding shares (7 565 732 shares) amounted
to 0.42%.

The company’s burn rate, defined as the number of equities (restricted shares and share units) granted in 2019 (3 031 units)
divided by the total number of outstanding shares, was 0.04%.

The Group recognised during the year a total expense of CHF 17 million (2018: CHF 13 million) in relation to equity
compensation plans.

Shares available for future plans:

AT 1 JANUARY 2018

Repurchased shares

Granted SGS-PSU-18-plan

Granted SGS-RSU-18 plan

Options cancelled and adjusted

Shares for PSU cancelled and adjusted

Shares for RSU cancelled and adjusted

Shares used for Restricted Shares plan as settlement of Short-Term Incentive

AT 31 DECEMBER 2018

Repurchased shares

Granted SGS-RSU-19 plan

Shares for PSU cancelled and adjusted

Shares for RSU cancelled and adjusted

Shares used for Restricted Shares plan as settlement of Short-Term Incentive

AT 31 DECEMBER 2019

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TOTAL

(6 497)

19 800

(28 487)

(2 197)

(416)

362

(977)

(18 322)

(2 011)

2 382

600

(1 020)

(18 371)

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

At 31 December, the Group had the following shares available to satisfy various programs:

Number of shares held

Shares allocated to 2014 option plans

Shares allocated to 2015 option plans

Shares allocated for 2016 RSU plans

Shares allocated for 2017 RSU plans

Shares allocated for 2018 PSU plans

Shares allocated for 2018 RSU plan

Shares allocated for 2019 RSU plan

SHARES REQUIRED FOR FUTURE EQUITY COMPENSATION PLANS AT 31 DECEMBER

2019 TOTAL

2018 TOTAL

13 342

(1 857)

(25 936)

(1 991)

(1 929)

(18 371)

15 025

(90)

(562)

(2 182)

(28 344)

(2 169)

(18 322)

For equity compensation plans, the Group had entered into agreements with various banks, whereby the Group had an obligation
to offer to sell to the banks the shares underlying the option program at the relevant strike price whenever these shares become
unblocked. In 2018, the banks exercised all their outstanding rights and the Group sold 44 442 shares, which led to an inflow of net
proceeds of CHF 87.6 million, leaving a net economic exposure of 90 shares in respect of option plans. These 90 shares have been
sold in 2019 following the exercise of the corresponding options.

Therefore, whilst as at 31 December 2019 the number of outstanding (not exercised) options amounts to 40 208 options, the
underlying economic exposure for the Group in respect of these options is nil.

29. RELATED-PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties of the Group, have been eliminated on
consolidation and are not disclosed.

COMPENSATION TO DIRECTORS AND MEMBERS OF THE OPERATIONS COUNCIL

The remuneration of Directors and members of the Operations Council during the year was as follows:

(CHF million)

Short-term benefits

Post-employment benefits

Share-based payments 1

TOTAL

2019

2018

1. 2019 represents the value at grant of Shares and resricted shares granted in 2019 while 2018 represents the value at grant of restricted shares

and performance share units granted in 2018.

The remuneration of Directors and members of the Operations Council is determined by the Nomination and Remuneration
Committee. Additional information is disclosed in the SGS Remuneration Report.

During 2019 and 2018, no member of the Board of Directors or of the Operations Council had a personal interest in any business
transactions of the Group.

The Operations Council (including Senior Management) participates in the equity compensation plans as disclosed in note 28.

The total compensation, including social charges, received by the Board of Directors amounted to CHF 2 268 000
(2018: CHF 2 035 000).

The total compensation (cash and shares/options), including social charges, received by the Operations Council (including Senior
Management) amounted to CHF 22 205 000 (2018: CHF CHF 47 182 000).

LOANS TO MEMBERS OF GOVERNING BODIES

As at 31 December 2019, no loan, credit or outstanding advance was due to the Group from members or former members of
its governing bodies (unchanged from the previous year).

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A
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TRANSACTIONS WITH OTHER RELATED PARTIES

In 2019, the Group did not perform any activity generating revenue for the other related parties.

In 2018, the Group sold a building to the “Fondation de prévoyance SGS” for an amount of CHF 18 million, based on an external
and independent valuation. The “Fondation de prévoyance SGS” is a foundation with a mandate to protect the employer’s
staff against the economic consequences of retirement, death and disability, by insuring defined benefits. The President of this
foundation is the SGS Chief Compliance and Legal Officer and as such, this person has full authority to represent the “Fondation
de prévoyance SGS” in all transactions.

During 2019 and 2018, neither related trade receivable balances unpaid nor expense in respect of any bad or doubtful debts due
from these related parties were recognized.

30. SIGNIFICANT SHAREHOLDERS

At 31 December 2019, the significant shareholders of SGS are the following:

(% of detention)

Groupe Bruxelles Lambert (acting through Serena SARL and URDAC)1

Mr. August von Finck and members of his family (acting in concert)2

BlackRock, Inc.

MFS Investment Management

2019

16.73%

15.66%

4.00%

3.81%

2018

16.60%

15.52%

4.00%

3.02%

1. The ultimate beneficial owners of the Groupe Bruxelles Lambert are Stichting Administratekantoor Frère-Bourgeois, Paul Desmarais Junior

and André Desmarais.

2. The Company was informed on 4 February 2020, that the von Finck family has disposed of a large portion of their holding, resulting in their

participation falling below the threshold of 3% of the share capital and voting rights.

31. APPROVAL OF FINANCIAL STATEMENTS AND SUBSEQUENT EVENTS

The Board of Directors is responsible for the preparation and presentation of the financial statements. These financial statements
were authorized for issue by the Board of Directors on 20 February 2020, and will be submitted for approval by the Annual General
Meeting of Shareholders to be held on 24 March 2020.

On 8 January 2020 the Group announced the acquisition of Thomas J. Stephens & Associates, Inc. (Stephens) in the USA,
providing safety and efficacy testing and contract research activities for a total purchase price of CHF 17 million.

On 31 January 2020 the Group sold its Pest Management and Fumigation activities in the Netherlands and Belgium for a total cash
consideration of CHF 68 million.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

Deloitte SA
Rue du Pré-de-la-Bichette 1
1202 Geneva
Switzerland

Phone: +41 (0)58 279 8000
Fax: +41 (0)58 279 8800
www.deloitte.ch

Statutory Auditor’s Report

To the General Meeting of
SGS SA, Geneva

Report on the Audit of the Consolidated Financial Statements

Opinion
We have audited the consolidated financial statements of SGS SA and its subsidiaries
(the Group), which comprise the consolidated balance sheet as at 31 December 2019, and
the consolidated income statement, consolidated statement of comprehensive income,
consolidated statement of cash flows, consolidated statement of changes in equity for the
year then ended and notes to the consolidated financial statements, including a summary of
significant accounting policies.
In our opinion the consolidated financial statements (presented on pages 132 to 173) give a
true and fair view of the consolidated financial position of the Group as at 31 December
2019, its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with International Financial Reporting Standards (IFRS) and
comply with Swiss law.

Basis for Opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing
(ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and
standards are further described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report. We are independent of the Group
in accordance with the provisions of Swiss law and the requirements of the Swiss audit
profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.

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SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019

Our Audit Approach

Summary

Key audit matters

Materiality

Scoping

Based on our audit scoping, we identified the following key
audit matters:

•

Revenue recognition in respect of unbilled revenue
and work in progress

Goodwill and associated impairment testing

Uncertain Tax provision

Based on our professional judgment we determined
materiality for the Group as a whole to be CHF60 million,
6% of Profit before tax (adjusted for non-recurring items,
goodwill and intangible impairment and restructuring costs).

Based on our understanding of SGS’s operations, we scoped
our audit of component operations based on the significance
of account balances and significant risks. We gained sufficient
and appropriate coverage across the Group. Coverage details
are provided on page 178.

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Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

174

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 3

Revenue recognition: Work in progress and unbilled revenues

Key audit matter

The Group recognises revenue on fees for services
rendered to third parties when the services have been
completed. However, in certain circumstances,
including where services are not billed at the end of
each financial period, revenue is recognized in
proportion to the stage of completion, normally by
reference to costs incurred to the balance sheet date
in comparison with the total estimated costs of the
contracted services to completion. A margin is
recognised based on cost incurred, providing it is
expected that the project will be profitable once
completed. Where services are completed, but
unbilled, revenue is recorded at net selling price.
Where services have been rendered but the project is
still incomplete, revenue is recorded including a
margin based on cost incurred and expected margin at
the completion of the project.

At December 31, 2019, the Group balance sheet
included unbilled revenues and work-in-progress
of CHF195 million (3% of total Group revenues).

For certain contracts, significant judgement is required
by management at the operational level to estimate
the value of unbilled revenue and work in progress and
the level of profit to be recognised prior to the year-
end as it is highly dependent on the nature and
complexity of the services being provided and the
contractual terms with customers. The incremental
revenue and profit recognised at period-end is also
included in the determination of management
incentives, increasing the risk of inappropriate
estimation. Accordingly, we have assessed the
estimation of work-in-progress and unbilled revenues
as a key audit matter. We also note it is considered to
be a significant accounting judgement and estimate
(note 2).

Refer to the accounting policy in note 2 and
additionally note 5.

How the scope of our audit responded to
the key audit matter

Our audit work during the year included the following
procedures on work-in-progress and unbilled revenues:

We reviewed SGS’s revenue recognition policies;
We assessed the design and implementation of key
internal controls regarding revenue recognition and
the approval of unbilled revenue and work in progress
balances;

We tested a sample of unbilled revenue and work in
progress balances recorded at the prior year-end to
subsequent invoices and recoveries from third party
clients in order to perform our risk assessment; and
We audited samples of credit notes and reversals of

unbilled revenue and work in progress throughout the
year to ensure that these adjustments were
appropriate and not related to deliberate
overstatement of revenue.

We used analytical procedures to identify businesses

and geographies across the Group which had
recorded significant work-in-progress and unbilled
balances at the year-end, and challenged local
management by tracing to contract and status reports
to verify significant variances for a sample of
contracts;

We tested a sample of work-in-progress and unbilled

balances to the related customer contracts and
appropriate operational evidence to confirm that the
services had been completed prior to the year-end;

On a sample basis, we tested new contracts by

reviewing revenue recorded with reference to the
customer contract terms and conditions and assessed
whether the revenue recognition is in line with group
policy and IFRS 15;

Where work had not yet been subsequently invoiced
and cash had not yet been received, we requested
third party confirmation of the work being performed
and obtained alternate audit evidence where direct
confirmations were not received;

We tested manual journal entries booked in revenue;

and

We also assessed the adequacy of the disclosures in

the consolidated financial statements.

Based on the procedures performed, we consider
management’s estimates and disclosures regarding
work-in-progress and unbilled revenue balances to
be appropriate.

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Goodwill and associated impairment testing

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 4

Key audit matter

The Group’s balance sheet includes CHF1’281 million
of goodwill (20.2% of total Group assets). In
accordance with IFRS, these balances are allocated to
Cash Generating Units (CGUs) which are tested at
least annually for impairment using discounted cash-
flow models of each CGU’s or group of CGU’s
recoverable value compared to the carrying value of
the assets. A deficit between the recoverable value
and the CGU’s net assets would result in an
impairment.

The inputs to the impairment testing model which
have the most significant impact on CGU recoverable
value include:

•

Projected revenue growth, operating margins and
operating cash-flows in the years 1-5;
Stable long term growth rates in years 6-10 and
in perpetuity; and
Country and business specific discount rates
(pre-tax).

The impairment test model includes sensitivity testing
of key assumptions, including revenue growth,
operating margin and discount rate.

We consider the annual impairment testing to be a key
audit matter because the assumptions on which the
tests are based are highly judgmental and are affected
by future market and economic conditions which are
inherently uncertain, and because of the materiality of
the balances to the financial statements as a whole.
We also note it is considered to be a significant
accounting judgement and estimate (note 2).

Refer to the accounting policy in note 2 and
additionally note 13 for details of the goodwill balances
and impairment testing inputs.

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177

How the scope of our audit responded to
the key audit matter

We considered the appropriateness of the methodology
applied and the key internal controls implemented by
management in testing for impairment and the
judgements in determining the CGUs to which goodwill is
allocated. In the current year, we specifically focused on
the calculation and allocation of goodwill (CHF86 million)
associated with the acquisition of Maine Pointe LLC during
the year.

We evaluated the appropriateness of the definition of
CGUs through discussions with senior operational
management, confirmation of the reporting levels at which
Group management monitors independent cash inflows
and trading performance and our knowledge of the
Group’s operations.

We assessed the impairment testing models and
calculations by:

•

Checking the mathematical accuracy of the
impairment models and the extraction of inputs from
source documents;
Challenging the discount rates applied in the
impairment reviews with support from our valuation
specialists, developing independent expectations for
key macroeconomic assumptions, in particular
discount rates, and comparing those independent
expectations to those used by management; and
Comparing forecast long-term growth rates to
economic data.

Based on our knowledge of the Group’s businesses and
considering the performance of the different CGUs, we
identified CGUs with significant goodwill balances,
declining trading performance compared with prior year,
specific risk factors or lower headroom in recoverable
value compared to net book value.

For these selected CGUs, we assessed the appropriateness
of cash-flow assumptions by analysing projected revenue
growth rates, margins and cash-flow levels against
current and historic trading and relevant market data, and
by meeting with senior operational and commercial
management in key businesses and geographies to
consider the evidence available to support projected
future performance. We also developed our own
independent expectations of recoverable value headroom
by performing additional sensitivity testing of key
assumptions.

We also assessed the adequacy of the related disclosures
in the consolidated financial statements.

Based on the audit procedures performed, we
consider the judgements applied in the
determination of CGUs and the assumptions
included in the impairment testing models, together
with the disclosures set out in the consolidated
financial statements, to be appropriate.

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176

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 5

Uncertain tax positions

Key audit matter

How the scope of our audit responded to
the key audit matter

The Group’s international operations give rise to
complex global tax considerations, particularly with
respect to cross border transactions. There continues
to be an increase in enforcement activities, aggressive
interpretations of existing legislation by local revenue
authorities and, in some cases, the introduction of new
legislation to increase taxes.

We evaluated Group management’s implementation of
Group policies and controls regarding the reporting of
uncertain tax positions. This evaluation was conducted
with assistance of our tax specialists. Specific discussions
were held on management’s approach determining
uncertain tax positions including the implementation of
IFRIC 23 requirements.

SGS considered and applied interpretation IFRIC 23 -
Uncertainty over Income Tax Treatments which came
into effect 1 January, 1 2019.

As a consequence, SGS reviewed and amended
aspects of its tax policy and judgement over tax risks
where there is uncertainty over income tax treatments
(see note 2 p142).

An amount of CHF40 million was recognised in opening
retained earnings (as at January 1, 2019) to record
the cumulative effect up until adoption of IFRIC 23
under the transitional requirements of the
interpretation.

Assessing uncertain tax positions requires estimation
and judgement as to the likely resolution of the
uncertainty. This gives rise to complexity and
uncertainty in respect of the calculation of tax risk
provision. Accordingly we have assessed the uncertain
tax positions as a key audit matter.

Refer to the accounting policy in note 2 and
additionally note 9.

We reviewed and challenged management’s assessment
of uncertain tax positions through discussions with the
Group taxation department and local SGS tax teams,
reviewing relevant correspondence with local tax
authorities, reviewing third party expert tax opinions and
using Deloitte tax specialists, where appropriate, to assess
the adequacy of associated provisions and disclosures.

We challenged management on the recognition of the
cumulative effect of the adoption of IFRIC 23 in opening
retained earnings, ensuring that the uncertain tax position
were realised in line with IFRIC 23 requirements including
the transition requirements.

Deloitte tax specialists in Switzerland and at local
operations were involved to ensure the accounting for the
IFRIC 23 adjustments was appropriate and reflected all
major transactions. We also performed a review of the
income tax rate reconciliation and audited significant
adjusting items.

We also assessed the adequacy of the related disclosures
in the consolidated financial statements.

Based on the procedures performed, we consider
management’s judgements, assessment and disclosures
regarding uncertain tax positions to be appropriate.

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SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 6

Our application of materiality
We define materiality as the magnitude of misstatement in the consolidated financial
statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning
the scope of our audit work and in evaluating the results of our work.
Based on our professional judgment we determined materiality for the Group as a whole to
be CHF60 million, based on a calculation of 6% of profit before tax adjusted for non-
recurring items, goodwill and intangible impairment and restructuring costs. We selected
profit before tax as the basis of materiality because, in our view, it is the measure against
which the performance of the Group is most commonly assessed.

The materiality applied by the component auditors ranged from CHF12 million to
CHF36 million depending on the scale of the component’s operations, the component’s
contribution to Group profit before tax and our assessment of risks specific to each location.
We agreed with the Audit Committee that we would report to the Committee all audit
differences in excess of CHF3 million as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also reported to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the
financial statements.

An overview of the scope of our audit
We designed our audit by obtaining an understanding of the Group and its environment,
including Group-wide controls, determining materiality and assessing the risks of material
misstatement in the consolidated financial statements.

Based on our scope assessment, we performed full scope component audits at 18 key
locations in 2019. In addition, we have requested 9 components to perform an audit on
specific account balances (principally Revenue, Accounts Receivable, Work-In-Progress and
Unbilled Revenues). In aggregate, these components represented the scope coverage
below:

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179

Group audit coverage

2019

Group revenue

Total assets

72%

78%

Net income for the year

71%

Remaining wholly owned and joint venture businesses were subject to analytical review
procedures for the purpose of the Group audit. Annual statutory audits are conducted by
affiliates of Deloitte SA at the majority of the Group’s subsidiaries, although these are
predominantly completed subsequent to our audit report on the consolidated financial
statements and do not form part of the Group Audit process.

At the parent entity level we tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant risks of material

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178

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 7

misstatement of the aggregated financial information of the remaining components not
subject to a full scope audit.

The group audit team continued to follow a program of planned visits that has been
designed so that the Senior Statutory Auditor visits most of the in scope locations on a
rotational basis. The program for the visits is established based on the significance of the
components and the results of our risk assessment.

For all components in scope for group reporting, we have included the component audit
partner in our team briefing, discussed their risk assessment, and reviewed documentation
of the findings from their work.

Other Information in the Annual Report
The Board of Directors is responsible for the other information in the annual report. The
other information comprises all information included in the annual report, but does not
include the consolidated financial statements, the stand-alone financial statements of the
Company upon which we issue a separate Statutory Auditor’s report, sections 4 and 5 of the
Remuneration Report and our auditor’s reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in
the annual report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information in the annual report and, in doing so, consider whether the other
information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this
regard.

Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial
statements that give a true and fair view in accordance with IFRS and the provisions of
Swiss law, and for such internal control as the Board of Directors determines is necessary to
enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
Board of Directors either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss
law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if,

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SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 8

individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial
statements is located at the website of EXPERTsuisse:
http://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of
our auditor’s report.

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019
Page 9

Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and the Swiss Auditing Standard
890, we confirm that an internal control system exists, which has been designed for the
preparation of consolidated financial statements according to the instructions of the Board
of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Deloitte SA

Matthew Sheerin
Licensed Audit Expert
Auditor in Charge

Joelle Herbette
Licensed Audit Expert

Geneva, 20 February 2020

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

2. SGS SA

—

NOTES

2019

2018

782

(6)

(36)

(42)

740

(55)

(7)

(62)

746

(1)

(10)

735

480

497

(6)

(24)

(30)

467

(54)

(4)

(58)

479

(7)

465

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2.1. INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER

(CHF million)

OPERATING INCOME

Dividends from subsidiaries

Other income

TOTAL OPERATING INCOME

OPERATING EXPENSES

Other operating and administrative expenses

Other expenses

TOTAL OPERATING EXPENSES

OPERATING RESULT

FINANCIAL INCOME

Financial income

Exchange gain, net

TOTAL FINANCIAL INCOME

FINANCIAL EXPENSES

Financial expenses

Liquidation of subsidiaries, net

TOTAL FINANCIAL EXPENSES

FINANCIAL RESULT

PROFIT BEFORE TAXES

Taxes

Withholding taxes

PROFIT FOR THE YEAR

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2.2. STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER

(BEFORE APPROPRIATION OF AVAILABLE RETAINED EARNINGS)

(CHF million)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Other financial assets

Amounts due from subsidiaries

Accrued income and prepaid expenses

TOTAL CURRENT ASSETS

NON CURRENT ASSETS

Investments in subsidiaries

Loans to subsidiaries

TOTAL NON CURRENT ASSETS

TOTAL ASSETS

SHAREHOLDERS’ EQUITY AND LIABILITIES

SHORT-TERM LIABILITIES

Other current liabilities

Amounts due to subsidiaries

Corporate bonds (less than one year)

Deferred income and accrued expenses

Provisions

TOTAL SHORT-TERM LIABILITIES

LONG-TERM LIABILITIES/NON CURRENT LIABILITIES

Long-term liabilities – subsidiaries

Corporate bonds

TOTAL LONG-TERM LIABILITIES/NON CURRENT LIABILITIES

SHAREHOLDERS’ EQUITY

Share capital

Statutory capital reserve

Statutory retained earnings

Own shares for share buyback

Reserve for own shares held by a subsidiary

TOTAL SHAREHOLDERS’ EQUITY

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES

NOTES

2019

2018

540

497

1 089

1 745

887

2 632

3 721

210

285

323

2 100

2 423

940

1 013

3 721

901

359

1 314

1 636

1 236

2 872

4 186

375

554

666

2 100

2 766

947

(158)

866

4 186

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2.3. NOTES

SGS SA (“the Company”) is the ultimate parent company of the SGS Group which owns and finances, either directly or indirectly,
its subsidiaries and joint ventures throughout the world. The head office is located in Geneva, Switzerland.

The average number of employees is effectively less than 10 people for this company.

1. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in accordance with the accounting principles required by Swiss law.

INVESTMENTS IN SUBSIDIARIES

Investments in subsidiaries are valued individually at acquisition cost less an adjustment for impairment where appropriate.

FOREIGN CURRENCIES

Balance sheet items denominated in foreign currencies are converted at year-end exchange rates with the exception of
investments in subsidiaries which are valued at the historical exchange rate. Unrealised gains and losses arising on foreign
exchange transactions are included in the determination of the net profit, except long-term unrealised gains on long-term loans
and related instruments, which are deferred.

DIVIDENDS FROM SUBSIDIARIES

Dividends are treated as an appropriation of profit in the year in which they are ratified at the Annual General Meeting and
subsequently paid, rather than as an appropriation of profit in the year to which they relate or for which they are proposed
by the Board of Directors.

As a result, dividends are recognised in income in the year in which they are received, on a cash basis.

BONDS

Bonds are recorded at nominal value.

2. SUBSIDIARIES

The list of principal Group subsidiaries appears in the Annual Report on pages 197–200.

3. CORPORATE BONDS

SGS SA made the following bond issuances:

DATE OF ISSUE

27.05.2011

27.02.2014

25.04.2014

08.05.2015

03.03.2017

29.10.2018

FACE VALUE IN
CHF MILLION

COUPON
IN %

YEAR OF
MATURITY

ISSUE
PRICE IN %

REDEMPTION
PRICE IN %

275

138

250

112

325

225

375

225

175

3.000

1.375

1.750

1.375

0.250

0.875

0.550

0.750

1.250

2021

2022

2024

2022

2023

2030

2026

2025

2028

100.480

100.517

101.019

101.533

100.079

100.245

100.153

100.068

101.157

100.000

On 8 March 2019, SGS SA reimbursed a CHF 375 million bond with a 2.65% coupon (2018: nil).

As at 31 December 2019, all the bonds disclosed in the above table are classified as long-term liabilities.

The Group has listed all bonds on the SIX Swiss Exchange.

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4. TOTAL EQUITY

(CHF million)

BALANCE AT 1 JANUARY 2018

Dividends paid

Decrease in the reserve for own shares

Purchase of shares for cancelation

Profit for the year

BALANCE AT 31 DECEMBER 2018

Dividends paid

Decrease in the reserve for own shares

Cancelation of treasury shares

Profit for the year

BALANCE AT 31 DECEMBER 2019

5. SHARE CAPITAL

SHARE
CAPITAL

STATUTORY
CAPITAL
RESERVE

RESERVE FOR
OWN SHARES
HELD BY A
SUBSIDIARY

OWN SHARES
FOR SHARE
BUYBACK

STATUTORY
RETAINED
EARNINGS

(62)

(4)

(0)

(158)

158

(0)

992

(572)

465

948

(589)

(158)

735

940

TOTAL

1 131

(572)

(158)

465

866

(589)

735

1 013

SHARES IN
CIRCULATION

OWN
SHARES

TOTAL SHARES
ISSUED

TOTAL SHARE CAPITAL
(CHF MILLION)

BALANCE AT 1 JANUARY 2018

Own shares released into circulation

Own shares purchased for future equity
compensation plans

Treasury shares purchased for cancelation

BALANCE AT 31 DECEMBER 2018

Own shares released into circulation

Capital reduction by cancelation of own shares

BALANCE AT 31 DECEMBER 2019

7 551 408

87 099

(19 800)

(68 000)

7 550 707

1 683

7 552 390

82 324

(87 099)

19 800

68 000

83 025

(1 683)

(68 000)

13 342

7 633 732

(68 000)

7 565 732

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ISSUED SHARE CAPITAL

SGS SA has a share capital of CHF 7 565 732 (2018: CHF 7 633 732) fully paid-in and divided into 7 565 732 (2018: 7 633 732)
registered shares of a par value of CHF 1. In 2019, SGS SA proceeded to a capital reduction of 68 000 shares. All shares, other
than own shares, participate equally in the dividends declared by the Company and have equal voting rights.

OWN SHARES

On 31 December 2019, SGS SA held indirectly 13 342 of its own shares. In 2019, SGS SA proceeded to the cancelation of
68 000 of its own shares directly held by SGS SA, while the shares to cover the equity compensation plans are held by a
subsidiary company.

In 2019, 1 683 own shares were sold to cover the equity compensation plans.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

6. FINANCIAL INCOME AND FINANCIAL EXPENSES

(CHF million)

FINANCIAL INCOME

Interest income 3rd party

Interest income Group

FINANCIAL INCOME

FINANCIAL EXPENSES

Interest expenses 3rd party

Interest expenses Group

Other financial expenses

FINANCIAL EXPENSES

2019

(27)

(7)

(21)

(55)

2018

(30)

(5)

(19)

(54)

7. GUARANTEES AND COMFORT LETTERS

(CHF million)

Guarantees

Performance bonds

TOTAL

2019 ISSUED

2019 UTILISED

2018 ISSUED

2018 UTILISED

709

764

488

543

579

630

373

424

The Company has unconditionally guaranteed or provided comfort to financial institutions providing credit facilities (loans and guarantee
bonds) to its subsidiaries. In addition, it has issued performance bonds to commercial customers on behalf of its subsidiaries.

The Company is part of a VAT Group comprising itself and other Group companies in Switzerland.

8. REMUNERATION

8.1. REMUNERATION POLICY AND PRINCIPLES

This section appears in the SGS Remuneration Report paragraph 2 in the Annual Report on pages 107–109.

8.2. REMUNERATION MODEL

This section appears in the SGS Remuneration Report paragraph 3 in the Annual Report on pages 110–118.

8.3. REMUNERATION AWARDED TO THE BOARD OF DIRECTORS

This section appears in the SGS Remuneration Report paragraph 4 in the Annual Report on pages 119–121.

8.4. REMUNERATION AWARDED TO THE OPERATIONS COUNCIL MEMBERS

This section appears in the SGS Remuneration Report paragraph 5 in the Annual Report on pages 122–128.

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9. SHARES AND OPTIONS HELD BY MEMBERS OF GOVERNING BODIES

9.1. SHARES AND OPTIONS HELD BY MEMBERS OF THE BOARD OF DIRECTORS

The following table shows the shares and vested options held by Members of the Board of Directors as at 31 December 2019:

NAME

L. von Finck

A. F. von Finck

C. Grupp

P. Kalantzis

S.R. du Pasquier

P. Desmarais

K. Sorenson

I. Galienne

G. Lamarche

C.Grieder

786 255

150

The following table shows the shares and vested options held by Members of the Board of Directors as at 31 December 2018:

NAME

A. von Finck

A. F. von Finck

C. Grupp

P. Kalantzis

S.R. du Pasquier

P. Desmarais

I. Galienne

G. Lamarche

C. Kirk

SGSBB (2015)

RESTRICTED SHARES

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19 670

786 255

150

310 208

1 199

9.2. SHARES AND OPTIONS HELD BY SENIOR MANAGEMENT

The following table shows the shares and vested options held by Senior Management as at 31 December 2019:

NAME

F. NG

CORPORATE RESPONSABILITY

Chief Executive Officer

D. de Daniel

Chief Financial Officer

O. Merkt

General Counsel and Chief Compliance Officer

D. de Daniel replaced C. De Geyseleer, who resigned in February 2019.

RESTRICTED SHARES

500

1 980

855

223

The following table shows the shares and vested options held by Senior Management as at 31 December 2018:

CORPORATE RESPONSABILITY

SGSBB (2015)

RESTRICTED SHARES

70 000

49 572

509

177

114

1 950

461

210

NAME

F. NG

Chief Executive Officer

C. De Geyseleer

Chief Financial Officer

O. Merkt

General Counsel and Chief Compliance Officer

Details of the various plans are explained in the SGS Remuneration Report.

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186

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

10. SIGNIFICANT SHAREHOLDERS

To the knowledge of the Company the shareholders owning more than 3% of its share capital as at 31 December 2019, or as
the date of their last notification as per Article 20 of the Swiss Stock Exchange Act were:

(% of detention)

Groupe Bruxelles Lambert (acting through Serena SARL and URDAC)1

Mr. August von Finck and members of his family (acting in concert)2

BlackRock, Inc.

MFS Investment Management

2019

16.73%

15.66%

4.00%

3.81%

2018

16.60%

15.52%

4.00%

3.02%

1. The ultimate beneficial owners of the Groupe Bruxelles Lambert are Stichting Administratekantoor Frère-Bourgeois, Paul Desmarais Junior

and André Desmarais.

2. The Company was informed on 4 February 2020, that the von Finck family has disposed of a large portion of their holding, resulting in their

participation falling below the threshold of 3% of the share capital and voting rights.

At the same date, SGS Group held 0.18% of the share capital of the Company (2018: 1.09%).

PROPOSAL OF THE BOARD OF DIRECTORS FOR THE APPROPRIATION OF AVAILABLE RETAINED EARNINGS

(CHF)

Profit for the year

Balance brought forward from previous year

Dividend paid on own shares released into circulation in 2018 prior to the Annual
General Meeting on 19 March 2018

Dividend paid on own shares released into circulation in 2019 prior to the Annual
General Meeting on 22 March 2019

Capital reduction by cancelation of shares

Share buyback program

Reversal from the reserve for own shares

TOTAL RETAINED EARNINGS AVAILABLE FOR APPROPRIATION

Proposal of the Board of Directors:

Dividends ¹

BALANCE CARRIED FORWARD

Ordinary gross dividend per registered share

1. No dividend is paid on own shares held directly or indirectly by SGS SA.

2019

2018

735 232 728

200 446 558

465 580 866

425 363 022

(6 164 250)

(85 410)

68 000

(157 616 100)

3 930 158

939 592 034

62 238 166

789 401 704

(604 191 200)

(588 955 146)

335 400 834

80.00

200 446 558

78.00

11. APPROVAL OF FINANCIAL STATEMENTS AND SUBSEQUENT EVENTS

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Deloitte SA
Rue du Pré-de-la-Bichette 1
1202 Geneva
Switzerland

Phone: +41 (0)58 279 8000
Fax: +41 (0)58 279 8800
www.deloitte.ch

Statutory Auditor’s Report

To the General Meeting of
SGS SA, Geneva

Report on the Audit of the Financial Statements

Opinion

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We have audited the financial statements of SGS SA, which comprise the balance sheet as
at 31 December 2019, the income statement and related notes for the year then ended,
including the summary of significant accounting policies.

In our opinion the accompanying financial statements as at 31 December 2019, presented
on pages 182 to 188, comply with Swiss law and the company’s articles of incorporation.

Basis for Opinion

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our
responsibilities under those provisions and standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the entity in accordance with the provisions of Swiss law and the
requirements of the Swiss audit profession and we have fulfilled our other ethical
responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.

Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit
Oversight Authority

Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period. These matters
were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.

188

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019

Valuation of Investments in subsidiaries and related loans to subsidiaries

Key audit matter

The company holds investments in subsidiaries
with a carrying value of CHF1’745 million as of
31 December 2019 (46.9% of total assets). The
list of material Group subsidiaries can be found
in the Annual Report on pages 197 to 200. The
company also has loans to subsidiaries
amounting to CHF887 million. The valuation of
these assets is dependent on the ability of these
subsidiaries to generate positive cash flows in
the future.

In accordance with Article 960 CO, these
investments are tested annually for impairment
on an individual basis. An impairment would
need to be recorded if the recoverable values of
individual investments were lower than the
associated carrying values, or if loan balances
were no longer considered recoverable from the
associated entities.

The company uses the “income approach” for its
impairment tests of investments, and prepares a
discounted cash flow forecast for each significant
balance. The inputs to the impairment testing
model which have the most significant impact on
the recoverable value include:

Projected revenue growth, operating

margins and operating cash-flows in the

years 1-5;

Stable long term growth rates in

years 6-10 and in perpetuity; and

Country and business specific discount

rates (pre-tax).

The annual impairment testing is considered to
be a risk area for the Board of Directors and a
key audit matter because the assumptions on
which the tests are based are highly judgmental
and are affected by future market and economic
conditions which are inherently uncertain, and
because of the materiality of the balances to the
statutory financial statements as a whole.

Refer to note 2 to the financial statements.

How the scope of our audit responded
to the key audit matter

We tested the adequate implementation of
accounting policies and the design and
implementation of key controls regarding the
valuation of investments in subsidiaries and
related loans.

We challenged the impairment testing conducted
by the company. We tested the impairment
model valuations for the recoverable amounts of
investments and loans to subsidiaries on a
sample basis by critically assessing the
methodology applied and assessing the
reasonableness of the underlying key
assumptions and judgements.

In particular, we performed the following
procedures:

we checked the mathematical accuracy

of the impairment models and the

accuracy of extraction of inputs from

source documents;

together with our valuation specialists,

we challenged the significant inputs and

key assumptions and judgements used

in the impairment testing models for

investments, specifically the discount

rates and the five year projected

revenues and margins; and

we developed our independent

expectations of recoverable value by

performing additional sensitivity testing

of key assumptions.

We evaluated the appropriateness and
completeness of the related disclosures in the
financial statements.

Based on the audit procedures performed
above, we consider management’s
estimates of the assessment of the
recoverable value of investments in, and
loans to, subsidiaries along with related
financial statement disclosures to be
appropriate.

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SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019

Responsibility of the Board of Directors for the Financial Statements

The Board of Directors is responsible for the preparation of the financial statements in
accordance with the provisions of Swiss law and the company’s articles of incorporation, and
for such internal control as the Board of Directors determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due
to fraud or error.

In preparing the financial statements, the Board of Directors is responsible for assessing the
entity’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the Board of Directors
either intends to liquidate the entity or to cease operations, or has no realistic alternative
but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and
Swiss Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is
located at the website of EXPERTsuisse:
http://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our
auditor’s report.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

SGS SA
Statutory Auditor’s Report
for the year ended
31 December 2019

Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and the Swiss Auditing Standard 890,
we confirm that an internal control system exists which has been designed for the
preparation of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with
Swiss law and the company’s articles of incorporation. We recommend that the financial
statements submitted to you be approved.

Deloitte SA

Matthew Sheerin
Licensed Audit Expert
Auditor in Charge

Joëlle Herbette
Licensed Audit Expert

Geneva, 20 February 2020

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O
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U
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A
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U
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A
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3. HISTORICAL DATA

—

3.1. SGS GROUP – FIVE-YEAR STATISTICAL DATA CONSOLIDATED INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER

(CHF million)

REVENUE

Salaries and wages

Subcontractors’ expenses

Depreciation, amortization and impairment

Gain on business disposal

Other operating expenses

OPERATING INCOME (EBIT)

Financial income

Financial expenses

PROFIT BEFORE TAXES

Taxes

PROFIT FOR THE YEAR

Profit attributable to:

Equity holders of SGS SA

Non-controlling interests

OPERATING INCOME MARGINS IN %

AVERAGE NUMBER OF EMPLOYEES

2019

2018

2017

2016

2015

6 600

(3 357)

(386)

(548)

268

(1 495)

1 082

(79)

1 017

(315)

702

660

16.4

6 706

(3 422)

(387)

(317)

6 349

(3 193)

(394)

(338)

5 985

(3 009)

(368)

(336)

5 712

(2 849)

(345)

(322)

(1 634)

(1 530)

(1 456)

(1 374)

946

(58)

908

(218)

690

643

14.1

894

(57)

851

(187)

664

621

14.1

816

(53)

771

(185)

586

543

13.6

822

(56)

779

(195)

584

549

14.4

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94 494

96 492

93 556

89 626

85 903

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

3.2. SGS GROUP – FIVE-YEAR STATISTICAL DATA CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
AT 31 DECEMBER

(CHF million)

Property, plant and equipment

Right-of-use assets

Goodwill

Other intangible assets

Investments in joint-ventures, associates and other

Deferred tax assets

Other non current-assets

TOTAL NON-CURRENT ASSETS

Inventories

Unbilled revenues and work in progress

Trade receivables

Other receivables and prepayments

Current tax assets

Marketable securities

Cash and cash equivalents

TOTAL CURRENT ASSETS

TOTAL ASSETS

Share capital

Reserves

Treasury shares

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF SGS SA

Non-controlling interests

TOTAL EQUITY

Loans and other financial liabilities

Lease liabilities

Deferred tax liabilities

Defined benefit obligations

Provisions

TOTAL NON-CURRENT LIABILITIES

Loans and other financial liabilities

Lease liabilities

Trade and other payables

Provisions

Current tax liabilities

Contract liabilities

Other creditors and accruals

TOTAL CURRENT LIABILITIES

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

2019

926

611

2018

969

2017

1 002

2016

972

2015

964

1 281

1 224

1 238

1 195

1 088

187

174

149

3 363

195

953

219

1 466

2 964

6 327

1 536

(30)

1 514

1 595

2 199

490

151

2 954

154

638

145

155

574

1 778

4 732

6 327

202

203

133

2 767

226

969

214

1 743

3 301

6 068

1 851

(191)

1 668

1 743

2 110

119

2 350

412

685

127

112

618

1 975

4 325

6 068

222

168

137

2 803

293

1 068

236

104

1 383

3 140

5 943

2 036

(125)

1 919

2 005

2 095

143

2 357

647

151

606

1 581

3 938

5 943

246

165

122

2 738

249

997

252

975

2 611

5 349

2 243

(478)

1 773

1 853

1 735

154

2 008

598

166

539

1 488

3 496

5 349

219

173

141

2 617

248

917

272

244

1 734

3 277

5 894

2 222

(324)

1 906

1 981

1 742

181

2 061

546

493

159

113

492

1 852

3 913

5 894

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3.3. SGS GROUP – FIVE-YEAR STATISTICAL SHARE DATA

(CHF unless indicated otherwise)

2019

2018

2017

2016

2015

SHARE INFORMATION

REGISTERED SHARES

Number of shares issued

Number of shares with dividend rights

PRICE

High

Low

Year-end

Par value

KEY FIGURES BY SHARES

Equity attributable to equity holders of SGS SA
per share in circulation at 31 December

Basic earnings per share1

Dividend per share ordinary

Total dividend per share

DIVIDENDS (CHF MILLION)

Ordinary2

Total

7 565 732

7 552 390

7 633 732

7 550 707

7 633 732

7 551 408

7 822 436

7 538 507

7 822 436

7 605 460

2 689

2 213

2 651

2 683

2 170

2 210

2 541

2 051

2 541

2 317

1 734

2 072

2 049

1 577

1 911

200.37

220.86

254.16

235.22

250.56

87.45

80.00

84.54

78.00

82.41

75.00

71.54

70.00

71.99

68.00

604

589

566

528

517

1. Calculation of the basic earnings per share (weighted average for the year) is disclosed in note 10 of SGS Group Results.

2. As proposed by the Board of Directors.

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3.4. SGS GROUP SHARE INFORMATION
SHARE TRANSFER

SGS SA has no restrictions as to share ownership, except that registered shares acquired in a fiduciary capacity by third parties
may not be registered in the shareholders’ register, unless a special authorization has been granted by the Board of Directors.

MARKET CAPITALIZATION

At the end of 2019, market capitalization was approximately CHF 20 057 million (2018: CHF 16 871 million). Shares are quoted
on the SIX Swiss Exchange.

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

3.5. CLOSING PRICES FOR SGS AND THE SMI 2018-2019

SGS SA

2 900

2 800

2 700

2 600

2 500

2 400

2 300

2 200

2 100

2 000

1 900

1 800

1 700

1 600

1 500

1 400

1 300

J F M A M J J A S O N D J F M A M J J A S O N D

2018

HIGH PRICE

LOW PRICE

SGS SA

2019

SWISS MARKET INDEX (MONTHLY CLOSE)

< BACK TO CONTENTS

SMI

12 000

11 750

11 500

11 250

11 000

10 750

10 500

10 250

10 000

9 750

9 500

9 250

9 000

8 750

8 500

8 250

8 000

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A
U
N
N
A
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4. MATERIAL OPERATING COMPANIES
AND ULTIMATE PARENT

—

The disclosure of legal entities is limited to entities whose contribution to the Group revenues in 2019 represent
at least 1% of the consolidated revenues, but includes, in addition, the main operating legal entity in every
country where the Group has permanent operations, even when such legal entities represent less than
1% of the Group consolidated revenues. This definition of materiality excludes dormant companies,
pure sub-holding companies or entities used solely for the detention of assets.

COUNTRY

NAME AND DOMICILE

ISSUED CAPITAL
CURRENCY

ISSUED CAPITAL
AMOUNT

% HELD BY
GROUP

DIRECT /
INDIRECT

Albania

Algeria

Angola

Argentina

Australia

Austria

Azerbaijan

Bangladesh

Belarus

Belgium

SGS Automotive Albania sh.p.k., Tirana

SGS Qualitest Algérie SpA, Alger

SGS Serviços Angola

SGS Argentina SA, Buenos Aires

ITV SA, Buenos Aires

SGS Australia Pty. Ltd., Perth

SGS Austria Controll-Co. Ges.m.b.H., Vienna

Société Générale de Surveillance Azeri Ltd., Baku

SGS Bangladesh Limited, Dhaka

SGS Minsk Ltd., Minsk

SGS Belgium N.V., Antwerpen

Bosnia-Herzegovina

SGS Bosna i Hercegovina (d.o.o.) Ltd., Sarajevo

Botswana

SGS Botswana (Proprietary) Limited, Gaborone

Brazil

Bulgaria

SGS PID Serviços de Inspecao

SGS Bulgaria Ltd., Sofia

Burkina Faso

SGS Burkina SA, Ouagadougou

Cambodia

Cameroon

Canada

Chile

China

Colombia

Congo

Croatia

SGS (Cambodia) Ltd., Phnom Penh

SGS Cameroun SA, Douala

SGS Canada Inc., Missisauga

SGS Minerals S.A., Santiago de Chile

SGS-CSTC Standards Technical
Services Co. Ltd., Beijing

SGS-CSTC Standards Technical
Services Co. Ltd., Shanghaï

SGS Colombia SAS, Bogota

SGS Congo SA, Pointe-Noire

SGS Adriatica, w.l.l., Zagreb

Czech Republic

SGS Czech Republic s.r.o., Praha

Denmark

SGS Danmark A / S, Glostrup Hvidovre

Democratic Republic
of Congo

SGS Minerals RDC SARL, Lubumbashi

ALL

DZD

USD

ARS

AUD

EUR

USD

BDT

USD

EUR

BAM

BWP

BRL

BGN

XOF

KHR

XAF

CAD

CLP

USD

CNY

COP

XAF

HRK

CZK

DKK

USD

190 000 100

50 000 000

30 000

230 603 536

1 500 000

200 000

185 000

100 000

10 000 000

20 000

35 995 380

2 151

1 000

91 266 840

5 010 000

601 080 000

4 000 000 000

10 000 000

20 900 000

29 725 583 703

3 966 667

180 000 000

135 546 166 036

1 510 000 000

1 300 000

7 707 000

700 000

50 000

100

92.3

100

98.9

100

99.9

100

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OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

COUNTRY

NAME AND DOMICILE

ISSUED CAPITAL
CURRENCY

ISSUED CAPITAL
AMOUNT

% HELD BY
GROUP

DIRECT /
INDIRECT

25 000

1 500 000

42 174

15 000

260 000

3 172 613

80 000

1 210 000

7 490 000

1 978 604

8 000 000

301 731

25 000

4 250 000

5 000 000

10 000 000

200 000

518 000 000

960 000

350 000

100

50 000 000

99.99

62 500

2 500 000

200 000 000

100 000 000

100 000

100

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N
A
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Ecuador

Egypt

Estonia

Ethiopia

Finland

France

Georgia

Germany

Ghana

Consorcio SGS – Revisiones Técnicas

SGS Egypt Ltd., Cairo

SGS Estonia Ltd., Tallinn

SGS Ethiopia Private Limited, Addis Abeba

SGS FIMKO

SGS France SAS, Arcueil

SGS Georgia Ltd., Batumi

SGS Germany GmbH, Hamburg

SGS Institut Fresenius GmbH, Taunusstein

Ghana Community Network
Services Limited, Accra

Great Britain

SGS United Kingdom Limited, Ellesmere Port

Greece

Guam

SGS Greece SA, Peristeri

SGS Guam Inc., Guam

Guatemala

SGS Central America SA, Guatemala-City

Guinea-Conakry

SGS Mineral Guinea Conakry

Guinea-Equatorial

Compañia de Inspecciones y
Servicios G.E., Malabo

Hong Kong

SGS Hong Kong Limited, Hong Kong

Hungary

India

Indonesia

Iran

Ireland

Italy

Ivory Coast

Japan

Jordan

SGS Hungária Kft., Budapest

SGS India Private Ltd., Mumbai

P.T. SGS Indonesia, Jakarta

SGS Iran (Private Joint Stock) Limited, Tehran

SGS Ireland (Holdings) Limited, Dublin

SGS Italia S.p.A., Milan

Société Ivoirienne de Contrôles Techniques
Automobiles et Industriels SA, Abidjan

SGS Japan Inc., Yokohama

SGS (Jordan) Private Shareholding
Company, Amman

USD

EGP

EUR

ETB

EUR

USD

EUR

GHS

GBP

EUR

USD

GTQ

GNF

XAF

HKD

HUF

INR

USD

IRR

EUR

XOF

JPY

JOD

Kazakhstan

SGS Kazakhstan Limited, Almaty

Kenya

SGS Kenya Limited, Mombasa

Korea (Republic of)

SGS Korea Co., Ltd., Seoul

Kuwait

SGS Kuwait W.L.L

KZT

KES

KRW

KWD

228 146 527

2 000 000

15 617 540 000

50 000

Lao (People's
Democratic Republic)

SGS (Lao) Sole Co., Ltd., Vientiane

LAK

2 444 700 000

< BACK TO CONTENTS

COUNTRY

NAME AND DOMICILE

ISSUED CAPITAL
CURRENCY

ISSUED CAPITAL
AMOUNT

% HELD BY
GROUP

DIRECT /
INDIRECT

Latvia

Lebanon

Liberia

Lithuania

Madagascar

Malawi

Malaysia

Mali

Mauritius

Mexico

Moldova

Mongolia

Morocco

SGS Latvija Limited, Riga

SGS (Liban) S.A.L., Beirut

SGS Liberia Inc, Monrovia

SGS Klaipeda Ltd., Klaipeda

Malagasy Community Network
Services SA, Antananarivo

SGS Malawi Limited, Blantyre

Petrotechnical Inspection (Malaysia) Sdn. Bhd.,
Kuala Lumpur

SGS Mali Sàrlu, Kayes

SGS (Mauritius) LTD, Phoenix

SGS de Mexico, SA de C.V., Mexico

SGS (Moldova) SA, Chisinau

SGS-IMME Mongolia LLC, Ulaanbaatar

SGS Maroc SA, Casablanca

Mozambique

SGS MCNET Moçambique Limitada, Maputo

Myanmar

SGS (Myanmar) Limited, Yangon

Namibia

Netherlands

New Zealand

Nigeria

Norway

Oman

Pakistan

Panama

SGS Inspection Services Namibia (Proprietary)
Limited, Windhoek

SGS Nederland B.V., Spijkenisse

SGS New Zealand Limited, Auckland-Onehunga

SGS Inspection Services Nigeria Limited, Lagos

SGS Norge A / S, Austrheim

SGS Oman (FZC) LLC, Sohar

SGS Pakistan (Private) Limited, Karachi

Laboratorios Contecon Urbar Panama

Papua New Guinea

SGS PNG Pty. Limited, Port Moresby

Paraguay

Peru

Philippines

Poland

Portugal

Qatar

Romania

Russia

SGS Paraguay SA, Asunción

SGS del Perú S.A.C., Lima

SGS Philippines, Inc., Manila

SGS Polska Sp.z o.o., Warsaw

SGS Portugal – Sociedade Geral
de Superintendência SA, Lisboa

SGS Qatar WLL,Doha

SGS Romania SA, Bucharest

AO SGS Vostok Limited, Moscow

EUR

LBP

LRD

EUR

MGA

MWK

MYR

XOF

MUR

MXN

MDL

MNT

MAD

MZN

MMK

NAD

EUR

NZD

NGN

NOK

OMR

PKR

USD

PGK

PYG

PEN

PHP

PLN

EUR

QAR

RON

RUB

118 382

30 000 000

100

711 576

10 000 000

30 000

750 000

300 000 000

100 000

7 068 828

488 050

1 787 846 388

17 982 000

343 716 458

300 000

100

250 000

10 522 190

200 000

804 000

500 000

2 300 000

760 000

1 962 000 000

43 081 182

24 620 000

27 167 800

500 000

200 000

100 002

18 000 000

100

99.97

100

S
T
L
U
S
E
R
9
1
0
2

199

198

< BACK TO CONTENTS

OUR VALUE TO SOCIETY2019 INTEGRATED ANNUAL REPORT

COUNTRY

NAME AND DOMICILE

ISSUED CAPITAL
CURRENCY

ISSUED CAPITAL
AMOUNT

% HELD BY
GROUP

DIRECT /
INDIRECT

Saudi Arabia

SGS Inspection Services Saudi Arabia Ltd., Jeddah

Senegal

Serbia

SGS Sénégal SA, Dakar

SGS Beograd d.o.o., Beograd

Sierra Leone

SGS (SL) Ltd., Freetown

Singapore

Slovakia

Slovenia

South Africa

Spain

Sri Lanka

Sweden

SGS Testing and Control Services
Singapore Pte Ltd., Singapore

SGS Slovakia spol.s.r.o., Kosice

SGS Slovenija d.o.o. – Podjetje za
kontrol blaga, Ljubljana

SGS South Africa (Proprietary) Limited,
Johannesburg

SGS Española de Control SA, Madrid

SGS Tecnos, SA, Sociedad Unipersonal, Madrid

SGS Lanka (Private) Limited, Colombo

SGS Sweden AB, Göteborg

Switzerland

SGS Société Générale de Surveillance SA, Geneva

Switzerland

SGS SA, Geneva

Switzerland

SGS Group Management SA, Geneva

Taiwan

Tanzania

Thailand

Togo

Tunisia

Turkey

SGS Taiwan Limited, Taipei

African Assay Laboratories (Tanzania) Ltd

SGS (Thailand) Limited, Bangkok

SGS Togo SA, Lomé

SGS Tunisie SA, Tunis

SGS Supervise Gözetme Etud Kontrol Servisleri
Anonim Sirketi, Istanbul

Turkmenistan

SGS Turkmen Ltd., Ashgabat

Uganda

Ukraine

SGS Uganda Limited, Kampala

SGS Ukraine, Foreign Enterprise, Odessa

United Arab Emirates SGS Gulf Limited Dubai Airport Free Zone Branch

United States

SGS North America Inc.

Maine Pointe LLC

Uruguay

Uzbekistan

Vietnam

Zambia

Zimbabwe

SGS Uruguay Limitada, Montevideo

SGS Tashkent Ltd., Tashkent

SGS Vietnam Ltd., Ho Chi Minh City

SGS Inspections Services Ltd., Lusaka

SGS Technical Services (PTY) Ltd, Harare
(Branch office)

SAR

XAF

EUR

SLL

SGD

EUR

ZAR

EUR

LKR

SEK

CHF

TWD

TZS

THB

XOF

TND

TRY

USD

UGX

USD

UYU

USD

ZMK

1 000 000

35 000 000

66 161

200 000 000

100 000

19 917

10 432

452 000 500

240 000

92 072 034

9 000 000

1 500 000

10 000 000

7 565 732

100 000

62 000 000

2 000

100

20 000 000

99.99

10 000 000

50 000

6 550 000

50 000

5 000 000

400 000

73 701 996

1 500

50 000

288 000

16 944 000

100

Ultimate
parent
company

S
T
L
U
S
E
R
9
1
0
2

200

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

< BACK TO CONTENTS

N
O

I
T
A
M
R
O
F
N

I
R
E
D
L
O
H
E
R
A
H
S

201

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

SHAREHOLDER
INFORMATION

200

< BACK TO CONTENTS

N
O

I
T
A
M
R
O
F
N

I
R
E
D
L
O
H
E
R
A
H
S

202

Y
T
E
I

C
O
S
O
T
E
U
L
A
V
R
U
O

T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
A
R
G
E
T
N

9
1
0
2

SGS SA CORPORATE OFFICE

INVESTOR RELATIONS SGS SA

1 place des Alpes
P.O. Box 2152
CH – 1211 Geneva 1

t +41 (0)22 739 91 11

f +41 (0)22 739 98 86

e sgs.investor.relations@sgs.com

www.sgs.com

STOCK EXCHANGE LISTING

SIX Swiss Exchange, SGSN

STOCK EXCHANGE TRADING

SIX Swiss Exchange

COMMON STOCK SYMBOLS

Bloomberg: Registered Share: SGSN.VX

Toby Reeks
SGS SA
1 place des Alpes
P.O. Box 2152
CH – 1211 Geneva 1

t +41 (0)22 739 99 87

m +41 (0)79 641 83 02

www.sgs.com

ANNUAL GENERAL MEETING
OF SHAREHOLDERS

Tuesday, 24 March 2020
Geneva, Switzerland

2020 HALF-YEAR RESULTS

Tuesday, 21 July 2020

Reuters: Registered Share: SGSN.VX

INVESTOR DAYS – EUROPE

Telekurs: Registered Share: SGSN

ISIN: Registered Share: CH0002497458

Thursday and Friday
5 – 6 November 2020

Swiss security number: 249745

DIVIDEND PAYMENT DATE

Thursday, 26 March 2020

Ex-date:
Record date: Friday, 27 March 2020
Payment date: Monday, 30 March 2020

MEDIA RELATIONS

Daniel Rufenacht
SGS SA
1 place des Alpes
P.O. Box 2152
CH – 1211 Geneva 1

t +41 (0)22 739 94 01

m +41 (0)78 656 94 59

www.sgs.com

PROJECT MANAGEMENT

John Coolican

Paula Ordoñez

CONCEPT, DESIGN, PHOTOGRAPHY,
REALIZATION AND PRODUCTION

Group Charlescannon SARL
Geneva, Switzerland

PRINTED BY

Druckcenter am Rigi
Küssnacht, Switzerland

Printed on 100% recycled BalancePure
offset paper, February 2020

< BACK TO CONTENTS

WWW.SGS.COM

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