Enabling a better,
safer and more
interconnected
world
SGS 2021 Integrated Report
Our global teams of highly
qualified experts provide
specialized solutions across
our industries to enable a better,
safer and more interconnected
world, making business faster,
simpler and more efficient.
Better means
We enable a better world by helping
businesses everywhere to work
efficiently, to deliver with quality,
and to trade with integrity and trust.
Safer means
We enable a safer world by ensuring
that your car is safe to drive, that the
environment you work in is secure
and clean, and that the food you eat
is safe.
More interconnected means
We enable a more interconnected
world by helping new technology
to reach consumers quickly and
affordably, by ensuring the security
of IT systems and data, and by using
AI and the Internet of Things to help
develop smart cities.
Our integrated reporting approach
The Integrated Reporting framework
aims to create transparency. 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 2021 Corporate
Sustainability Report.
www.sgs.com/en/annual-report
In this report
Management report
– Creating value through
purpose driven leadership
– Better solutions
– Safer working environment
– More interconnected more secure
– Letter to stakeholders
– Financial results
– Sustainability Ambitions 2030
– Our company
– Positioning SGS to meet
customer demand
– Our business model
– Our leadership team
– Our strategy
– Our divisions
– Investing in our platform for growth
– Acquisitions and partnerships
– Material topics
– Risk intelligence
– Our principal risks
– Our sustainability goals aligned
to our capitals
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2
4
6
8
12
13
14
16
18
22
24
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28
30
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40
Corporate governance
Remuneration report
Financial statements
Shareholder information
Financial capital
– Investor relations
– Business review
– Integrating SGS Analytics to
create a ‘hub and spoke’ model
Manufactured capital
– Helping our customers adapt to
changing cosmetics regulations
in China
1
41
43
44
46
48
50
Intellectual capital
52
– Working with Lactalis in Italy to improve 54
efficiency at their Galbani plant
Human capital
– KUDOS employee recognition
program in North America
Social and relationship capital
– SGS People – 15 Day Challenge –
strengthen the SGS community
Natural capital
– Identifying the evolving needs of the
mining industry at our Lakefield site
56
60
62
64
66
68
Quantifying our value to society
70
Our approach to sustainable reporting 71
74
88
110
178
1
Creating value
through purpose
driven leadership
Our leading testing, inspection and certification
services add measurable value to society,
our planet, people and communities. They
reduce risk, improve efficiency, safety, quality,
productivity and sustainability, advance speed
to market and create trust.
Enabling a
better, safer
and more
interconnected
world through…
Integrity
Testing
Efficiency
Leadership
Inspection
Productivity
Health & Safety
Certification
Sustainability
Respect
Knowledge
Trust
Sustainability
Analytics
Speed to market
… our
business
principles
Quality and
professionalism
Verification
Quality
Outsourcing
Safety
Process
improvement
Reduced risk
… our
services
… the benefits we
provide to our
customers
… our value
to society
Smart
technology
development
Cybersecurity
research
Nurturing the
circular economy
Fostering zero
impact supply
chains
Promoting
sustainable
growth
Training the
next generation
Ensuring
food security
Faster and
cleaner mobility
Efficiency
and safety
of buildings
Enabling carbon
neutrality
Supporting
the switch to
renewables
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report Better
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Bringing our Sustainability Solutions
under one framework
Unifying our range of sustainability services
provides greater visibility of our comprehensive
range of services to support our customers and
help them make a positive impact on the planet,
people and communities that they touch.
Better
solutions
Management reportSGS | 2021 Integrated Annual Report
3
The challenge
for our customers
More than ever before, consumers,
investors and employees are demanding
that companies go beyond simple
compliance with sustainability
requirements. In particular, they face
increasing demands from the investment
community to act in a sustainable manner
and disclose the Environmental, Social
and Governance (ESG) issues affecting
their businesses.
Our solution
In early 2021 we launched SGS
Sustainability Solutions, unifying our
comprehensive range of sustainability
services across all divisions under one
framework. We also aligned these
solutions with key global sustainability
initiatives such as the United Nations’
Sustainable Development Goals (SDGs)
and the Principles for Responsible
Investment (PRI).
Our Sustainability Solutions are framed
across six sustainable pillars: Resources,
Energy, Production, Infrastructures,
Living and Business Practices.
These pillars allow us to focus on our
carbon footprint consultancy services,
business continuity and industrial safety,
and supporting industries in their energy
transition journey.
These services by definition enable our
customers to improve their impact on the
planet, people and communities in which
they operate.
Our new portfolio of ESG Assurance
Solutions, launched in March 2021,
is an important part of our Sustainable
Business Practices pillar. This includes
new and existing services in three
categories: ESG Certified, ESG Verified
and ESG Optimized. SGS has delivered
new services in all these categories to
customers in a range of sectors located
in North and South America, Europe,
Africa and Asia.
Next steps
We recognize that the TIC industry is at
an early stage in its development of new
sustainability solutions. Our framework
includes our existing Sustainability Solutions,
but will also support the development
of new services across ESG Assurance
Services, Energy Transition, Responsible
Supply Chain and Traceability. For example,
a stronger understanding of the voice
of the customer has helped us increase
the breadth of our services in waste
in construction and manufacturing.
Watch our case study
film by scanning the
QR code or click here
Better means
We enable a better world by helping
businesses everywhere to work
efficiently, to deliver with quality,
and to trade with integrity and trust.
1
framework unifying all
sustainability services
6
sustainability pillars to support
energy transformation
3
categories of new ESG
Assurance Solutions
Read more online
at www.sgs.com/en/
sustainability-solutions
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report Safer
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Improving air
quality in the
Boston School
District
Our innovative
‘Internet of Things’
(IoT) solution, SGS
SmartSense, uses
cloud-based continuous
monitoring to monitor
air quality for the Boston
School District (BSD).
Safer
working
environment
Management reportSGS | 2021 Integrated Annual Report
5
Next steps
SGS SmartSense enables customers
to monitor volatile organic compounds
(VOCs), carbon monoxide, temperature,
pressure, humidity and other contaminants
from anywhere in the world. It also
measures temperature, relative humidity
and barometric pressure, and can be
augmented with up to five additional
sensors with the ability to add noise,
particle, wind and sample capture.
This contract with BSD is an important
landmark for our Industries & Environment
division’s Building & Infrastructure strategy.
It has contributed towards our target of
achieving 50% of our revenue through
Sustainability Solutions, and has also
highlighted how we can assist our
customers to make their buildings safer,
smarter, healthier and greener globally.
Our solution
After winning a public tender, SGS
entered a three-year contract to provide
air monitoring services to the BSD in
March 2021. What set us apart from the
competition was the level of competence
and technical expertise demonstrated
by our infrastructure teams. SGS offered
advanced solutions for industrial hygiene,
including ‘Internet of Things’ Technology
(IoT) with our cloud-based continuous
monitoring and sampling system,
SGS SmartSense.
Collecting exposure data 24/7 for
Indoor Air Quality, SGS SmartSense is
able to provide around 5 000 real-time
measurement points that make a real
difference to the BSD, and provide
them with easy access to air quality
profiles, downloads, warnings and
reports. The schools occupy several
old buildings and presented a number
of additional challenges that we had
the capability to address. In addition to
assessing the air quality, we identified
asbestos in the buildings and even
lead in some of the water pipes.
Watch our case study
film by scanning the
QR code or click here
The challenge
for our customer
The BSD is the oldest public-school
system in the US, and issues with air
quality in their buildings could affect
the learning experience for its 54 000
students. Detecting and solving such
problems is a vital part of providing
the best possible environment for
the students, teachers and staff
across BSD’s 125 schools.
Safer means
We enable a safer world by ensuring
that your car is safe to drive, that the
environment you work in is secure
and clean, and that the food you eat
is safe.
54 000
students in the Boston schools
district with poor air quality
5 000
number of real time measurement
points collected by SGS SmartSense
$5.3m
landmark contract for Industries
& Environment (I&E) to provide
air monitoring services
Read more online at
www.sgsgalson.com/
healthy-school-buildings
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report More
interconnected
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SGS Brightsight – the
world’s leading independent
security evaluation lab
With over 35 years of
experience in evaluating
IT products in different
industries, SGS Brightsight
supports companies in
complying with the latest
security regulations and
requirements.
More
interconnected
More
secure
Management reportSGS | 2021 Integrated Annual Report
7
The challenge
for our customers
With the rapid evolution of new
technologies based on the use of
5G, the ‘Internet of Things’ (IoT) or
‘Artificial Intelligence’ (AI), businesses
that rely on them are facing new and
complex challenges. Customer demand
for stronger and more technical
cybersecurity assessments and testing
is rapidly growing, partly driven by
increasing pressure from authorities
and new regulations.
Our solution
Through our Connectivity & Products
division, we aim to offer our customers
a complete range of global solutions that
verify the quality, regulatory conformity
and performance of their products.
There is a growing demand from individuals
and organizations for information security,
data protection and cybersecurity.
The acquisition of Brightsight in May
2021 materially accelerates our global
strategy to become the global TIC leader
in cybersecurity. With an independent
network of laboratories headquarted in
the Netherlands, 145 highly qualified
employees and local offices in Barcelona,
Madrid, Graz (Austria), Meyreuil (France),
Beijing and Taipei, SGS Brightsight is
an accredited expert in cybersecurity.
Its product range includes bank cards,
mobile payment systems, payment
terminals, and electronic identity
solutions such as electronic passports.
Its quality management system is also
ISO 17025 certified.
A product evaluation from SGS Brightsight
gives our customers access to the markets
they want to serve with their products.
With more than 170 security evaluators in
different countries, the company has the
capacity to complete over 700 security
projects each year for more than 100
leading Cloud and Silicon customers
worldwide. SGS Brightsight has more than
55 laboratory setups that evaluate and
certify IT products across a range of areas
including perturbation attacks, side-channel
attacks, reverse engineering and physical
attacks, software-based security and
IT vulnerabilities.
Next steps
As more and more products are connected,
our customers face new challenges to
ensure that their products are not only
safe to use, but that they are also secure.
Serving this growing need for higher
standards of security is crucial for SGS,
and we continue to build on our reputation
and track record to drive future sales of
our cybersecurity services.
SGS Brightsight balances the right level
of security for our customers with time
to market for their products. Our experts
also provide up-to-date information on
market developments to further develop
our customers’ capabilities in the areas
of security technologies, regulations
and standards.
The cybersecurity market is developing
rapidly and requires a broad service scope.
SGS Brightsight’s expertise is testing
connected products (including hardware/
software) and connectivity (IT and Cloud).
We expect to see strong synergies from
SGS Brightsight across the business,
in particular in our operations in Asia.
Watch our case study
film by scanning the
QR code or click here
More interconnected means
We enable a more interconnected
world by helping new technology
to reach consumers quickly and
affordably, by ensuring the security
of IT systems and data, and by using
AI and the Internet of Things to help
develop smart cities.
170
security evaluators with
the acquisition of Brightsight
700
number of security projects
each year by SGS Brightsight
50
laboratory set ups
Read more online at
www.brightsight.com
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 8
Letter to stakeholders
– building a thriving
future for SGS
Implementing the next phase of our strategic
evolution in 2021 is increasing the cooperation and
agility across our global network. This is helping us
leverage our expertise and competence, specifically
in our key focus areas, and is making SGS more
digital and sustainable.
Calvin Grieder
Chair of the Board
of Directors
Frankie Ng
Chief Executive Officer
Dear stakeholders,
We were excited to start the implementation of our new strategic plan
at the beginning of this year, and we have already made significant
progress in deploying it across our network.
The strategic plan puts a renewed emphasis on market leadership through: digital
innovation, ‘thinking sustainably’, including further integrating our non-financial
and financial objectives. It also aligns SGS more explicitly to the five key TIC
growth megatrends of: Connectivity, Nutrition, Health & Wellness, Sustainability
& Climate, Infrastructure, and Consumer Empowerment.
Our people, our colleagues remain our key success factor and their energy
and passion makes us unique. It is through their hard work and commitment
to supporting our customers, that SGS has delivered another strong
operational performance in 2021. At the same time, they continue to deal
with personal and professional Covid-related challenges, and regrettably,
for some, tragedies in their personal lives.
We are making significant investment in our employees and platform to
reinforce our leadership positions in the TIC industry and build a thriving future
for SGS. As we continue to execute our strategy, we are evolving into an even
more sustainable, digital and data-driven company, fully capable of supporting
our commitment to enabling a better, safer and more interconnected world
for all our stakeholders.
Organic* revenue growth of 8.9% and an increase in adjusted operating income
margin* from 16.1% in the prior year to 16.5% were supported by strong cost
discipline and economic value-added performance management. Cash flow
from operating activities was CHF 1 169 million, comparable with prior year.
Higher profit was offset by a higher net working capital requirement to support
the recovery of activity in 2021. Operating net working capital remained
negative as a percentage of revenue at (2.4)% compared to (2.5)% in prior year.
The strong operating performance was supported by our pricing initiatives and
cost control in an inflationary environment.
Management reportSGS | 2021 Integrated Annual Report “ Our investment in and commitment to supporting our
customers more sustainably and digitally is fundamental
to our growth and success. Multiplied by the commitment
of our colleagues, we are building a thriving future for SGS.”
Calvin Grieder
Chair of the Board of Directors
9
Key highlights from the year
• Launched Sustainability Ambitions
2023/2030 driving a ‘thinking sustainably’
approach to engaging with stakeholders
• Accelerating net capex to 5.1% of Group
revenue by allocating more operational
capital to structurally growing markets
• Investing significantly in Digital & Innovation
to create new products and services,
improve customer experience and
automate operations
• Introduced our Sustainability Solutions
Framework to further support our customers
to achieve their sustainability goals
• Nine acquisitions further aligning our
portfolio with our focus on megatrends
The SGS family is a wide and diverse community spread around the globe. To celebrate it, we organized
a drawing contest for the children of all our employees where we asked them to draw what they like the
most about their locations or what parts of the world they would like to visit. The almost 2 000 drawings
we received highlight the talent, diversity and wanderlust of our little artists.
Learn more about the highlights
this year. Watch our highlights film
2021 online at sgs.com/2021highlights
Revenue
CHF 6.4BN
+14.2%1 +8.9% organic*
Value to society calculated
in 2021 for 2020
CHF 5 496 MIO
Adjusted operating income margin*
16.5%
+0.4pp1,2
A year of strategic evolution
Implementing the next phase of our
strategic evolution has fostered increased
cooperation and agility across our global
network. It has further brought together
and built upon our competence across our
global network, specifically in our strategic
focus areas. Only by positioning our global
network for future customer demand
can we ensure a thriving future for SGS.
Our culture of ‘thinking sustainably’ when
dealing with all stakeholders, and our
investment in digital are significant
catalysts in the process.
We have increased our net capex to 5.1%
of Group revenue. This has enabled us
to accelerate our digital transformation
and build exciting new services. We are
the global leader in three of our divisions:
Knowledge, Natural Resources and
Connectivity & Products. We are targeting
a leadership position in Environment,
Health & Safety services in Industries
& Environment, and to reach over
CHF 1 billion of revenue in Health
& Nutrition.
We continue to improve the operational
excellence. For example, as part of our
long-term strategic global World Class
Services (WCS) program, 12 of our
laboratories achieved their first external
audits and other sites are getting closer
to this milestone.
In terms of strategic portfolio evolution,
we acquired Brightsight, the world’s
leading cybersecurity evaluation laboratory
network for chip-based secure payment
systems, secure identity solutions and
IoT platforms. This acquisition materially
accelerates our strategy to become the
global TIC leader in cybersecurity. We made
four acquisitions to increase our presence
across the health sciences, food and
cosmetics supply chains. This includes
Quay Pharmaceuticals Limited, a leader
in formulation research and development,
further expanding our positioning along
the Health Science supply chain. We also
continued to integrate SGS Analytics,
acquired in December 2020, which
significantly accelerates our European
hub and spoke laboratory model in
high-volume environmental testing.
1. Constant currency (CCY)*.
2. Percentage points.
*
Alternative Performance Measures (APM),
refer to the ‘2021 Full Year APM’ document.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 10
Letter to stakeholders
continued
“ Our key success factor remains the dedication
and dynamism of our colleagues. It is through
their hard work and commitment to supporting
our customers, that SGS has delivered another
strong operational performance this year.”
Frankie Ng
Chief Executive Officer
Thinking sustainably at SGS
A large number of ESG related regulations
are expected to be enacted over the
next few years and we are positioning
SGS to support our customers to meet
them. Pressure is growing to move from
voluntary to mandatory sustainability
reporting disclosures, which will then
trigger changing behavior across the
supply chain, and represents a significant
opportunity for the TIC industry.
To further support our customers to
achieve their sustainability goals, we
introduced our Sustainability Solutions
Framework. This unifies our comprehensive
range of existing and new innovative
services aligned with the UN Sustainable
Development Goals. It increases the
visibility of the value to society of our
current services and provides a platform
for the launch of new sustainability
solutions to complement them. By 2023,
we aim to generate more than 50% of
our revenues from sustainability solutions
across our global network.
We have further aligned our capital
allocation decisions and management
incentivization to sustainable criteria.
Progress was through: launching a €1 billion
sustainability-linked revolving credit facility;
further elevating sustainability factors in
the Operations Council capex approval
process; introducing sustainability KPIs
in both our short-term and long-term
management incentivization.
Finally, in 2021, we launched our Corporate
Sustainability Ambitions 2030, including
our most challenging targets yet for 2023
and 2030. These are directly linked to our
strategic evolution, span our entire value
chain, and are factored into our capital
allocation and management remuneration.
Our new targets are built around three pillars:
• Better governance, upholds our standards
of excellence and integrity, enhances
our information governance framework
and extends our sustainability principles
to our supply chain
• Better society ensures equal opportunities,
investing in our employees and
communities, occupational health and
safety and human rights compliance
• Better planet is our climate change strategy,
reducing energy consumption at source,
using renewable energy whenever possible,
and off-setting residual emissions. We have
been carbon neutral since 2014 and we
were one of the first companies to set
science-based targets for 2025 and 2030.
Following our climate strategy, we are
now committed to the Business Ambitions
for 1.5 degrees and to Net-Zero
Following the AGM we will appoint a
dedicated Sustainability Committee of the
Board to reflect its growing importance
to all our stakeholders and build on the
substantial work already achieved by
the company and its employees.
Digital service innovation
Our vision is to become the most digital
company in the TIC industry. As part of this
process, we have accelerated our Digital &
Innovation strategy to create new products
and services, improve customer experience
and automate our operations.
Tangible progress in 2021 includes: establishing
an emerging technology competence center;
developing digital, IoT and AI centers of
excellence, and partnering with Microsoft to
accelerate the process; implementing process,
governance and KPIs to ensure progress;
we now have more than 150 different
projects across the organization today
where digitalization plays an important part.
Data is increasingly a prerequisite for
our customers and society, and SGS is on
the path to becoming a data-driven company.
To help us achieve this goal, we are evolving
to fully harmonized Laboratory Information
Management Systems (LIMS) that will help
us create Digital Labs with harmonized
data that can then benefit fully from AI,
Machine Learning and predictive analysis.
This will enable our customers to connect
and integrate with our data platform. It also
materially improves the customisation of
our service offering. This will significantly
improve customer experience and enhance
both their and our operational efficiency.
Our digital innovation is concentrated
on three main areas:
• Automating our existing operations
for efficiency and effectiveness, such
as: container inspection and reporting,
monitoring stock volume, and next
generation performance testing for
consumer products
• Digitalizing 30% of our customers’
journeys through our new digital hub
by 2023
• Creating new solutions and business
models that can add significant value
to our service offering
2022 Outlook
• Mid single-digit organic growth
• Improving adjusted operating income
benefiting from operational leverage
• Strong cash conversion
• Maintain best-in-class organic return
on invested capital*
• Accelerate investment into our
strategic focus areas with M&A
as a key differentiator
• At least maintain the dividend
*
Alternative Performance Measures (APM), refer to the
‘2021 Full Year APM’ document.
Management reportSGS | 2021 Integrated Annual Report 11
Planet, Performance and People
Our 2020-23 strategic evolution further integrated our financial and non-financial objectives by setting
together our three target criteria: Planet, Performance and People.
Planet
Performance
People
Reducing our CO2 emissions
Support the transition to a low-carbon
world by meeting our Science-based
Target of reducing our CO2 emissions
per revenue by 35%¹
High single-digit constant currency
revenue Compound Annual Growth
Rate (CAGR)
Driven by mid single-digit organic*
growth per annum and a focus on M&A
Sustainability solutions
Support our customers on their journey
to sustainability by increasing the
proportion of revenue generated by our
sustainability solutions to above 50%
Integrity principles
Reduce the impact that our supply chain
has on society by committing our strategic
suppliers to support our integrity principles
Energy efficiency
Increasing annually the number of energy
efficiency measures in our 100 most
energy intensive owned buildings
> 10% adjusted operating
income* CAGR
Strong Economic Value Added
discipline (EVA)
Maintain or grow the dividend
per share
1. Against a 2014 baseline.
2. Against a 2019 baseline.
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Management changes
Jessica Sun joined the SGS Group as Senior
Vice President of Human Resources and has
been appointed to the Operations Council.
José María Hernández-Sampelayo (formerly
Senior Vice President of Human Resources)
stepped down from the Operations Council
to take the role of Vice President of Group
Strategic Projects.
Steven Du has been appointed Chief
Operating Officer of North East Asia
replacing Helmut Chik who has decided
to leave the SGS Group to pursue
other interests.
We would like to thank José María and
Helmut for their dedication and contributions
to the Operations Council and Helmut for his
significant contribution to the SGS Group.
Board changes
On 23 March 2021, Janet S. Vergis was
elected as a member of the Board of Directors
bringing over 30 years of experience in
positions of responsibility in research &
development, new product development and
sales & marketing in the healthcare industry.
François von Finck, Gérard Lamarche and
Cornelius Grupp did not stand for re-election.
SGS would like to thank them for their long-
term support and direction. We appreciated
their vast leadership experience.
Distribution to shareholders
The SGS Board of Directors will
recommend to the Annual General Meeting
(to be held on 29 March 2022) the approval
of a dividend of CHF 80 per share.
Ensuring diversity
Nurture diversity and inclusion based
on merit by ensuring equal opportunity
to all employees and evolving our gender
diversity to 30% women in leadership
at CEO-3 positions and above
World Class Service (WCS)
Promote a culture of operational safety,
efficiency and excellence through our
WCS program: 20% of our WCS labs
(2020 perimeter) reaching WCS Bronze
award level
Supporting personal development
Support the personal development of our
employees by increasing the completion
rate of job-related training by 10%²
Positive impact on communities
Increase by 10%² our positive impact
on our communities through employee
volunteering, focusing on vulnerable groups
including those affected by pandemics
Significant shareholders
As at 31 December 2021, Groupe Bruxelles
Lambert (acting through Serena SARL
and URDAC) held 19.11% (December
2020: 18.91%) of the share capital and voting
rights of the company. At the same date,
the Group held 0.04% of the share capital
of the company (December 2020: 1.28%).
Calvin Grieder
Chair of the Board of Directors
Frankie Ng
Chief Executive Officer
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 12
Financial results
Our strong 2021 performance has confirmed
our strategic focus. Combined with the
investment in our platform we are building
a thriving future for SGS.
Revenue
Adjusted operating income*
Adjusted operating income margin*
CHF 6.4BN
+14.2%1 +8.9% organic*
CHF 1 055MIO
+16.8%1
16.5%
+0.4pp1,3
2021
2020¹
6.4
5.6
2021
2020¹
1 055
2021
903
20201
Profit for the period
Basic earnings per share
CHF 655MIO
+29.7%
CHF 81.91
+27.9%
Proposed dividend
CHF 80
2021
2020
655
2021
505
2020
81.91
64.05
2021
2020
Free cash flow*
Return on invested capital*
Acquisitions completed in 2021
CHF 635MIO
(16.2)%
19.6%
+3.1pp3
9
2021
2020
635
2021
758
20202
19.6
20.9
2021
2020
16.5
16.5
16.1
80
80
9
6
1. Constant currency (CCY)*.
2. 2020 ROIC at 20.9% when adjusted for SYNLAB Analytics & Services (A&S) acquisition completed on 31 December 2020.
3. Percentage points.
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Management reportSGS | 2021 Integrated Annual Report Sustainability
Ambitions 2030
Meeting our
commitments
to environment
and society
Delivering our strategic pillars
Sustainability is fundamental to what we
do and how we behave as a company.
Rankings and ratings
A-, climate
management and
disclosure, CDP
Low Risk
Sustainalytics
13
We launched our Sustainability Ambitions 2030
focusing on three pillars: better governance, better
society and better planet. These targets will be
achieved by our colleagues ‘thinking sustainably’
when engaging with all stakeholders.
Better
governance
88%
NEW
customer satisfaction
score
sustainable procurement
strategy launched
NEW
€1BN
sustainable IT action plan
to drive SA30 innovation
sustainability-linked
revolving credit facility2
AAA, MSCI
ESG rating
PRIME rated, ISS
ESG Corporate Rating
Platinum, Ecovadis
Sustainability
Rating
Constituent,
FTSE4Good Index
4 consecutive years
Better
society
29%
women in
leadership positions
14%
decrease in Lost Time Incident
Rate (LTIR) since 2018
of Dow Jones
Sustainability Indices
(World and Europe)
CHF 1.45 MIO
ESG KPIs
total community
investment
embedded into the
Long-Term Incentive plan1
Better
planet
Carbon
neutral since
2014
6.7%
lower-emission
company vehicles
39%
decrease in CO2
emissions since 2014
97%
renewable
energy sourced
Committed to
Net Zero
1. KPIs include women in leadership, CO2 emissions
and safety LTIR.
2. Under the Facility, SGS is committed to meeting
ambitious targets for the following three sustainability-
linked key performance indicators (KPIs), which are an
integral part of our SA30: (1) CO2 emissions, (2) women
in leadership positions, and (3) Lost Time Incident Rate.
2022Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 14
Our Company
Our seven regions
SGS operates in 125 countries.
This makes us truly global and
focused on the impact we have
on the planet.
Americas
18.9%
of total SGS revenue
North America
Latin America
Our five divisions
1
2
3
Connectivity & Products
Making products better, safer and more
sustainable in a more connected world.
Our experts support brands, manufacturers,
retailers and governments across the supply
chain with the performance, safety, security
and quality of their products and services.
Health & Nutrition
We help customers meet stringent
standards along their supply chain and
improve the quality of life in society by
assuring the quality, safety, sustainability
and security in the health, wellness and
nutrition industries.
Industries & Environment
As organizations transition towards
cleaner and sustainable energy solutions.
Environmental responsibilities are
paramount and our innovative solutions
enable safer, greener and smarter
infrastructure, transportation and industries.
Adjusted operating income
Adjusted operating income
Adjusted operating income
CHF 316 MIO
CHF 149 MIO
CHF 240 MIO
Adjusted operating income margin
Adjusted operating income margin
Adjusted operating income margin
24.5%
17.3%
11.3%
Read more on page 44
Read more on page 44
Read more on page 45
Management reportSGS | 2021 Integrated Annual Report 15
Asia Pacific
35%
of total SGS revenue
North East Asia
South East Asia & Pacific
Europe, Africa,
Middle East
46.1%
of total SGS revenue
Africa & Western Europe
North & Central Europe
Eastern Europe & Middle East
4
5
Natural Resources
Our global network of trusted, independent
and committed experts delivers pivotal
solutions to the agricultural, mining, oil, gas
and chemical industries, supporting quality,
safety, efficiency and sustainability goals,
across the supply chain.
Knowledge
Through the expertise and knowledge of
our people, processes and tools, we help
organizations to improve results, manage
risk, comply with regulatory changes,
adopt best practice and reach increasingly
stringent sustainability requirements.
Adjusted operating income
Adjusted operating income
CHF 210 MIO
CHF 140 MIO
Adjusted operating income margin
Adjusted operating income margin
14.3%
21.1%
Read more on page 45
Read more on page 45
Revenue by division
Total
CHF 6 405 MIO
1
2
3
4
5
N
B
8
8
2
1
N
B
1
6
8
N
B
0
2
1
2
N
B
3
7
4
1
1. Connectivity & Products
2. Health & Nutrition
3. Industries & Environment
4. Natural Resources
5. Knowledge
N
B
3
6
6
20%
13%
33%
23%
11%
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report
16
Positioning SGS
to meet customer
demand
We have integrated the five interconnected TIC
megatrends into our long-term strategic thinking
and mapped them to our five divisions. This ensures
that SGS is ready to meet customer demand
in the structurally growing markets and we are
focused on addressing some of the planet and
society’s largest challenges.
The five megatrends impacting on society
Connectivity
Nutrition, Health
& Wellness
Sustainability
& Climate
According to the World Economic Forum,
access to the internet has doubled since
2010.1 The emergence of new technologies
such as 5G, the IoT and AI are combining to
transform the way products are produced.
We are entering a new era where networks
of machines that are digitally connected
through cyber-physical systems are
sharing information often without human
involvement. A more connected world
brings both opportunities and challenges
to society. Brands, manufacturers, retailers
and governments must ensure the safety,
quality and regulatory conformity of their
products and services. They need to deliver
safe, accessible, high quality products
and services in stores and online, ensure
secure connectivity and reduce risks for
all stakeholders.
The nutrition, health, wellness industries
are converging, responding to consumer
demands for healthier lifestyles and well-
being. McKinsey estimates the global
wellness market at more than $1.5 trillion3,
with annual growth of 5-10%. A rise in
both consumer interest and purchasing
power presents tremendous opportunities
for companies, particularly as spending on
personal wellness rebounds after stagnating
or even declining during the Covid-19 crisis.
Consumers need to know that the food they
eat, the medicines, cosmetic and hygiene
products they use are safe and will not
harm them. Companies need to be able
to demonstrate the safety, security, quality,
sustainability, authenticity and efficacy of
food, healthcare and wellness products.
We are facing a climate emergency,
with more than one in ten of the world’s
population vulnerable to climate change
impacts such as droughts, floods, heat
waves, extreme weather events and a
rise in sea-levels. The earth’s finite natural
resources are disappearing fast, with global
use of natural resources reaching 100 billion
tons per year. Of all the minerals, fossil
fuels, metals and biomass used each year,
just 8.6%5 are cycled back into the circular
economy. Organizations of all sizes face
a growing social and regulatory scrutiny
of climate, natural resources, health and
wellness and responsible consumption.
A commitment to sustainability is expected
to be central to their value proposition and
integrated into all operational and financial
business models.
$10.5tn
is the estimated annual
cost of cybercrime by 20252
80%
of survey respondents said they will be
more mindful about practicing regular
self-care once the pandemic is over 4
11%
of the world’s population
currently vulnerable to
climate change6
s
e
i
r
t
s
u
d
n
i
r
u
O
SGS offers services
across 11 major industries.
We develop and maintain
world-class expertise to
support the evolving needs
of our customers. Thanks to
our capabilities we are able
to provide solutions to the
challenges they face across
the globe. Our chosen markets
are and will be determined
by our ability to be the most
competitive and to consistently
deliver unequalled service
to our customers.
Oil
and gas
Innovative,
sustainable
solutions that
add up along
the value chain.
Agriculture
and food
Developing
innovative
safety, quality
and sustainability
solutions for
supply chains.
Transportation
Mining
Driving a safer,
cleaner and more
efficient industry.
Delivering
expert services
to improve
speed to market,
manage risks
and maximize
returns.
Industrial
manufacturing
Making
manufacturing
more productive
and profitable.
Life
sciences
Safeguarding
the quality
and efficacy
of medicines.
Energy
Construction
Public sector
Chemical
Powering
processes in
renewables and
when constructing
development.
and performance
and sustainable
Ensuring safety
Facilitating trade
Driving innovation,
Enabling
conventional
energy.
buildings or
infrastructure.
Protecting
society against
fraud and
economic crime.
finished products.
optimization,
efficiency and
safety across
the board, from
feedstocks to
Consumer
and retail
manufacturers,
exporters,
importers and
retailers to
generate trust
throughout the
supply chain.
Management reportSGS | 2021 Integrated Annual Report
1. www.weforum.org/agenda/2020/
08/internet-users-usage-countries-
change-demographics/
4. www.statista.com/topics/
1145/internet-usage-worldwide/
5. www.circle-economy.com/resources/
2. https://cybersecurityventures.com/
circularity-gap-report-2020
cybersecurity-almanac-2022/
3. Feeling good: The future of the
$1.5 trillion wellness market,
April 8, 2021, McKinsey.
6. www.conservation.org
7. www.who.int
8. www.accenture.com
17
Infrastructure
Consumer
Empowerment
Market size by
business division
(CHF BN)
More than half of the world’s population
lives in metropolitan areas. While this
urbanization enables increased productivity,
the need for resources and space affects
the economy, environment and quality
of life. Innovation in areas such as smart
cities and smart mobility are helping to
advance economic growth and improve
infrastructure and community services.
Organizations need to adopt more
sustainable approaches to infrastructure,
transportation and business operations
while protecting their workers, reducing
their environmental footprint, managing risk,
increasing business efficiency and ultimately
enhancing their brand reputation.
68%
of the world’s population
is projected to live in urban
areas by 20507
We are seeing how increased purchasing
power can really make a difference,
especially as more consumers want
companies to take a stand on issues
like sustainability, transparency and fair
employment practices. This has led to
increased market demand for traceability
and transparency across the supply chain.
There is also pressure on regulators to
support people, as they make better
informed decisions like eating less meat,
sourcing organic food, flying less and
buying electric cars. At the same time,
Covid-19 has enhanced people’s trust in
institutions – businesses, organizations, and
governments8 – as the public looks to them
for protection. Increasingly, organizations
must keep up to date with complex
regulatory obligations and best practices to
reduce legal, financial and reputational risks.
62%
of customers want companies to take
a stand on issues like sustainability
transparency and fair employment8
Oil
and gas
Innovative,
sustainable
solutions that
add up along
the value chain.
Agriculture
and food
Developing
innovative
and sustainability
solutions for
supply chains.
Transportation
Mining
Industrial
manufacturing
Life
sciences
Driving a safer,
Delivering
Making
cleaner and more
expert services
manufacturing
safety, quality
efficient industry.
to improve
more productive
speed to market,
and profitable.
Safeguarding
the quality
and efficacy
of medicines.
manage risks
and maximize
returns.
Energy
Construction
Public sector
Chemical
Powering
processes in
renewables and
conventional
energy.
Ensuring safety
and performance
when constructing
buildings or
infrastructure.
Facilitating trade
and sustainable
development.
Protecting
society against
fraud and
economic crime.
Driving innovation,
optimization,
efficiency and
safety across
the board, from
feedstocks to
finished products.
Consumer
and retail
Enabling
manufacturers,
exporters,
importers and
retailers to
generate trust
throughout the
supply chain.
Connectivity
& Products
CHF 40 BN
Health
& Nutrition
CHF 50 BN
Industries
& Environment
CHF 70 BN
Natural
Resources
CHF 60 BN
Knowledge
CHF 20 BN
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 18
Our business model
Creating value
to society
As leaders in the TIC industry, SGS plays a crucial
role in bringing value to society, as well as to our
investors and other stakeholders by setting planet,
performance and people together as targets.
Our inputs
Total equity
CHF 1 202 MIO
Profit (prior year)
CHF 505 MIO
Financial
capital
The funds
available to us
Total assets
CHF 7 007 MIO
Offices and laboratories
Capital expenditure
+2 600
CHF 336 MIO
Manufactured
capital
Infrastructure,
equipment
and tools
Intellectual
capital
Organizational,
knowledge-
based intangibles
Human
capital
The skills and
know-how of
our employees
Social and
relationship
capital
Our relationships
with our
stakeholders
Goodwill and other
intangible assets
CHF 2 160 MIO
R&D
expenditure
CHF +70 MIO
Employees
96 000
SGS Rules for Life
15
Suppliers
+65 000
SGS Recruiter Academy
1
Customers
+800 000
SGS Community Program
Our business model
Our purpose
Enabling a better,
safer and more
interconnected
world
About our business model
Most of our revenues are tied to contracts of
varying lengths with a broad range of customers.
Customer retention is strong for several reasons.
In certification areas such as health and safety, and
supply-chain management, switching costs can be
high, as changing providers may involve retiring an
existing system and incurring significant costs to
start again. In other areas, such as consumer product
testing, the average contract length is short, typically
a year. Switching carries a risk of reputational damage
and the financial benefits of switching can be small.
Typically, manufacturers spend less than 1% of the
value of goods in control and testing.
All our businesses operate under our globally
recognised name. Over our long history, we have
amassed a vast number of operating licences,
accreditations, and government authorisations, which
is difficult to replicate. We have a global footprint
comprising 2 600 laboratories and offices and 96 000
experts. Our scale allows us to leverage these
capabilities and expertise to bid for large multiyear
contracts. As our network expands, our customer
offer also increases creating a virtuous circle.
What we do
Electricity consumed
480 GWh
Water consumed
1.9 MIO m3
Testing
Inspection
Natural
capital
The natural
resources we
need to operate
Fuel consumed
448 GWh
Certification
Knowledge
Our global drivers
Management reportSGS | 2021 Integrated Annual Report
19
Our outputs
Revenue
CHF 6.4 BN
Free cash flow*
CHF 635 MIO
Financial
capital
Long-term shareholder
value creation
Adjusted operating income margin*
16.5%
SGS Analytics significantly
strengthened presence in
North-Western Europe with:
New cosmetic testing
labs in China equipped with
cutting-edge technologies
Manufactured
capital
Efficient and
sustainable services
Labs
37
Professionals
2 000
2
Our value
CHF 3 180 MIO paid in wages
to our employees
CHF 270 MIO taxes paid to governments
CHF 599 MIO in dividends proposed
to our shareholders
Delivering safe medicine to patients
Ensuring a safe, quality and sustainable
food supply chain
Quickly adapting to regulatory changes
to provide efficient and safe products
to consumer
Training ratio1
2.61%
Intellectual
capital
Expertize and
innovative solutions
Employees trained in information
security and data privacy
99%
Number of laboratories using
World Class Services
Enhancing career opportunities
through training
22
Improving knowledge through innovation
Simplifying the customer journey
through innovation
Women in leadership positions
Lost time incident rate
29%
Employees trained
to Code of Integrity
99%
Community
investment
0.22
(occurrences per 200 000)
Satisfaction score in our Voice
of the Customer surveys
CHF 1.45 MIO
88%
Percentage of suppliers locally sourced
Protecting the health of employees
through Operational Integrity excellence
and well-being programs
Reducing social risks by reinforcing
human rights compliance
Work from home remains in place
Supporting communities during Covid-19
Improving how we work with
our customers and suppliers
82%
Metric tons
of CO2e
131 542
EEB program: number of
buildings under the program
694
Carbon neutral since 2014
Helping mitigate climate change
by reducing air pollution
Minimizing resource depletion
and protecting the environment
Human
capital
Diverse leaders in a safe
working environment
Social and
relationship
capital
Meaningful stakeholder
engagement and strong
brand and reputation
Natural
capital
Carbon neutrality, limited
waste and wastewater
1. % of total employment cost spent on training.
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Our value to society
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 20
Our business model
continued
Our process: Testing
Customer
The activities that underpin our
business model also underpin
the global economy.
For example, consumers can be confident
the products they buy have been tested
and meet the required quality and safety
standards. A proliferation of global
brands has increased the need for brand
protection, leading to greater scrutiny
of supply chains and quality, health and
safety and environmental systems.
Importers know the content of their cargo
has been inspected and meets quality
control standards. The contents have
been monitored across supply chains
and are the same as those specified in
their contract. In an increasingly digital
world, ever more sophisticated products
need a high degree of testing expertise.
ICT devices and systems need to be
certified against international security
standards to provide the highest levels
of assurance and confidence.
Testing reduces risks, shortens time to
market and tests the quality, safety and
performance of products against relevant
health, safety and regulatory standards.
Inspection controls quantity and quality,
and helps customers meet all relevant
regulatory requirements across different
regions and markets. Certification ensures
products, processes, systems or services
meet national and international standards
and regulations.
1 Customer need
Job scope agreed with
customer encompassing
compliance or meeting
a quality specification
and, in some cases,
establishing value
2 Process planning
Define the
correct methodology
including safety and
ESG considerations
3 Sampling
Collected by SGS
(including digitally)
or submitted
by customers
8 Customer outcome
Assessment of sample
is compliant/meeting
customer requirements.
Post-analysis review
with customer and
satisfaction assessment
7 Data generation
approval and reporting
6 Analysis
5 Sample preparation
4 Sample registration
Digital registration of
samples in LIMS (this
step can be combined
with sampling)
Management reportSGS | 2021 Integrated Annual Report
21
Our process: Inspection
Customer
4 Customer outcome
Assessment of inspection
findings is compliant/meeting
customer requirements.
Post-analysis review
with customer and
satisfaction assessment
1 Customer need
Job scope agreed with customer.
Inspection of quantity or
compliance to measurement
or a build specification
3 Physical or remote inspection
Field measurements, visual
inspection, timelines (taking
into account the allocation
of logistical charges), incident
reporting and sampling and
associated services if required
2 Process planning
Define the correct
methodology including
safety and ESG
considerations
Our process: Certification
Customer
1 Customer need
Agree with customer on
which standard to be applied
7 Maintaining
certification
Ongoing
surveillance
and cyclical
recertification
audit program
6 Customer
Certification
documents
provided to
the customer
2 Process planning
Audit/assessment dates,
sites and processes to
be sampled and agreed
with the customer
5 Technical review &
certificate decision
Independent evaluation
of the efficacy of the audit
process to determine if
certification shall be granted
4 Stage 2
Audit
Evaluation of compliance
with certification
standard requirements
3 Stage 1
Preparedness review
Evaluation of client’s
preparedness for the
stage II audit
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report
22
Our leadership
team
Headed by our CEO, the Operations Council
governs SGS’s future and comprises a total of
18 members across six key business principles
areas, seven regions and four functions.
Regions
Functions
Frankie Ng
Chief Executive Officer
Fabrice Egloff
Africa & Western Europe
Wim Van Loon
North & Central Europe
Dominik de Daniel
Finance, M&A,
IT & Procurement
Teymur Abasov
Eastern Europe & Middle East
Steven Du
North East Asia
Jessica Sun
Human Resources
Luis Felipe Elias
Latin America
Malcolm Reid
South East Asia & Pacific
Toby Reeks
Investor Relations,
Corporate Communications
and Sustainability
Stephen Nolan
North America
Olivier Merkt
Legal, Compliance
& Corporate Security
Management reportSGS | 2021 Integrated Annual Report Our Operations Council
Our Operations Council is made up of six Executive Vice
Presidents, seven Chief Operating Officers and four functional
Senior Vice Presidents, as well as our Chief Executive Officer,
Chief Financial Officer and General Counsel. The Council
meets regularly to decide on strategies and priorities, and
to review the Group’s performance.
Cross-divisional
strategic units
Divisions
Siddi Wouters
Digital & Innovation
Charles Ly Wa Hoi
Connectivity & Products
Jeffrey McDonald
Knowledge
Olivier Coppey
Health & Nutrition
Alim Saidov
Industries & Environment
Derick Govender
Natural Resources
23
s
e
l
p
i
c
n
i
r
p
s
s
e
n
i
s
u
B
We follow six key
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
in which we operate. We speak up; we are
confident enough to raise concerns and smart
enough to consider any that are brought to us.
Leadership
Making sure we work together and think ahead.
We are passionate and innovative people
with a relentless desire for improvement.
We work in an open culture, where smart
work is recognized and rewarded. We foster
teamwork and commitment.
Health & safety
Making sure we establish safe and
healthy workplaces and protect the
environment. We fully protect all SGS
employees, contractors, visitors and other
stakeholders, as well as physical assets
and the environment from any work-related
accident, exposure and any kind of damage.
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 the scale and expertise
of SGS to enable a more sustainable future.
We ensure our impact on the environment
is minimized throughout the value chain.
We are good corporate citizens, investing
in our communities and enabling a better,
safer and more interconnected world.
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-centric and
committed to excellence. We are always clear,
concise and accurate. We strive to continually
improve quality and promote transparency.
We respect client confidentiality and
individual privacy.
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/en/our-company/about-sgs/
business-principles
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report
24
Our strategy
We evolved our strategy in 2021, to further align
SGS to our customers’ demand and the five key
TIC megatrends of Connectivity, Nutrition, Health
& Wellness, Sustainability & Climate, Infrastructure
and Consumer Empowerment. Bringing a renewed
concentration on market leadership, digital innovation
and sustainability, the strategy also further integrates
our non-financial and financial objectives.
Invest to consolidate
leadership position
Become most
digital company
in the TIC industry
Increase proportion
of revenue from
sustainability solutions
1
Invest to consolidate
leadership position
Higher
+++
+
+
++
Our objectives by division
Mid single-digit
+
Lower
++
+++
20%
+++
1%
+++
2%
+
=
-
-
=
26%
+++
+++
7%
+++
+++
12%
9%
+++
4%
19%
+++
+++
<0.9 Challenger
0.9-1.1 Equal
1.1+ Leader
Relative market share
Return profile
– Value destroying
= Earning more
than 1x Cost
of Capital
+ Earning more
than 2x Cost
of Capital
++ Earning more
than 3x Cost
of Capital
+++ Earning more
than 5x Cost
of Capital
Our divisions are closely aligned to the key
TIC megatrends and customer demand.
The combined size of the TIC market
is estimated to be worth around CHF
240 billion on a global basis, though only
45% may be accessible, i.e. outsourced
to a third-party business like SGS.
We are the global leader in three of our
divisions: Knowledge, Natural Resources,
and Connectivity & Products. We aim to
build on these leadership positions through
expanding our technical consulting network,
particularly in Europe and Asia, developing
new digital solutions.
We are optimizing our field and lab
resources to generate network synergies,
building on our cybersecurity expertise,
and addressing the key opportunities in
the environmental, connectivity, mobility
and natural resources industries. We are
also accelerating investment in biopharma
and analytical services to grow our Health
& Nutrition division.
Our Environment, Health & Safety services
will become an important building block
in our Industries & Environment division
through the integration of SGS Analytics.
Connectivity
& Products
Market Leader
Achieved
Health
& Nutrition
>CHF 1bn
Target 2023
Industries
& Environment
Market Leader
in Environment
Target 2025
Natural
Resources
Market Leader
(No1)
Achieved
Knowledge
Market Leader
(No1)
Achieved
Management reportSGS | 2021 Integrated Annual Report 25
Digitalizing
operations
ongoing
>50%
applicable
inspections &
audits remote
>50%
FAIR* data-
leveraging
structured data
A data-driven
company
Our vision is to become the most digital
company in the TIC industry through
a customer-centric approach.
We already have more than 150 different
projects where digitalization is helping us to
put the customer first. As part of our updated
Digital and Innovation strategy and 2023
ambitions, we are focused on being a data-
driven company, while simplifying the way
we work and the services that we provide.
Our aim is to see at least 20% of our revenues
linked to digital services by 2023, with more than
50% of applicable inspections and audits being
done remotely.
Beyond 2025, our aim is to become a fully data-
driven company, connecting real-time data with
people and processes to build digital services
that improve the employee and customer journey.
We will simplify the way we work through the
integration of AI and machine learning, and our
aim is to digitize at least 30% of our customer
journeys by 2023.
* Findable, Accessible, Interoperable, Reusable.
Follower
Mature
Leader
Innovator
Bottom
80% of
companies
Middle
5–20% of
companies
Top
1–3% of
companies
Top
1% of
companies
t
c
a
p
m
i
y
t
i
l
i
b
a
n
i
a
t
s
u
S
Compliance
& Risks approach
Regulatory
environmental, Social and
Governance risks widely
addressed through ISO
and standards
Sustainability
approach
Considers an extended set
of Environmental, Social and
Governance topics across
the entire value chain of
the organisation
Value to
Society approach
Integrated holistic approach
to sustainability across the
entire value chain
2
Become most
digital company in
the TIC industry
Our goals
Digitalizing operations
Ongoing
>20% revenue delivered
by digital services
Target 2023
>50% of SGS data
is FAIR by 2023
Target 2023
A data-driven company
Target 2025
3
Increase proportion
of revenue from
sustainability
solutions
Our goals
Launch Sustainability
Solutions Framework
Achieved
New sustainability
solutions in all divisions
Target 2022
Level of customer maturity
>50% revenue under our
Sustainability Solutions
Framework
Target 2023
We believe there is tremendous potential
to increase our proportion of revenues from
sustainability solutions as the market matures.
Only 1% of companies could be described
as innovators adopting a holistic approach to
sustainability across their entire value chain.
The vast majority are followers with a lower
sustainability impact. They have a compliance
and risks approach to address regulatory
environmental, social and governance risks
through ISO and standards.
As companies move along this curve from
follower to innovator, our goal is to generate
more than 50% of our revenues from sustainability
solutions across our divisions. Regulations from
the EU will drive steady growth in sustainability
reporting and related activity, as the move
from voluntary to mandatory disclosures gains
pace, and the requirement for accurate and
timely data grows. To meet this customer
need, we launched our ESG Assurance
Solutions services.
Sustainability reporting is only the start.
Customers will increasingly require services
to help them to change their behavior, many of
which will fit more squarely in the field of TIC
service provision. We have already started to
develop new sustainability services for the mid-
term transformation of our Natural Resources
portfolio and are complementing our established
expertise in Industries & Environment related
to energy transition through selected M&A
in energy transition and specialty fields.
In their letter to shareholders, our Chairman and
Chief Executive Officer have outlined how we have
aligned our capital allocation and management
incentivization to meet our goals in this area.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report
26
Our divisions
Our five divisions are closely aligned to the key
TIC megatrends (see page 16), to better service
our customers and to anticipate future demand.
Connectivity
& Products
Health
& Nutrition
Focusing investment in Connectivity
to increase our competitive advantage.
Expanding our global footprint though
the organic development of our network
and acquisitions.
Strategic objectives 2023 and beyond
Strategic objectives 2023 and beyond
• Consolidate our leading market position
• Achieve CHF 1 billion of divisional revenue
• Leverage market growth supported by the
proliferation of 5G technology and loT devices
• Continue to build cybersecurity expertise
as an integral part of our ‘total solution’
• Focus on automotive and semiconductor
industries as key opportunities
• Continue to lead the expansion of the
domestic Chinese market
• New data services to generate first revenue
by 2022
by 2023
• Health Science to become the largest business
unit of Health & Nutrition, with investment
focusing on Biopharma and health services
• Consolidate our leadership position
in Cosmetics supported by increasing
regulatory requirements
• Consolidate our market leadership position
in Food in Asia and expand our global network
and portfolio in the Americas and Europe
• Enhance AI-enabled regulatory and compliance
solutions in key Health & Nutrition sectors
Progress during the year
Progress during the year
• Acquired Brightsight, which materially
• Following the acquisitions of Quay
accelerates our global strategy to become
the global TIC leader in cybersecurity
• Connectivity & Products expanded its reach
into the automotive sector with growth
accelerated with the sector recovery
• Expanded our lab capacity in 5G technology,
loT device and semiconductor global network
in China, Taiwan, Korea, Japan, Singapore,
Vietnam, India and Germany
• Launch of several new digital services including
Truum, an e-commerce data verification
service with large retail customers and the use
of robotic processes to simulate consumer
behavior for product performances
Pharmaceuticals Limited and International
Service Laboratory, and very strong double-
digit organic growth Health Science is now
the largest business in H&N
• We have increased our leadership position
in Cosmetics & Hygiene with double-digit
organic growth, including two new clinical
testing centers in Asia and one new laboratory
in the Middle East, and the acquisition of
Groupe IDEA TESTS in France
• Expanded our global Food laboratory network,
with two new labs Latin America in 2021 and
three more planned for 2022 and a new food
technology center in India
• Digicomply, our best-in-class regulatory and
compliance intelligence platform, is now used
by six of the top ten food companies, and we
added a module to analyze emerging risks
Capex intensity
Higher
Capex intensity
Higher
Net working capital intensity
Lower
Net working capital intensity
Average
Return profile
+++
M&A appetite
High in Connectivity
Return profile
+
M&A appetite
High
Management reportSGS | 2021 Integrated Annual Report 27
Industries
& Environment
Natural
Resources
Using our expertise to provide
integrated solutions, while accelerating
our transition to a high-volume hub
and spoke testing model.
Building on our wide-ranging expertise
across the mining industry and optimizing
our processes to help customers use
fewer resources.
Knowledge
Providing business assurance and
operational efficiency solutions across
supply chains that deliver sustainable
value for the organization, the
environment, society and shareholders.
Strategic objectives 2023 and beyond
Strategic objectives 2023 and beyond
Strategic objectives 2023 and beyond
• Reach a market leadership position in
Environment Health & Safety in 2025
• Reassess portfolio focusing on TIC
megatrends and complement our expertise
related to energy transition through M&A
in renewables and specialty fields
• Increase footprint and competences in
sustainability services through organic
growth and acquisitions
• Leverage the acquisition of SGS Analytics to
transition to a hub and spoke laboratory model
• Leverage digital and data to enhance
our existing and create new services
• Consolidate our leading market position
• Consolidate our leading market position
• Trade activities to remain core, with a
• Certification remains core with new schemes
supportive outlook for mining and agriculture
and oil & gas currently under pressure
• Develop new sustainability services for
mid-term transformation of portfolio
• Optimize field and lab resources to generate
network synergies
• More than 50% of trade back-office activities
to operate on digital platforms (i.e. blockchain)
by 2023 to enhance security and efficiency
driving demand
• Business enhancement to represent >50%
of divisional revenue by 2023, including
expanding our technical consulting network
in Europe and Asia
• ESG and sustainability services to increasingly
become a material part of the portfolio
• Focus on digital solutions in Supplier Risk
Management, with 20% revenue delivered
by digital services and remote by 2023
Progress during the year
Progress during the year
Progress during the year
• Realigned organisational structure, with
• Expanded our leading on-site laboratory
• Double-digit growth in certification in part
dedicated resource focused on environment,
renewable energy and infrastructure, and
invested in our renewable, hydrogen and
nuclear competence including investing
in wind in six Latin American countries
• The integration of SGS Analytics has
accelerated our transition to a hub and
spoke laboratory model and is on track for
generating synergies of CHF 20 million
• Expanded our environmental laboratory
footprint significantly, both organically and
through the acquisition of SGS Analytics,
in the Nordics, Sweden and Denmark
• Leveraged technology to enhance our service
portfolio, for example through the launch of
SGS AirSense, which monitors air quality in
schools, warehouses and other buildings and
is supported by a significant customer pipeline
position from a leading position in minerals
in Latam and the Caspian region, and
through new contract wins in oil & gas
in the Caspian region
driven by growth in information security, food,
and medical devices supported by Medical
Device Regulation designation achieved
in Belgium
• Implemented a blockchain-based digital
authentication tool for trade certificates
in the agriculture sector
• The acquisition of Sulphur Experts Inc.
expanded our testing and sustainability
services capability in the Oil & Gas market
• Piloting new sustainability services for battery
metals recycling and carbon capture in
metallurgy with leading industrial players
• Successfully replicated our technical
consultancy services into five European
countries and will launch the next phase
in Asia in H1 2022
• The launch of ESG Assurance solutions
in Q2 2021 generated a significant number
of new contracts
• Up to 80% of our training services and a high
percentage of our certification audits were
executed digitally. Significant investment is
being made in new digital solutions for 2022
(e.g. integrated customer portal)
Capex intensity
Average
Capex intensity
Lower
Capex intensity
Lower
Net working capital intensity
Average
Net working capital intensity
Average
Net working capital intensity
Lower
Return profile
=
M&A appetite
High in Environment and Health & Safety
Return profile
+++
M&A appetite
Low
Return profile
+++
M&A appetite
In selective areas
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 28
Investing in
our platform
for growth
We have accelerated the investment in our
platform to improve and harmonize our processes
and accelerate our digital transformation.
Initiatives
Objective
Benefits
Target 2023
Target 2025
Financial Shared
Service Centres
(FSSCs)
Operating all key finance
processes Procure to
Pay (P2P), Order to Cash
(O2C), Record-to-Report
(R2R) in a standardized
and fully harmonized
way by regional FSSCs
Billing
Centralization
Centralizing all billing activities
within the majority of countries
through the full standardization
of processes and systems
+5%
Productivity increase of
5% per annum for the scope
under consideration
• Increase efficiencies
through standardization and
automation of invoicing/
execution systems and
faster billing
• Increase productivity by
20% for processes in scope
• Reduce DSOs
Enterprise
Performance
Management
Significantly improve our
management reporting
capabilities to support high
quality business decisions and
to ensure that performance
is aligned with SGS strategic
objectives and Economic
Value Added (EVA) criteria
Higher granularity and data
capturing in a consistent
way will materially improve
performance assessment
and decision-making
75%
33%
Operate five regional FSSCs
covering 75% of revenues
via fully standardized/
harmonized processes
Accelerated roll-out of
centralized billing covering
33% of Group revenue
by 2023
Reporting process fully
harmonized/standardized
down to account balances
to be achieved by the end
of 2021
Full coverage via regional
FSSCs and fully standardized/
harmonized processes
70%
n/a
Centralized billing to cover
over 70% of Group revenue
Progress during
the year
FSSC on-boarding (incl. Group
standard ERP and standard
processes) for Nordics,
Germany (A&S) and Southern
Africa (8 countries)
Go–live of centralized
billing in India, Mexico and
Southern Africa and centralized
cash collection for Spain,
Mexico and Brazil
Reporting process fully
harmonized and standardized
FSSC now covers 40 countries
or 59% of Group revenue
IT Transformation
IT Shared
Digital Labs
World Class Services
Services Center
(WCS)
Group IT modernization:
Improve quality, cost and
Evolution of current LIMS to
• Deliver WCS to our customers
adopting modern technologies
service moving low added value
create Digital Labs, with artificial
and sustain our ambition of
and processes, improving time
work from countries to low-cost
intelligence, machine learning
world leader in the TIC industry
locations with strong processes
and full predictive analysis based
• Foster a culture that targets:
to ensure best-in-class service
in consolidated data with fully
improved safety, quality
to market and quality as well
as efficiency in the delivery
and operations
standardized and harmonized
and efficiency
LIMS processes
• Elimination of all types
of waste and losses
20%
Improve our discretional
and non-discretionary
IT spend split by 20%
25%
25% of cost reduction
on IT Service desk and
maintenance/improving
quality and time to serve
Better quality, cost optimization,
• Cultural change, engagement
innovation of new services,
enhancement of customer
and empowerment of
people, creation and diffusion
experience and launching new
of knowledge
services to generate streams
• Better and safer place to work
of revenues based on data
with improved standards
and enhanced productivity
by 15% in model areas by
waste and losses elimination
• Full customer satisfaction
and prompt level of services
Extend and develop modern
technologies like Agile, DevOps,
DevSecOps and new setup for
IT processes based in ITSM.
Plan to modernize applications
(native cloud). New SOA
architecture, microservices
33%
Accelerated roll-out of
centralized billing covering
33% of Group revenues
by 2023
30%
20%
30% of the total Group sales
20% of WCS labs (2020
from new digital labs with
‘new generation’ LIMS
perimeter) to reach WCM Bronze
Award level, expansion to at least
10 new sites in WCS program
100%
100% of group critical
applications migrated to
full cloud with a modern
microservices architecture
100%
100% of the users using
IT services in Manila
70%
90%
70%+ of the total Group sales
90% of current WCS perimeter
from new digital labs with
‘new generation’ LIMS
to achieve WCM awarded levels
(bronze and above), reach at
least first WCM Gold awarded
site by end of 2030
Program Prometheus to spur
growth, new technology and
cultural transformation has
improved our discretional/non-
discretional ratio by 20%
Strong adoption of DevOps,
DevSecOps and global
roll-out of ITSM supported by
one platform (Service Now)
90% of our critical applications
are now in the cloud
Global process standardization
Global program launched
of service desk process,
and sponsored by senior
including process automation,
management, detailed
WCS implementation has
progressed according to each
lab WCS route maps: 60%
of current WCS sites/labs
expansion of service desk
in Manila planned for 2022
& 2023
roadmap per lab until end of
2023. Today 10% of the sales
perimeter have been audited
in labs are managed across
and five labs also already passed
new generation LIMS
their second audit. Expansion
started with 2 additional
labs kicked-off in LATAM
and Europe and further
labs assessed
Management reportSGS | 2021 Integrated Annual Report Initiatives
Objective
Benefits
Target 2023
Target 2025
Financial Shared
Service Centres
(FSSCs)
Operating all key finance
processes Procure to
Pay (P2P), Order to Cash
(O2C), Record-to-Report
(R2R) in a standardized
and fully harmonized
way by regional FSSCs
+5%
Productivity increase of
5% per annum for the scope
under consideration
Billing
Centralization
Enterprise
Performance
Management
Centralizing all billing activities
Significantly improve our
within the majority of countries
management reporting
through the full standardization
capabilities to support high
of processes and systems
quality business decisions and
to ensure that performance
is aligned with SGS strategic
objectives and Economic
Value Added (EVA) criteria
way will materially improve
performance assessment
and decision-making
• Increase efficiencies
Higher granularity and data
through standardization and
capturing in a consistent
automation of invoicing/
execution systems and
faster billing
• Increase productivity by
20% for processes in scope
• Reduce DSOs
75%
33%
Operate five regional FSSCs
Accelerated roll-out of
covering 75% of revenues
via fully standardized/
harmonized processes
centralized billing covering
33% of Group revenue
by 2023
Reporting process fully
harmonized/standardized
down to account balances
to be achieved by the end
of 2021
Full coverage via regional
FSSCs and fully standardized/
harmonized processes
70%
n/a
Centralized billing to cover
over 70% of Group revenue
Progress during
the year
FSSC on-boarding (incl. Group
Go–live of centralized
Reporting process fully
standard ERP and standard
billing in India, Mexico and
harmonized and standardized
processes) for Nordics,
Southern Africa and centralized
Germany (A&S) and Southern
cash collection for Spain,
Africa (8 countries)
Mexico and Brazil
FSSC now covers 40 countries
or 59% of Group revenue
29
IT Transformation
IT Shared
Services Center
Digital Labs
World Class Services
(WCS)
Group IT modernization:
adopting modern technologies
and processes, improving time
to market and quality as well
as efficiency in the delivery
and operations
Improve quality, cost and
service moving low added value
work from countries to low-cost
locations with strong processes
to ensure best-in-class service
Evolution of current LIMS to
create Digital Labs, with artificial
intelligence, machine learning
and full predictive analysis based
in consolidated data with fully
standardized and harmonized
LIMS processes
• Deliver WCS to our customers
and sustain our ambition of
world leader in the TIC industry
• Foster a culture that targets:
improved safety, quality
and efficiency
• Elimination of all types
of waste and losses
20%
Improve our discretional
and non-discretionary
IT spend split by 20%
25%
25% of cost reduction
on IT Service desk and
maintenance/improving
quality and time to serve
Better quality, cost optimization,
innovation of new services,
enhancement of customer
experience and launching new
services to generate streams
of revenues based on data
Extend and develop modern
technologies like Agile, DevOps,
DevSecOps and new setup for
IT processes based in ITSM.
Plan to modernize applications
(native cloud). New SOA
architecture, microservices
33%
Accelerated roll-out of
centralized billing covering
33% of Group revenues
by 2023
30%
30% of the total Group sales
from new digital labs with
‘new generation’ LIMS
100%
100% of group critical
applications migrated to
full cloud with a modern
microservices architecture
100%
100% of the users using
IT services in Manila
70%
70%+ of the total Group sales
from new digital labs with
‘new generation’ LIMS
Global process standardization
of service desk process,
including process automation,
expansion of service desk
in Manila planned for 2022
& 2023
Global program launched
and sponsored by senior
management, detailed
roadmap per lab until end of
2023. Today 10% of the sales
in labs are managed across
new generation LIMS
Program Prometheus to spur
growth, new technology and
cultural transformation has
improved our discretional/non-
discretional ratio by 20%
Strong adoption of DevOps,
DevSecOps and global
roll-out of ITSM supported by
one platform (Service Now)
90% of our critical applications
are now in the cloud
• Cultural change, engagement
and empowerment of
people, creation and diffusion
of knowledge
• Better and safer place to work
with improved standards
and enhanced productivity
by 15% in model areas by
waste and losses elimination
• Full customer satisfaction
and prompt level of services
20%
20% of WCS labs (2020
perimeter) to reach WCM Bronze
Award level, expansion to at least
10 new sites in WCS program
90%
90% of current WCS perimeter
to achieve WCM awarded levels
(bronze and above), reach at
least first WCM Gold awarded
site by end of 2030
WCS implementation has
progressed according to each
lab WCS route maps: 60%
of current WCS sites/labs
perimeter have been audited
and five labs also already passed
their second audit. Expansion
started with 2 additional
labs kicked-off in LATAM
and Europe and further
labs assessed
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 30
Acquisitions and
partnerships
Acquisition timeline 2021
Jan
Analytical &
Development
Services (ADS)
BZH GmbH
Deutsches
Beratungszentrum
für Hygiene
Feb
Autoscope/CTOK
Apr
International
Service Laboratory
(ISL)
May
Brightsight
June
Metair Lab
Dec
Groupe
IDEA TESTS
Sulphur Experts
Inc.
Quay
Pharmaceuticals
Limited
An important part of our growth strategy is through
acquisitions which help us grow geographically, fill
service gaps or expand our skill set and technological
capacities. In 2021 we announced or completed nine
acquisitions and purchased the remaining minority
stake of The Lab (Asia) Ltd.
Quay Pharmaceuticals
Limited
Analytical & Development
Services (ADS)
Quay Pharmaceuticals is a leading
innovative formulation research and
development organization with a
comprehensive and flexible range of
services. It supports its customers through
the various stages of pharmaceutical
clinical development, from pre-formulation
to formulation, dosage form design
and optimization.
ADS is a fully ISO/IEC 17025 accredited
food testing laboratory currently active
in the UK market, offering complex
testing services in a wide range of
areas, including pesticides, nutrition,
microbiology, food molecular biology
and allergens.
Location
Division
United Kingdom
Location
United Kingdom
Health
& Nutrition
Division
Health
& Nutrition
International Service
Laboratory (ISL)
Acquisition of lab facilities
Groupe IDEA TESTS
The lab facilities of ISL, located on
the Novartis site in Ireland, provides
analytical services for a broad variety
of pharmaceutical products. It is Good
Manufacturing Practices (GMP) certified
by the Irish health authorities (HPRA)
and US FDA registered.
IDEA is a leading provider of clinical,
microbiological and in-vitro testing, and
regulatory services to the cosmetics and
personal care industry. The company is
headquartered in France, and also has
facilities in Romania.
Location
Division
Ireland
Location
France
Health
& Nutrition
Division
Health
& Nutrition
Management reportSGS | 2021 Integrated Annual Report 31
Brightsight
Sulphur Experts Inc.
(Majority stake acquired)
Autoscope/CTOK
Brightsight is the leading cybersecurity
evaluation laboratory network for
chip-based secure payment systems,
secure identity solutions and IoT
platforms. The company has a
network of laboratories located in the
Netherlands, Spain, China and France.
Sulphur Experts is a highly recognized
company providing process engineering
consulting, specialized testing and training
activities, supporting customers in the
amine treating and sulphur recovery
industries to optimize performance and
reduce their impact on the environment.
Autoscope/CTOK operates three vehicle
inspection services centers in Le Mans,
France. These centers complement the
acquisition of CTA Gallet and Groupe
Moreau in 2020 and further consolidate
SGS’s market leading position in vehicle
inspection services in France.
Location
Division
The Netherlands
Location
Canada
Location
France
Connectivity
& Products
Division
Natural
Resources
Division
Industries
& Environment
BZH GmbH Deutsches
Beratungszentrum für
Hygiene (Majority stake acquired)
Metair Lab
The Lab (Asia) Ltd.
(Acquisition of 49% minority stake)
Based in Germany, BZH is a leader in
the field of infection control solutions,
and a subsidiary of the SYNLAB
Analytics & Services (A&S).
Metair Lab provides air sampling
and asbestos testing services in
France and is accredited by the French
accreditation committee COFRAC for
both asbestos and air quality assessment.
The company has also developed an
indoor air quality solution.
The Lab (Asia) Ltd. is a fully independent
materials testing, inspection and consulting
company serving the construction, civil
engineering, highways, airports and
associated industries. The company
has comprehensive laboratory and
site testing operations, and provides
materials inspection, investigation
and consultancy services.
Location
Division
Germany
Location
France
Location
Hong Kong, China
Industries
& Environment
Division
Industries
& Environment
Division
Industries
& Environment
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 32
Material topics
We carry out an extensive analysis of
all these inputs to determine which are
material for SGS and our stakeholders, and
their relative level of importance. We then
use this deep understanding to shape our
strategy, our ambitions and our KPIs.
Materiality assessment
We conduct a formal materiality assessment
every two years. The last one was completed
in 2020, so in 2021, we kept in close contact
with our stakeholders through our regular
channels, such as meetings with investors,
our investor days, voice of the customer
surveys, our employee engagement survey,
and meetings with local communities.
This has further contributed to our deep
understanding of the most material topics
for the Group.
Our 2020 formal materiality assessment
involved over 4 000 stakeholders in 112
countries, including customers, employees,
suppliers, investors, non-governmental
organizations and sustainability professionals.
Individuals were asked to evaluate the
importance of each topic from a long list
established following a benchmarking
exercise of megatrends and sector specific
sustainability issues and trends. At the same
time, our Operations Council evaluated the
potential impact these topics could have
on SGS from a risk perspective.
The SGS Business Materiality Matrix captures the
issues deemed by our stakeholders to be materially
important to our organization. It is the outcome of a
rigorous process, including stakeholder consultation,
megatrend and risk analysis, and benchmarking
against international principles, including the UN
Sustainable Development Goals (SDGs).
The seven topics that are most important to the organization
1 Cybersecurity
5 Risk management
2 Data privacy and protection
6
Talent attraction and retention
3 Ethical behavior
4 Health and safety
7 Customer relationship management
These are key topics which have helped to shape our Group strategy. Although relatively
less material for SGS, all other topics remain an essential part of our sustainability
management systems. We systematically re-evaluate them to determine whether
they have become more material to the organization.
Other material topics
8 Adaption and mitigation of climate change
17 Local community
9 Biodiversity
18 Preventing air pollution
10 Corporate governance
19 Reducing and managing waste
11 Diversity in the executive team
20 Responsible use of materials
12 Diversity and inclusion
21 Sustainable procurement
13 Employee engagement and consultation
22 Tax strategy
14 Executive compensation linked to sustainability
23 Training and development
15 Freedom of association
24 Water footprint
16 Innovation in services and operations
25 Well-being and work-life balance
1
4
3
5
2
6
7
8
21
23
10
12 11
14
13
17
24
19
25
16
20
22
15
18
9
Management reportSGS | 2021 Integrated Annual Report Risk intelligence
During 2021 we have focused on and addressed
the main prevailing risks facing the organization,
to ensure we can fulfil our purpose of making
the world better, safer and more interconnected.
33
Risk governance
Our Board of Directors reviews risks
to ensure that the Company has a solid
strategic approach to mitigating them (see
page 83). However, the ultimate responsibility
for identifying risks and integrating their
management into key business planning
processes sits with our Operations Council.
The Group Risk Steering Committee oversees
our Risk Management Framework, chaired by
the Chief Executive Officer. The committee
comprises executive members, including the
Chief Financial Officer and Chief Compliance
Officer, together with representatives from
departments including Risk Management,
Human Resources, Operational Integrity and
Sustainability. As well as biannual meetings,
the Committee meets as necessary, and
reports directly to the Board.
Accountability for managing risk rests with
our ‘Risk Champions’ who are charged with
assessing risk in the jurisdictions for which
they have responsibility. In addition, SGS
integrates a broad array of risk categories
(see the charts below) directly into the
management process (under the oversight
of ‘Global Risk Category Owners’), resulting
in a robust and comprehensive approach.
Risk management process
Risk Management Framework
During the year, SGS has worked to enhance
and streamline its Risk Management
Framework, to better address the main
prevailing risks facing the organization. As a
result, a number of risk categories have been
redefined, including specific risks contained
in these categories, to emphasize where
the focal points, and resources to address
these risks, should be placed. This was
further strengthened by introducing new risk
significance grading and risk tolerance levels.
Risk oversight
To support our Risk Management Framework,
the Group has a customized Governance Risk
and Compliance platform. This tool enables
affiliates, local businesses and operations
to assess, taking a bottom-up approach,
potential risks and have mitigation in place at
a local level where appropriate. Additionally, at
Group level, SGS uses a top-down approach
to identify and assess global risks to the
Company that might potentially be overlooked
in the bottom-up evaluation.
We recognize the need to identify
changing risk, including changes arising
as the world moves on from Covid-19.
We continue to monitor the measures we
have in place to deal with all new emerging
eventualities, ranging from climate change
and consequential extreme weather,
natural disasters and cyberattacks.
The scope and global coverage of the risk
management assessment was also extended,
offering a full and limited scope approach,
driven by the magnitude and risk profile
on a country-by-country basis.
This allowed SGS to further increase the
worldwide applicability of the framework,
ensuring key markets and businesses
were appropriately involved. The local risk
management assessment inputs provided
further validation from a global management
perspective, contributing to a comprehensive
and insightful overview of risk perception
which appears on the risk heatmap,
presented on page 35.
Enterprise Risk Management Framework
Places responsibility and accountability for managing risk
close to our operations
Board of Directors and CEO
Reviews risks and ensures that the Company has a solid
strategic approach to mitigating them
Group Level
Top-down approach with
the objective of identifying
and assessing global risks
Operations Council
Ultimately responsible for identifying Company
risks and integrating the management of these
risks into key business planning processes
Macro
risk assessment
Global Risk
& Compliance
(GRC) platform
Group Risk Steering Committee
Chaired by the CEO, the Committee gathers executive members,
including the CFO and CCO, together with operational function
representatives
Risk champions
– Affiliates
– Local Business Lines
– Operations
Own risks in local jurisdictions
applying a bottom-up approach
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 34
Risk intelligence
continued
The Task Force on Climate-related
Financial Disclosures
The Task Force on Climate-related Financial
Disclosures (TCFD) is a guidance framework
that helps companies disclose climate
related financial risks to investors, lenders,
and insurers.
Read more in our TCFD Report
(available 1 March 2022)
2021 Risk assessment results
In 2021, we carried out risk assessments
in 51 of our main markets, applying full
and limited scope approach. We assessed
164 specific risks within 43 risk categories
defined globally.
The assessment has confirmed a number
of prevailing and emerging risks, particularly
in relation to cyber and data security,
increasing dependence on technology,
including outsourced IT services and
disruptive technology, also the attention
to information governance, fraud and illicit/
unauthorized activities, continued pandemic
challenges, as well as the importance
of customer needs, service delivery and
pricing processes, and talent management.
As part of our assessment process, we
also identify emerging risks that are likely
to impact our business in the next 3-5 years.
An example of these risks is the increase of
extreme weather events which already occur
due to climate change and are expected to
continue increasing in frequency and severity
over the coming years. The main impact
of extreme weather on SGS is closure of
laboratories and offices and interference
with logistics of our services, whose impact
is being assessed in order to be mitigated,
(i) through business continuity plans, to
ensure that we are fully prepared for any
extreme weather eventuality, and (ii) through
a global climate scenario analysis, to help
us with future planning. Another significant
risk is pandemics, which have two variants
when looking at the long term; not being
able to revert to pre-pandemic levels; and
the appearance of a new pandemic resulting
from a different pathogen. The impact of
this risk is known to most organizations and
passes through general disruption in the way
the business operates, which may limit the
generation of revenue from specific services,
as well as an increase in certain operational
costs. To mitigate this risk, we have learned
from Covid-19 what measures are most
effective to fight a pandemic crisis, and
have integrated various possible scenarios
in our long-term future planning.
Business continuity
These times have underlined the need
for businesses to build resilience and
to be prepared for disruptive events.
During the year, we have built on our
robust business continuity resilience
strategy that focuses on the critical
processes of the business, and minimizes
the risks associated with them from a
business continuity perspective. We validate
our business continuity plans by running
scenario exercises, which cover resilience,
proactive resilience, planning and response.
Our Business Continuity Officers, who
operate at the three levels – local, regional
and global – are central to everything we
do. They are normally managers or senior
managers, who have positions where they
can influence what happens. To support
them, we have provided hundreds of
training sessions and webinars.
This year, we also launched our
knowledge hub for all the hundreds
of business continuity officers, so
now they each have access to best
practice documentation.
Management reportSGS | 2021 Integrated Annual Report 35
External risks
Communication & IR
Customer needs
Cyberattack
Economy & sovereign
Internal risks
Operational
risks
Process
Environment
(operations)
Health & safety
Pricing
Real estate
Service delivery
Sourcing
Supply chain
Management
information
Accounting,
budgeting &
forecasting
External
reporting
Internal
reporting
Tax
Environment & climate change
Pandemic
Industry
Legal & regulatory
Political risk, war, crime, terrorism
Technological innovation
Non-operational
risks
Human capital
Compliance
Technology
Treasury
Strategic
Compliance
Reward
Talent
acquisition
Talent
management
Contract commitment
& claim
Access
Availability
Credit
Business model
Foreign exchange
Business portfolio
Data privacy
Fraud & illicit or
unauthorized activities
Information governance
Unethical behavior,
bribery & corruption
Data integrity
Infrastructure
Reliability
Technological
capacity
Liquidity
M&A
Social responsibility
Heat map of highest scored residual risks (after risk mitigation)
1 Cybersecurity
2
3
Technological capacity
Technological availability
4 Data privacy
5
6
Fraud & illicit or unauthorized activities
Information governance
7 Pandemic
8
Talent management
9 Pricing
10 Technological infrastructure
11 Customer needs
12 Service delivery
0
.
3
t
c
a
p
m
I
0
.
2
2
1
7
10
12
3
4
6 8
9
11
5
2.0
Likelihood
3.0
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 36
Our principal risks
The identification and management of risks
is aligned to our materiality assessment
to help us manage the principal risks.
We have measures in place to mitigate
those risks to an acceptable level.
Risk description
Material topic
Summary of impact
Mitigation measures
• Cybersecurity
• Financial losses resulting from
• Execution and monitoring of
l Cyberattack
a
n
r
e
t
x
E
business disruption or interruption
due to cyberattacks
• Loss of certification accreditation
leading to significant reduction
of our certification business
• Loss of cyber insurance cover as a
result of cyberattacks, lack of internal
knowledge and adequate technology
and security controls and processes
• Reputational impact
cybersecurity roadmap, strengthened
by additional cybersecurity resources
within the organization
• Proactive monitoring of all security
systems, through the Security
Operations Centre (SOC)
• Implementation of security measures
at different organizational layers
• Execution and monitoring of advanced
Endpoint Detection and Response
(EDR) anti-malware systems
• Application of security policies
and procedures
• Failure to implement IT technology
aligned with organizational strategy
• Enhancement of IT Risk & Compliance
management framework
• Lack of global reporting view
and standardization in systems
• Data loss due to inefficient data
retention and backup processes
and breakdown of critical
IT infrastructures
• Risk of untimely resolution
of operational issues due
to system limitations
• New reporting dashboards with KPIs
• Improvements in backup systems
and BCP revisions
• Improvements in the processes
of demand management, project
management and metrics monitoring
using Information Technology
Infrastructure Library (ITIL)
methodology
• Risk of loss of key finance data
and/or closing process delay
• Optimization of IT infrastructure
(cloud strategy, etc.)
l
y Technological
g
capacity,
o
o
availability
n
and infrastructure
h
c
e
T
• Innovation
in services
and operations
e Data
c
n
a
i
l
privacy
p
m
o
C
• Data privacy
and protection
• Corporate
governance
• Failure to comply with data
protection laws and/or changes
in privacy regulatory environment
and enforcement
• Implementation of improvements
in network monitoring and
access control
• Deployment of SGS privacy policy and
procedures across the organization
• Deployment of global privacy
management platform for privacy
and compliance management
• Development and implementation of
Third Party Privacy Risk Assessment
to reduce and/or eliminate privacy and
security risks to SGS’s information
• Monitoring and impact assessment
of new personal data transfer
requirements
Management reportSGS | 2021 Integrated Annual Report 37
Risk description
Material topic
Summary of impact
Mitigation measures
• Ethical behavior
• Employee sabotage, theft,
• Strong Code of Conduct policy and
• Corporate
governance
fraud, criminal damage or other
non-acquisitive crime
philosophy with regular and recurrent
training for SGS employees
e Fraud and illicit
c
or unauthorized
n
a
activities
i
l
p
m
o
C
• Falsification, adulteration or misuse
of certificates & reports, information
security violation
• Organized criminality or collusion
in illicit activities, parallel trading or
other misuse of company resources
• Risk of losing business, business
disruption (management fraud,
third-party fraud, unauthorized acts)
• Illegitimate and unsupported revenue
recognition, mainly linked to Unbilled
Revenue and Work-In-Progress,
resulting in potential overstatement
of revenue and understatement of
cost (P&L)
• Confidential and anonymous
whistle-blower reporting system
• Introduction of a Business Process
Security and Integrity self-assessment
methodology for all businesses, with
a focal point on highest earning/most
vulnerable services
• Enhancement of the Security
Integrity Vulnerability Assessment,
with bottom-up implementation
by all businesses and functions
• Workshop-based curriculum for
country management, cascaded
to local teams
• Enhancement of risk assessment
reporting tool for incident reporting
• Launch of the worldwide Order-to-
Bill (O2B) initiative to standardize
and centralize billing, coupled
with application of best practices/
O2B golden rules across all
key business activities
• Centrally driven oversight through
internal controls, balance sheet/profit
and loss reviews and internal audits
at country level
• Implementation of the Information
Governance Framework (IGF), based
on best practices
• Extensive and detailed piloting of the
new SGS Information Classification
system, which forms an integral
part of IGF, to ensure the fit for
classification system across all
businesses and territories
Information
governance
• Data privacy
and protection
• Corporate
governance
• Loss of relevant information and
supports due to lack of ongoing
responsibility to supervise mandatory
retention of documents
• Unauthorized altering or falsification
of classified information
• Unauthorized disclosure
of/unauthorized access
to classified information
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 38
Our principal risks
continued
Risk description
Material topic
Summary of impact
Mitigation measures
l Pandemic
a
n
r
e
t
x
E
• Health and safety
• Spread of infections (including
• Well-being and
work-life balance
outbreak, epidemics, pandemics,
etc.), disrupting business operations,
interactions with suppliers and
customers, resource availability
• Building of Business Continuity
taxonomy to monitor ‘resilience
on-going and closed actions’
integrating the Pandemic risk
• Enhancement and introduction of
upgraded overarching Corporate
Standard Operating Procedures,
action plans and requirements,
preventive training on proper
behaviors, medical knowledge,
external support
• Deployment of policies in regions
and countries
management
l Talent
a
t
i
p
a
c
n
a
m
u
H
s Pricing
s
e
c
o
r
P
• Talent attraction
and retention
• Training and
development
• Employee
engagement and
consultation
• Well-being and
work life balance
• Ineffective/inadequate training
and development programs
for employees
• Lack of leadership alignment and
• Succession planning process
across the organization to
enhance talent management
and people development
effectiveness, lack of qualified and
competent employees, lack of
succession planning of key personnel
• Enhancement of Leadership
Development framework and
process for all leadership levels
• Risk of inefficient
performance management
• Introduction of a new performance
management governance, feedback
culture and tools
• Customer
relationship
management
• Risk of incorrect pricing due to
inadequate/poor pricing model
• Risk of margin pressure and
• Completion of pricing self-assessment
leading to implementation of key
pricing actions
processing inaccurate discounts
• Implementation of the Pricing Golden
• Risk of underutilized capacity due to
too high pricing versus competition
Rules and Value-Based Pricing
• Execution of pricing actions leveraging
of available data (internal dashboards,
external market intelligence)
Management reportSGS | 2021 Integrated Annual Report
39
Risk description
Material topic
Summary of impact
Mitigation measures
l Customer
a
n
needs
r
e
t
x
E
s Service
s
e
delivery
c
o
r
P
• Customer
relationship
management
• Innovation in
services and
operations
• Customer
relationship
management
• Innovation in
services and
operations
• Loss of revenue due to insufficient
• Enable business digitalization
capacity from change in
customer demand
• Risk of losing customer due to
customer dissatisfaction, key
subcontractor loss, lack of agility,
technology and systems
• Risk of lost opportunity
through strategic partnership on
technology development to identify
solutions to mitigate operational
risks, and to improve efficiency
and competitiveness
• Inadequate capability to deliver, due
to insufficient resources, equipment
and investment
• Risk of incurring liability and losses
from inaccurate service performance
or mistakes, process non-compliance
• Risk of missed revenue and margin
• Implementation of the World Class
Services initiative to achieve and
maintain ‘Zero Defects’ standards
in our labs
• Standardization and optimization of the
LIMS execution systems (worldwide
Digital Lab initiative)
pressure (service failure)
• Enhancement of Voice of Customer
Program to enable consistent
measurement of Customer
Satisfaction (CSAT) and Net Promoter
Score (NPS), and corrective measures
for main SGS affiliates
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 40
Our sustainability
goals aligned to
our capitals
Our 2030 sustainability goals, which are based
on supporting the transition to a low carbon and
climate resilient world, empowering equality,
well-being and prosperity and enabling long-term
value, are integrated into capitals.
Better
governance
Enabling long-term value through
secure, fair, transparent and
responsible business practices
Better
society
Empowering equality,
wellbeing and prosperity
Better
planet
Supporting the transition to a low
carbon and climate resilient world
through responsible resource use
and effective waste management
Direct operations and supply chain
• Embed integrity, efficiency and
customer centricity to provide
best-in-class services
Direct operations and supply chain
• Promote a safe, fair and inclusive
working environment with highly
engaged and empowered teams
Direct operations and supply chain
• Continue driving GHG emissions
reduction and support sustainable
infrastructures and mobility
• Collaborate with our suppliers
to promote sustainability
• Make a positive and longlasting
impact on local communities
• Promote a culture of efficiency
in the use of natural resources
Services
Services
Services
• Enable sustainable economic growth
through enhanced knowledge, skills
and technologies
• Enable universal connectivity and
affordable, safe and sustainable
products and services
• Enable better, safer and low
carbon infrastructures, transportation
and industries
• Enable safe and fair access to, and
security of, the digital environment
• Enable improved nutrition, health
and wellness for everyone
• Enable the sustainable management
and efficient use of natural resources
SDG focus 2030
SDG focus 2030
SDG focus 2030
Our capitals
Financial
capital
Manufactured
capital
Intellectual
capital
Human
capital
Read more
on page 41
Read more
on page 48
Read more
on page 52
Read more
on page 56
Social and
relationship
capital
Read more
on page 62
Natural
capital
Read more
on page 66
Management reportSGS | 2021 Integrated Annual Report Financial capital
Financial capital includes the value we add 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.
41
1 How we develop our financial capital
Mid-term targets
2020-2023
– High single-digit constant currency revenue Compound Annual Growth Rate (CAGR)
driven by mid single-digit organic* growth per annum and a focus on M&A
– >10% Adjusted operating income* CAGR
– Strong economic value added discipline (EVA)
– Maintain or grow the dividend per share
2 Our inputs
Profit CHF MIO
Total equity CHF MIO
Total assets CHF MIO
2021
655
1 202
7 007
2020
505
1 134
6 908
2019
702
1 595
6 327
2018
690
1 743
6 068
3 Progress during the year
Financial discipline
and focused
capital allocation
– In 2021, our strong operational performance was supported by our pricing initiatives and cost
control in an inflationary environment, and working capital management. At the same time,
we have continued to invest in productivity across the global network
– Organic* growth was particularly strong in our key strategic focus areas of Health & Nutrition,
Connectivity & Products, Knowledge, which are all tracking comfortably above 2019 organic
revenue levels
– Significant progress was made on the strategically important implementation of our ‘Level Up’
finance, IT and operations initiatives. This includes accelerating the coverage and capability
of our shared service centers, progress on our IT transformation, billing centralization and
improving our reporting data intelligence
– Nine acquisitions were completed, further aligning our portfolio with our key megatrends
A strong financial performance
– Total revenue reached CHF 6.4 billion, up by 14.3% (14.2% at constant currency*), driven by
the ongoing recovery from the Covid-19 pandemic as well as strategic focus and significant
contribution from acquired revenue
– Organic revenue* increased by 8.9%
– Operating income increased from CHF 795 million in prior year to CHF 977 million in 2021
due to the revenue increase and related productivity improvement. No goodwill impairment
was recognized in 2021. In 2020, the high restructuring costs were partly offset by a gain
on business disposal
– Adjusted operating income* increased from CHF 900 million in prior year to CHF 1 055 million
in 2021, an increase of 17.2% (16.8% at constant currency*)
– Adjusted operating income margin* increased from 16.1% in prior year (also 16.1% at constant
currency*) to 16.5% in 2021, supported by additional productivity increase
– Net financial expenses slightly decreased from CHF 54 million in prior year to CHF 53 million
in 2021
– Effective tax rate (ETR) decreased from 32% in prior year to 29%. The prior year was mainly
impacted by non-deductibility of both goodwill impairment and a portion of restructuring costs
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 42
Financial capital
continued
3 Progress during the year continued
Financial discipline
and focused
capital allocation
continued
– Profit attributable to equity holders increased from CHF 480 million in prior year to CHF 613 million
in 2021, an increase of 27.7% over prior year
– Basic earnings per share increased from CHF 64.05 in prior year to CHF 81.91, an improvement
of 27.9%
– Cash flow from operating activities was CHF 1 169 million, comparable with prior year.
Higher profit was offset by a higher net working capital requirement to support the recovery of
activity in 2021. Operating net working capital* remained negative as a percentage of revenue
at (2.4)% compared to (2.5)% in prior year
– Free cash flow (FCF)* decreased from CHF 758 million in prior year to CHF 635 million in 2021.
The lower level of FCF was mainly driven by higher capex investment
– Investment activities: Net capex was CHF 331 million versus CHF 246 million in prior year and
the Group completed nine acquisitions for a total cash consideration of CHF 214 million
– Financing activities: In 2021, the Group paid a dividend of CHF 599 million
– Return on invested capital (ROIC)* increased from 16.5% in prior year to 19.6% in 2021. Prior year
was impacted by SGS Analytics which was acquired as at 31 December 2020. Adjusted for this
acquisition, 2020 ROIC would have been 20.9%
– As at 31 December 2021, the Group net debt* was CHF 1 691 million versus CHF 1 478 million
in prior year
4 Outcomes
Revenue CHF BN
Free cash flow CHF MIO
Adjusted operating income margin* %
2021
6.4
635
16.5
2020
5.6
758
16.1
2019
6.6
673
16.1
2018
6.7
796
15.7
5 Outlook 2022
– Mid single-digit organic growth
– Improving adjusted operating income benefiting from operational leverage
– Strong cash conversion
– Maintain best-in-class organic return on invested capital*
– Accelerate investment into our strategic focus areas with M&A as a key differentiator
– At least maintain the dividend
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Management reportSGS | 2021 Integrated Annual Report Investor relations
Fostering transparency
and trust
Our investor relations program ensures that
we provide clear, transparent and consistent
information to build trust and to support the
financial community to make informed decisions.
43
The TIC industry is increasingly attractive for
investors. The technical and complex services
which we provide to our customers are largely
mandated by regulations conferring a high
proportion of predictable and recurring revenue
and attractive returns with a strong exposure
to sustainability. Our leadership position in the
TIC industry is purpose driven and directed
by a highly experienced management team.
In addition, the long-term megatrends towards
sustainability support our industry growth.
How we engage with shareholders
We have traditionally engaged with
shareholders and potential investors through
face-to-face meetings on our regular
roadshow schedule, at investor conferences
and through adhoc meetings. Our annual
investor days and site visits ensure that our
investors are able to physically experience
our facilities and spend time with our
operational management team to get a
deeper understanding of the business.
Our approach
We have an established and flexible
investor relations program. Our team leads
the communication with our current and
prospective shareholders, bond holders
and analysts. We also engage with a
broader ecosystem which supports
investor decision making.
We held our annual investor days meeting for
analysts and investors in May 2021. At this
virtual event, we outlined SGS’s strategy and
gave participants the opportunity to engage
with our Operations Council in an open and
transparent way. The event was a huge success
and we are being considered for an award.
The online format enabled more investors to
attend and we are pleased that our strategy
is becoming more understood (see chart).
We also covered SGS’s 2030 sustainability
commitments and outlined our expectations
for a growing suite of ESG services, which form
a key part of our strategy. Our commitment to
enabling a better, safer and more interconnected
world for employees, customers, shareholders
and for society at large is integral to the next
phase of our strategic evolution. We continue
to engage with investors on all matters relating
to SGS and sustainability.
The pandemic represented a watershed for
communication and we will continue with
a combination or virtual formats and fewer
face-to-face meetings than we have done
traditionally. However we do look forward
to meeting our investors again in person
over the course of 2022.
Our Investor Relations webpage on sgs.com
is central to our program and we continue
to use technology to streamline our investor
relations processes. This includes algorithms
to efficiently target potential investors.
Despite the ongoing challenges due to
Covid-19, in FY21, we successfully and
independently organised roadshows in two
key cities and held our annual investor days
virtually. More broadly, we have engaged
with investors in over 400 meetings over
the course of 2021.
Our investor base is evolving
The majority of our institutional investors
are based in Europe, which accounts
for over 60% of our shareholder base,
while investors in North America
and Asia account for approximately
a quarter and 10% respectively.
FY21 investor engagement feedback
(average rating 1 – negative to 5 – very positive)
What was your overall impression
of the meeting?
Do you feel you understand our strategy?
How confident are you that SGS’s strategy
will accelerate organic growth?
How clear are our capital allocation priorities?
Do you view sustainability as integral
to our strategy and culture?
4.6
4.3
3.8
4.2
4.1
1 Investor contact by region
2
0
2
n
1
3
i
s
n
o
i
t
a
l
e
r
r
o
t
s
e
v
n
I
2
1. Europe
2. Americas
3. Rest of the world
64%
25%
11%
Institutional investors
by geography
1110
9
1
8
7
6
5
4
2
3
1. Switzerland
2. United Kingdom
3. United States
4. Norway
5. Luxembourg
6. Germany
7. The Netherlands
8. France
9. Canada
10. Japan
11. Other
26.9%
26.2%
20.5%
7.1%
3.5%
2.7%
2.4%
2.2%
1.3%
1.2%
6.0%
Moody’s credit opinion rating
A3 stable
2020: A3
Toby Reeks
SVP, Corporate Communication,
Sustainability & Investor Relations
+44 (0) 7899 800 575
Livia Baratta
Investor Relations Manager
+41 (0) 22 739 95 49
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report
44
Business review
Performance and
outlook by division
1
2
Connectivity & Products
Health & Nutrition
Revenue (CHF million)
CHF 1 288m
Revenue (CHF million)
CHF 861m
Constant currency* growth in 2021
Constant currency* growth in 2021
8.8%
Overview
• Organic growth of 7.7% driven by
pandemic recovery and investment
in Connectivity
• Excellent performance in Connectivity
• Solid recovery in Softlines supported
by brands and retailers, but lower
PPE volume
• Strong performance of Hardgoods,
better market conditions for Auto
labs and Toys were stable
• Trade Facilitation services growth was
led by eCustoms expansion in Europe
30.1%
Overview
• Organic growth of 15.9%, ahead of
pre-pandemic levels in double digits
• Food delivered double-digit organic
growth driven by new regulations
and an expanded customer base
• Health Sciences grew well above
the divisional average boosted by
Covid-19 vaccine work
• Cosmetics & Hygiene grew in double
digits, benefiting from a strong rebound
in activity and expanded competence
Outlook
Outlook
• Continued growth expected
• Strong growth drivers are expected
in all SBUs
to continue in 2022
• Significant investment in capacity and
competence to support Connectivity
growth; Cybersecurity to contribute
to performance
• Hardlines to maintain its growth
momentum in Hardgoods and a
continued improvement in Auto
• Trade Facilitation services to benefit
from the expansion of eCustoms
solutions and new contracts
• Softlines expected to remain stable
• Outsourcing and regulation trends
to continue supporting growth in
Food and Health Sciences
• Momentum to continue in Cosmetics
& Hygiene led by strong demand and
additional capabilities
• Continued integration of acquired
companies and a solid pipeline
of potential targets
Management reportSGS | 2021 Integrated Annual Report 3
4
5
Industries & Environment
Natural Resources
Knowledge
45
Revenue (CHF million)
CHF 2 120m
Revenue (CHF million)
CHF 1 473m
Revenue (CHF million)
CHF 663m
Constant currency* growth in 2021
Constant currency* growth in 2021
Constant currency* growth in 2021
18.0%
Overview
• Organic growth of 7.5% driven by
strong volumes across Europe,
Asia and Latin America
• Field services and Inspection
grew in double digits as demand
improved across all geographies
• Industrial and Public Health & Safety
grew above the divisional average
driven by lab testing in Asia and strong
volumes in Health & Safety services
in North America
• Latin America drove double-digit
organic growth in Technical Assessment
and Advisory. The acquired Ryobi
also performed very strongly
6.2%
Overview
• Organic growth at 6.0% driven
by a buoyant minerals market
• Strong demand across Minerals
commodities offset volatile performance
in Agricultural commodities
• Oil & Gas commodities maintained
stable growth
• Lab Testing benefited from a surge
in minerals exploration sample
volumes across the network
• Metallurgy and Consulting grew
in double digits as delayed prior
year projects resumed
14.7%
Overview
• Organic growth of 14.7% driven
by a double-digit increase in all
SBUs and regions
• Management System Certification
grew in double digits driven by
recertification and high volumes
in information security and
medical device certification
• Customized Audits grew above
the divisional average, driven by
social audits and ESG services
• Consulting grew more than
the divisional average as SGS
Productivity (LeanSis) and Maine
Pointe rebounded strongly
Outlook
Outlook
Outlook
• Growth to be driven by increased
demand from energy, manufacturing,
building and infrastructure markets
with focus on sustainability and
renewables
• Targeting scalable bolt-on acquisitions
and new state-of-the-art solutions
to strengthen competitive position
• Full benefit from the integration
of SGS Analytics to be realized,
delivering operational synergies
and the acceleration of our hub
and spoke lab model in Europe
environmental testing
• Strong outlook in Mining with ongoing
increased exploration funding and
demand for critical metals
• Strong growth driven by solid demand
in Certification, especially medical
devices, ESG services and consulting
• Improving market fundamentals
for Agriculture albeit at a slow pace
• Slow recovery in Oil & Gas
with ongoing transition to
renewable sources
• Development of sustainability
solutions to continue with focus
on the energy and mining industry
• Service innovation in Geomet
and technical consulting
• Supplier Risk Management
digital services to generate
new revenue streams
• Continued roll-out of CertIQ, the new
knowledge certification platform,
to drive further efficiencies through
the digitalization of audit data
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Financial
capital
The integration of SGS Analytics into the Group
is on track and enables us to help businesses
comply with increasing food, pharmaceutical
and environmental safety regulations.
Integrating SGS
Analytics to create a
‘hub and spoke’ model
The challenge for our customer
Ensuring the safety of the air we breathe,
the soil that grows the food we eat, the
pharmaceuticals we use and even the hospitals
we visit is a growing concern for our customers
and their clients. By expanding our geographic
reach and accelerating the establishment of
our hub and spoke model we can serve more
customers and improve turnaround times.
Our solution
The acquisition of SYNLAB Analytics
& Services, now known as SGS
Analytics, has added more than 37
laboratories and approximately 2 000
professionals to our global network.
It has strengthened our presence in
North-Western & Central Europe,
particularly in Germany, Benelux
and the Nordics, and enhanced
our environmental, food and life
sciences testing, and oil condition
monitoring portfolios.
Not only was this the largest acquisition
in the history of SGS, it was also our first
centrally driven integration. While most
acquisitions are local, this integration has
involved people from several countries
and affiliate companies in different
regions. To manage this effectively,
we set up a new strategic integration
team led by a former member of our
Operations Council to oversee the
project, and to stand ready to support
similar projects in the future.
With dedicated project managers,
financial, IT, marketing and HR
representatives in each area, the
integration team was tasked with
finding significant synergies, and
building on an efficient and market
leading environment, food and
pharmaceutical testing business.
While systems integration is a big
challenge, as we bring the facilities into
line with SGS standards, our core aim
has been to create a ‘hub and spoke’
model – with a ‘hub’ laboratory and other
facilities, ‘spokes’, that feed into it. It is
a model that is relatively undeveloped
at SGS, and will help us maximize the
value of SGS Analytics, both to the
Group, and to our customers worldwide.
Management reportSGS | 2021 Integrated Annual Report
“ With the legacy business added to our existing service
portfolio within Analytics, we have a much more complete
offering to provide to our customers in Scandinavia.
We are expanding the business to new customer segments
and markets. By the ‘reverse’ integration we are a true
TIC company active in all aspects of the TIC industry.”
Johan Bengtsson
Managing Director, SGS Scandinavia
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Next steps
The integration of SGS Analytics is
well on track. We have retained all of
the company’s larger customers, and
they appreciate that we can complete
the testing we do for them as a core
part of our business. It has given us
a major presence in Scandinavia for
the first time, and the deal has opened
up new opportunities to work with
a broader range of customers in the
UK food industry.
We also achieved the rebranding of the
company to SGS Analytics in just five
months – covering all aspects, from
top to bottom. The business is now
presented consistently at all locations,
and we remain on track to be EVA
positive in year four of trading as SGS
Analytics, with a fully integrated business
that can capitalize on the underlying
growth opportunities in this market.
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countries – Belgium, Denmark,
Finland, France, Germany,
Norway, the Netherlands,
Portugal, Spain, Sweden,
Switzerland, United Kingdom
2 000+
professionals added to
our network
37
laboratories adding to our
portfolio of testing services
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 48
Manufactured capital Manufactured capital covers the property, plant,
equipment and other manufactured goods, and
our investments in our buildings, laboratories
and offices which enable us to provide better
services to our customers.
1 How we develop our manufactured capital
Invest in
and maintain
our testing
laboratories
– With laboratory testing at the center of our main business activities, one of our largest
procurement categories concerns the equipment and services required to operate our
laboratories. As well as negotiating the right commercial terms for the business, we also
ensure fit for purpose quality and on time delivery in every corner of the world
Deliver the
best deals
– SGS purchases tens of thousands of different items and services on a recurring basis. To best
manage this spend Procurement has launched a new 2023 Procurement Strategy. It has been
designed to deliver the best deals throughout our operations, while connecting us with our
suppliers who can help ensure we achieve sustainable profitable growth. The strategy focuses on
four pillars: value for money, productivity, operational excellence, and sustainability and innovation
2 Our inputs
Capital expenditure CHF MIO
Operating expenditure CHF MIO
2021
336
1 364
2020
259
1 206
2019
290
1 495
2018
304
1 634
3 Progress during the year
Invest in
and maintain
our testing
laboratories
– We made several strategic laboratory acquisitions focusing on new digital solutions,
and purchasing the testing equipment we need to support long-term profitable growth
– The acquisition of SGS Analytics, which was completed at the end of 2020, added more
than 37 laboratories and approximately 2 000 professionals to our global network, significantly
strengthening our presence in North-Western Europe. You can read more about our SGS
Analytics in our case study on pages 46-47
– We made several other acquisitions including Quay Pharmaceuticals Limited a leading innovative
formulation research and development organization supporting its customers through the various
stages of pharmaceutical clinical development. This acquisition represents a step forward in our
strategy, increasing the scope of services to support our customers across the Health Science
supply chain
– We have further expanded our expertise in construction materials testing this year by making
The Lab (Asia) Ltd. a wholly owned subsidiary of the SGS Group. The acquisition of the minority
stake has allowed us to fully integrate The Lab (Asia) Ltd. into SGS, offering both the platform
and competence for further expansion into the mainland Chinese infrastructure market
– The acquisition of Metair Lab has further consolidated our market leading position in health
and hygiene testing in France. The company provides air sampling and asbestos testing
services in the country and is accredited for both asbestos and air quality assessment.
Metair Lab has also developed an indoor air quality solution, an area of great interest globally
Deliver the
best deals
– Following some caution in 2020, we increased our capital expenditures during the year.
We saw signs of growth across most of our regions following the gradual easing of
Covid-related restrictions and strong recoveries in the economy
You can read more about our new Procurement strategy in
our social and relationship capital section on pages 62-63
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Our Global Biosciences
Center and E-DNA
At the SGS Global Biosciences Center,
we specialize in both the microbial world
and the DNA present in all life on our
planet. We are using the Center to develop
integrated services that are applicable
to many of the industries we serve,
often with a strong sustainability benefit.
For instance, the use of E-DNA will allow
biodiversity assessments to be carried out
more effectively and frequently, meaning
that ecosystems can be better monitored
and managed.
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• SGS Global Biosciences Center’s
diverse, multidisciplinary experts have
years of experience in microbiology,
ecology, molecular biology and
bioinformatics
• Our state-of-the-art laboratory
is fully equipped with the latest
technology and is complemented by
our extensive network of laboratories
around the world
• The Center serves a wide range
of sectors – including mining,
energy, environment, biodiversity,
industry, buildings, transportation
and supply chains
4 Outcomes
– SGS Analytics added 37 labs & 2 000 professionals
significantly strengthening presence in North-
Western Europe
– Two new cosmetic testing labs in China equipped
with cutting-edge technologies
5 Outlook 2022
Procurement Strategy
– Continue working towards our 2023
– Work with innovative suppliers to support our
digital agenda and develop new innovative and
sustainable business opportunities
– Develop a plug & play model to integrate new
companies efficiently and leverage acquisitions
to further deliver synergies across the Group
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Manufactured
capital
As the new Chinese cosmetics regulation
came into force in 2021, we had to
adapt our capabilities and support our
customers through this change.
Helping our customers
adapt to changing cosmetics
regulations in China
The challenge for our customer
In January 2021, the new Cosmetic Supervision
and Administration Regulation came into effect.
This regulation introduced new Standards
for Cosmetic Efficacy Claim Support, which
requires the cosmetics industry to comply with
extensive efficacy testing. Many players have
been struggling to implement these changes,
particularly when it comes to ensuring that their
product claims can meet the National Medical
Products Administration’s (NMPA) detailed
claim classification requirements.
Our solution
As a leader in testing, inspection and
certification for the cosmetics and
hygiene industries, our customers rely on
the services we provide. Over the years,
we have built a strong market reputation
with our customers, and SGS is proud
to be their first choice when they need
to demonstrate safe, effective and
stable products.
To maintain this level of trust, we
needed to be ready for these changes.
Our experts undertook a significant
amount of work to prepare for the
implementation of this new regulation,
and provided training and guidance to
support our customers along the way.
SGS China already operated two state-
of-the-art cosmetic clinical evaluation
centers in Shanghai and Guangzhou, but
space for expanding either laboratory
was limited. To cope with the increased
demand, we have opened two new
laboratories in Xiamen and Hangzhou,
locations that are both close to key
players in the industry. We invested
heavily in technologies including an
impressive array of testing instruments
and imaging systems to support skin
care product claims. While these sites
were under construction, we trained
new technicians and clinical evaluators,
to ensure we were ready to be
operational as soon as possible.
Management reportSGS | 2021 Integrated Annual Report
“ Product claim substantiation is never easy, especially
when dealing with new regulations. To complement our
existing state-of-the art clinical testing facilities in Shanghai,
Guangzhou and Xiamen, we have invested heavily to
equip the Hangzhou facility with the latest, most cutting-
edge technologies, so we can help our customers back
up their product claims with 100% accurate data.”
Pierre-Yves Dupont
Group VP Cosmetics & Hygiene
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Next steps
Our new site in Xiamen focuses on tests
seeking to validate anti-acne, nourish,
repair, anti-wrinkle, oil control, skin
firmness, moisturization and hydration
claims. The laboratory opened in June
and it was already working at full
capacity within a few months.
The Hangzhou site opened in October
and offers a wide range of efficacy
tests to validate skin moisturization/
repair, skin tone evenness, skin brilliance,
anti-wrinkle, firming, sensitive skin and
dermatologist tested claims, as well as
patch testing, safety-in-use tests and
color cosmetic testing. With all four sites
now in operation, we are able to better
meet market demand.
In the years ahead, we expect the
Chinese authorities to further strengthen
cosmetics and hygiene regulations to
ensure product safety and efficacy and
protect consumers.
We will continue to invest in expanding
our capabilities and capacity to
support our customers to place their
Cosmetics and Hygiene products on
the China market.
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laboratories
14
clinical facilities
+9 000
clinical studies
+78 000
panelists
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 52
Intellectual capital
Intellectual capital is our intangible and knowledge
based assets, which include our people’s knowledge
of protocols, procedures, our business lines
and customers. It also encapsulates our focus
on developing innovations that meet customer
needs, and the way we improve our processes
and services, adding value to society.
1 How we develop our intellectual capital
Build capabilities
that will enable
us to deliver on
our strategy
– We are pursuing several initiatives to enhance the delivery of our strategy. In our labs, our WCS
methodology is based on the zero optimum concept: working towards zero accidents (safety),
zero defects (quality), zero breakdowns (maintenance) and zero inventory (logistics)
Innovate for
our customers
– We promote innovation among our employees and provide tools that will help us develop ideas
and prioritize projects with the potential to scale up to significant new revenue streams for SGS.
Specifically, we are applying digital technologies to make existing processes more efficient
and create new services. Applying IoT technologies to existing services is reducing inspector
involvement and gives us new ways to monitor and manage objects in the physical world
while providing new streams of data
Train our people
to innovate and
generate new
intellectual capital
Secure our
information
and know-how
– The ability of our people to innovate is integral to our success. We promote self-directed learning,
tailor our talent development programs to fit local markets, business needs and employee
expectations, and invest in digital tools for training and development
– This involves protecting our business and the intellectual capital we have developed. Key areas
for us are data privacy and information security
2 Our inputs
Goodwill and other intangible assets CHF MIO
– R&D expenditure CHF +70 MIO
2021
2 160
2020
1 984
2019
1 468
2018
1 426
3 Progress during the year
Build capabilities
that will enable
us to deliver on
our strategy
– Twenty-two laboratories have adopted WCS methodology and started their journey towards
World Class. The roadmap towards World Class status for each laboratory is challenging, and
is evaluated by external parties in order to have a recognized value. Twelve of our laboratories
had been audited by the end of 2021, of which five have already had a second audit. In addition,
we have identified five potential additional sites to be included under the scope of WCS.
This is in line with our 2030 Sustainability Ambitions and supports our 2023 goal to promote
a culture of efficiency and excellence through WCS – with 20% of WCS labs to reach World
Class Manufacturing (WCM) Bronze award level and for SGS to expand the program to at
least 10 new sites. This expansion will be at our laboratories in Latin America, South East
Asia & Pacific, and the Eastern Europe & Middle East regions
Management reportSGS | 2021 Integrated Annual Report 53
3 Progress during the year continued
Innovate for
our customers
– We have successfully deployed services in a wide range of sectors. For example, SGS AirSense is
a comprehensive real-time indoor air quality monitoring solution that combines continuous sensor
measurements, powerful Cloud tools, insightful reporting and analysis, and an SGS Indoor Air
Quality (IAQ) Monitored Mark, all packaged together – enabling customers to really understand
their space and improve their air quality
Train our people
to innovate and
generate new
intellectual capital
Secure our
information
and know-how
– Using SmartWarehouse we have also been sensing and collecting valuable data throughout 2021,
which has helped our customers to preserve their grain commodities in Kazakhstan, the Baltic
States, Spain, Bulgaria, Hungary, the Netherlands, Turkey and many other countries
– Our knowledge management platform, SGS Campus has become the most visited site by SGS
people. It is one part of our more self-directed, on-demand, digitalized and continuous learning
culture, which helps us deliver greater efficiency, the right skills and proficiency, and better
service for our customers
– We have leadership programs with two business schools. We nominated 16 senior managers for
the International Institute for Management Development leadership program in Switzerland and
our new partnership with INSEAD has allowed us to scale up executive education to an additional
45 leaders. In addition, our internal management and leadership framework INSPIRE supports
SGS managers at all levels
– While 2021 has been a transition year for us with new leadership in digital and innovation, and
a fresh approach to the way we work, we have focused on three key areas – automating our
existing operations, digitalization of the customer journey and defining our vision and mission
– We continue to encourage our employees to put forward new ideas and set up a monthly
innovation. We have started to form ‘innovation squads’ (our first is in Lisbon) to address particular
projects. We have also started to use Viima software, which enables us to gather and develop
ideas from employees and stakeholders, prioritize them and pick the right ones to progress
– Specific training on information security and data privacy considering the implications of remote
working regarding information security, data protection and cybersecurity
– We comply with the EU Cyber Security Act and other relevant legislation, and seek to expand
this focus worldwide, applying it to hardware, consumer IT and medical solutions
– We are major investors in Komgo, a blockchain-based platform that supports traders by securing
all digital documents in one place, helping to simplify operations and standardize documentation.
We also use the blockchain system to ensure that no health data from Covid-19 testing, for
example, is shared with anyone apart from the subject of that data. All data is kept on the
user’s mobile phone and the test result is confirmed via the blockchain system
– We launched our Information Governance Framework (IGF) last year, which provides a cradle
to grave approach to the security of information pertaining to SGS and its employees, customers
and suppliers throughout the information cycle. The approach incorporates behavioral guidelines
and physical controls for the protection of hard copy and verbally transmitted information.
We developed it further to address the issue of classification predicated on the risks related
to information content
– We aim to be a leader in the field of data protection and are working to achieve greater consistency
across the organization, improving processes with IT vendors and strengthening our data privacy
team – including the appointment of a new Data Privacy Officer in China. We continue to roll out
data privacy policies that raise global standards
4 Outcomes
Training ratio
% of total employment cost spent on training (includes safety training hours)
WCS Number of laboratories using the services
Employees trained in information security and data privacy %
2021
2020
2019
2018
2.61
22
99
2.51
20
99
3.24
3.38
19
95
5
95
5 Outlook 2022
– Complete our succession planning
– Restructure our performance appraisal process
– Deploy our digital and innovation strategy
– Further expand the WCS methodology to other labs. The focus of
this expansion will be on our laboratories in Latin America, South
East Asia & Pacific, and the Eastern Europe & Middle East regions
– Further reinforce our information governance framework
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 54
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Intellectual
capital
Using the SGS Productivity System we involved
people on the shop floor to develop better working
methods to achieve business improvements.
Working with Lactalis in
Italy to improve efficiency
at their Galbani plant
The challenge for our customer
Our customer Lactalis produce Galbani,
Italy’s best known cheese brand, at their
plant in Casale Cremasco, in Cremona,
Lombardia. Founded in 1928, the plant
is very well established and successful,
but Lactalis asked SGS to help them
drive through some changes at the site,
in particular to improve efficiency and
reduce waste on their production lines.
Our solution
At SGS Productivity we help our
customers improve their productivity,
quality and lead times. With Lactalis, our
local team started with a diagnosis of the
current situation at their Galbani plant and
how they were managing the production
line producing Mozzarella cheese.
Then they discussed this with our
international team, to determine the best
improvement tools they could use to add
value, and how best to implement them.
We know that change management
is often regarded with criticism and
distrust on the shop floor. There is always
some resistance, but our approach is to
involve people at every stage – engaging
staff while optimizing processes
to create a sustainable system of
continuous improvement.
If you can get everyone behind the
change, and explain the benefits to them
as well as the organization, then you are
much more likely to achieve the results
you are looking for.
At the Galbani plant we agreed to
proceed with a Lean manufacturing
project that included in-house training,
shop floor instruments and Lean
methodologies that were applied together
with the workers on the production line.
This enabled Lactalis to reduce the set-up
time when you change from one product
to another. For example, changing a line
from their 125g Mozzarella product to
the 100g Mozzarella pack resulted in
50 minutes of manufacturing downtime.
Working through the process, we reduced
this set-up to just 20 minutes, while also
reducing plastic bag waste by 2.5%.
Management reportSGS | 2021 Integrated Annual Report
“ Our Lean manufacturing project included in-house
training, shop floor instruments and Lean methodologies
that were introduced with the cooperation of the workers.
Change management can be met with distrust, but when
we had the opportunity to involve people it was well
worth the effort. And the results followed.”
Andrea Chevallard
SGS Productivity Manager
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Next steps
This saving on set-up time can also
be applied to other changes on the
production line, such as a change
from Lactose-free or Light to standard
Mozzarella. Lactalis confirmed the
increase in productivity, and we also
introduced a KPI Dashboard and a formal
communication system to support the
change. The model will now be used
more widely across the Company’s
plants, not just in Casale Cremasco,
but also at Corteolona, Certosa
and Melzo.
400
people work at the Galbani
Plant in Casale Cremasco
60%
reduction in set-up time,
when changing from one
product to another
2.5%
reduction in plastic bags waste
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Human capital
Working with integrity, employing people fairly
and without discrimination, and protecting the
health and safety of our employees are our top
priorities. Addressing these human rights risks
is also a priority in our supply chain. Our services
help our customers to address these same risks.
1 How we develop our human capital
Work with
integrity
– Given the nature of our business, being trusted is a prerequisite of everything we do. That is
why we must always act with integrity, and why that is embedded into our business model.
SGS people do not engage in any form of bribery or corruption, and we adhere to the legal
requirements of every country where we operate. The SGS Code of Integrity applies to
all employees, as well as affiliated companies, contractors, subcontractors, joint venture
partners and agents
Respect
human rights
– We have a company-wide human rights policy, which is in line with 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. 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
Acquire the
best talent
– It is important for SGS to attract the best and right people to work with us, now and in the future.
To do this, we manage our talent acquisition strategy locally with global guidance
Commit to
diversity and equal
opportunities
– This is expressed in our SGS Business Principles, Code of Integrity and Human Rights
Policy. We have also implemented a Global Anti-Discrimination and Dignity at Work Policy.
It complements our Code of Integrity and aims to raise awareness of our zero tolerance
of any form of discrimination, as well as providing guidance on how to deal with it
Engage and care
for our people’s
well-being
Providing a safe
and healthy
environment
– In line with our culture of care, we promote initiatives to enhance the physical and mental
well-being of our employees. We value feedback and encourage employees to voice their
opinions via our voluntary annual employee engagement survey, Catalyst
– Our goal is for zero accidents and for zero harm to come to our people across our operations.
To achieve our Operational Integrity (OI) mission, we develop safety initiatives around eight areas:
(i) Visible Leadership; (ii) Performance Management; (iii) Resources and Skills; (iv) Training and
Awareness; (v) Communications; (vi) Risk Management; (vii) Health, Safety and Environmental
(HSE) Compliance; and (viii) Digitalization, recognizing the important benefits technology can
bring to our work in OI
– 93 297 (average number of employees)
– One SGS Recruiter Academy
– 15 SGS Rules for Life
2 Our inputs
3 Progress during the year
Work with
integrity
– In 2021, the total number of integrity issues reported through corporate integrity helplines was 262.
Of these, 35 were identified as breaches of the code of integrity. Our Code of Integrity is reinforced
through mandatory annual integrity training, and all new employees are required to complete the
same integrity training within three months of joining SGS. As integrity risks evolve over time,
we remain alert to significant changes and update our policies and materials accordingly
– We have reviewed our procedures to include more internal integrity audits. We continue to
strengthen our compliance and integrity function, underlining its strategic importance to the
organization. We have increased the size of our team this year, and plan to expand the team
further over the next two years
Management reportSGS | 2021 Integrated Annual Report 57
3 Progress during the year continued
Respect
human rights
– In December we launched new human rights training that is compulsory for all employees.
The three main objectives of the training are to raise employees’ awareness of the rights they
have; to ensure they fully understand their own responsibilities in the area of human rights;
and to let them know more about the communication and reporting tools available to them
Acquire the
best talent
Commit
to diversity
and equal
opportunities
Engage and care
for our people’s
well-being
– We also reinforced our governance around human rights. This involved the creation of a new
Human Rights Taskforce, bringing together colleagues from several key functions, including
Human Resources, Legal, Global Procurement, Corporate Security, Operational Integrity and
IT. The new Taskforce defines our human rights strategy at an operational level, and has put
together an action plan for 2022 that will support our commitment to human rights, and seek
to harmonize our global approach
You can read more about our approach to human rights
in our 2021 Sustainability Report
– By the end of 2021, we had rolled out our new e-recruitment tool, SmartRecruiters, to 36
countries, twice the number we had reached at the same point last year, and covering 80% of all
the open positions across the Group. The tool has helped us improve our hiring velocity and the
quality of our hires, with more data driven decision making assisted by AI, resulting in an increase
in the diversity of our employees. It has also proved very popular with hiring managers, and has
enabled collaborative recruitment, which is the key to success
– At the end of 2021, women occupied 29% of leadership positions. Having gender diversity in
leadership positions is very important, and we encourage women to progress their career through
our active diversity & inclusion strategy. To that end, we are working towards equal representation
in our succession planning exercises and leadership development programs
– We also launched an awareness session focusing on Inclusion, Diversity, Equity and Accessibility
(IDEA), with around 400 managers in attendance
You can read more about our Diversity & Inclusion
strategy in our 2021 Sustainability Report
– Activities have involved a further drawing contest for children, as well as a community food
bank challenge. The SGS People – 15 Day Challenge has also been used to thank colleagues
for their hard work during a difficult period
– Towards the end of 2020, we launched a global home working policy as part of an overall
strategy to address changing work patterns, disaster recovery situations, and workplace
preferences, many of which have stayed in place for much of 2021. We are also now
benefiting from the increased flexibility afforded by technology
– We sought out the opinion of 35 000 employees using our Catalyst employee survey.
More than 85% of our colleagues shared their opinions and highlighted that they have
felt safe at work and recognize that the level of integrity at SGS is higher than ever
– Employee engagement and manager effectiveness has significantly improved compared to
previous years and now surpasses external benchmarks, highlighting the positive impact of
concrete actions we have taken during the past 36 months. Despite Covid, and the remote
work relationships that resulted from it, 76% of our employees feel well connected to their
co-workers and believe that they receive feedback from their managers
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Be the change. Be SGS.
With our new employer brand, we are asking
all of our colleagues to ‘Be the change’, and
to ‘Be SGS’. The brand has been carefully
designed to help us attract, engage and retain
the best people by clearly communicating who
we are, what we offer employees, and the
skills and qualities we’re looking for. While it is
a dedicated employer brand, it aligns closely
with the broader SGS brand narrative and
brand guidelines.
Employer branding benefits
• Improved attraction and retention
• Clear and coherent communication
• Lower cost per hire (lower turnover)
• Candidate and employee engagement
• Employees become brand advocates
• Attractive to investors and
potential clients
A new chapter for our
employer brand
We have revamped our employer brand to
create a compelling, competitive, credible,
and segmented SGS brand, both internally
and externally. It aligns with our 2023 Group
Business strategy, our Talent strategy and
SGS’s sustainability ambitions, and allows
us to fulfil the needs of our different regions,
businesses and job groups, while ensuring a
consistent employer brand identity globally.
We have also sought to give SGS a more visible
human face by creating an employee-centric
brand that will help us adapt to the workforce of
the future, and meet their needs and priorities,
particularly around safety, purpose, wellbeing,
and flexible working arrangements.
We have developed four employer value
proposition (EVP) pillars that are globally
defined SGS themes – ‘Be Proud’,
‘Be Collaborative’, ‘Be the Expert’ and
‘Be the Difference’. These are attributes
to build our Employer Brand strategy on,
positioning ourselves and differentiating us
from our competitors. We are embedding
these themes into all our communications,
across the many touchpoints we have that
define both the candidate and employee
experience at SGS.
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3 Progress during the year continued
Providing a safe
and healthy
environment
– We saw another moderate improvement in safety, but the most important program we started
this year was one around cultural change. We know that 90% of accidents are due to inappropriate
behaviors, but changing these behaviors is not easy. We are working to understand the triggers
in the field that might help us influence individual behaviors
– We have launched initiatives in France, Spain and Belgium to identify trends and behavioral
influencers or risk contributors. These involve sending surveys to our people about perceptions
around why accidents happen, and trying to determine differences between those who had
accidents and those who did not. As we reported last year, we have identified around 500 sites
globally that are considered ‘critical’ and ‘important’ sites across our operations, and we continue
to work with them on tackling their safety and resilience
– We have also looked at big programs, such as fire prevention and the use of acids that present
a significant risk of explosion. We have specialists in our global team working on these and we
dedicated CHF 4 million towards specific fire prevention investment alone
– We upgraded both the eLearning training for all employees that echo our ‘SGS Rules for Life’
and the OI Awareness for Managers program. The new ‘SGS Rules for Life’ eLearning is a
brand-new course, designed with illustrative 3D animations that reflect credible life-threatening
scenarios. The goal of the training was to make employees relate to their applicable rules for life
in a more relatable way and so learn the preventive actions
– We prioritized the global implementation of our Industrial Hygiene Monitoring System
‘HealthTRACK’. This included a full review and improvements to the functionality of the system,
and developing virtual ‘face-to-face’ training for nominated HealthTRACK Champions in close
to 50 countries across our operations worldwide
– The exposure risk to hazardous materials, such as chemicals and airborne contaminants was
also high on the Industrial Hygiene agenda. Our Chemical Safety Program focused on high
risk chemicals such as perchloric acid, due to its explosive nature under certain conditions.
The reinforcement of best practice requirements around ergonomics, chemical safety, and
laboratory design and management will continue in 2022 as a high priority
4 Outcomes
Lost time incident rate (LTIR)
Code of Integrity: % employees trained to Code of Integrity
Women in Leadership %
2021
0.22
99
29
2020
0.23
98.8
28
2019
0.26
98.8
26.7
2018
0.25
90.7
26.4
5 Outlook 2022
– We will seek to automate as much as we can within
our recruitment process to remove the potential for
bias and to ensure we find ‘top talent’ faster and
provide our qualified recruiters with more time to
search for the skills SGS will need in the future
– We are planning for tomorrow, while transforming
today. That means working to upscale our workforce
to maintain our advantage, in the face of political and
social change
– We will continue to build on our pipeline of well-rounded and
inspiring leaders, and ensure the knowledge we have is being
transferred to the next generation
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 60
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Human
capital
SGS North America needed a simple
employee recognition program that their
people would not only want to use but
could also see potential benefits.
KUDOS Employee
recognition program
in North America
The challenge for our business
We know from our Catalyst employee survey results
that recognition of our people has a very high impact
on colleagues’ engagement – improving morale and
boosting employee loyalty. When people feel valued
by SGS and their peers, they are more aligned to
our strategy, values and purpose. That is why the
HR team in SGS North America looked for a way
to provide managers with a tool that would help
them provide regular, meaningful recognition.
Our solution
As many of our managers across North
America are responsible for employees
in both the US and Canada, we needed
a solution that would provide the same
service across borders. SGS North
America partnered with Awardco, a
service provider that offers to ‘Reimagine
Recognition’ and provides a recognition
platform that is easy to use for both
managers and employees.
Awardco’s approach is simple: when
people are recognized and rewarded for
doing a good job they are more motivated
and more engaged in their work, which
leads to them getting recognized more.
It is a virtuous cycle, and one the team
in North America were keen to take
advantage of. With Awardco’s support,
we launched our revamped Service
Award Program.
Teams across borders can now
easily recognize their colleagues on
their service anniversary by sharing
pictures, memories and kind words.
Employees also get to choose a gift
from Amazon Business.
We then shifted our attention to the key
matter of recognition. To address this,
we created KUDOS, through which our
employees can recognize their peers
on a shared feed. Managers can also
recognize their people on the same
feed and provide points that add up
to another opportunity for employees
to select an item they would like from
Amazon Business.
Management reportSGS | 2021 Integrated Annual Report
“ We have received positive feedback on the
new KUDOS program from both employees
and managers. We are looking forward to
our next Catalyst employee survey to see
how KUDOS has affected our results.”
Kelly Gilbert
Compensations and Benefits Manager
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Next steps
SGS North America has received
positive feedback from both employees
and managers on this new approach to
recognition. We will be looking closely
at our next Catalyst employee survey
to see how KUDOS affects our results.
In the meantime, we will continue to look
for new ways to promote the program
among our employees, and conduct
a full review of KUDOS at the end of
the year, so that we can fine tune it
if necessary in 2022.
Recognitions
1 476
co-worker KUDOS program
977
Employee Recognition program
84 292
points awarded
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 62
Social and
relationship capital
Social and relationship capital covers how
we collaborate with our customers, suppliers,
communities, and other stakeholders. This is
not just important to our success, it ensures
we add value for them and that together
we add value to society.
1 How we develop our social and relationship capital
Engage with
our customers
– Each of our divisions has a customer care department, connecting customers to relevant parts
of SGS. Each of these departments works hard to adapt our communication channels to meet
our customers’ needs
Collaborate
with suppliers
– Our Procurement team provides SGS with a window to more than 65 000 suppliers worldwide,
with over 60 global agreements representing 20% of total spend. We work closely with these
strategic suppliers through our Supplier Relationship Management (SRM) program, developing
long-term partnerships based on close collaboration, transparency and a win-win approach,
which helps to boost innovation, sustainability and efficiency in our supply chain
Use procurement
to drive
sustainability
Support our
communities
– Sustainability is a qualifier in the selection of our suppliers, and we can influence and support
over 65 000 suppliers to adhere to our own values and principles, including collaboration
and specific initiatives
– We aim to make a measurable and lasting positive impact by investing in the communities
in which we operate
– SGS Community Program
2 Our inputs
3 Progress during the year
Engage with
our customers
– +800 000 customers
– 65 000 suppliers
– The SGS Online Store, now present in 28 countries, enables customers worldwide to either
buy or request a quote for a large range of SGS services. These include services in the areas
of Environment, Health and Safety; Agriculture, Food, Oil, Gas and Chemicals; Certification; and
Cybersecurity. The SGS Online Store makes it easier for us to engage with customers, reach new
customers and makes the sales process more efficient. For customers, it simplifies the process
of engaging with SGS, making it easier and more appealing for them to access our services
Collaborate
with suppliers
– We track customer sentiment through our annual Voice of the Customer surveys, and all
feedback is reviewed and followed up swiftly. We are working to enhance these surveys
further in 2022, increasing the sample size of customers interviewed, and bringing greater
visibility to the survey results globally
– The results of our Laboratory Excellence Program, the largest of our annual Voice of the
Customer surveys, help us to continually improve our services. This year we achieved a result
of 88% customer satisfaction, in line with last year and high compared to the past few years
– Since 2020 business continuity challenges have increased, becoming one of our most important
priorities in the cooperation with our suppliers. Our supply chain is truly global, which provides
us with opportunities but also makes us more vulnerable to global turmoil such as geopolitical
disputes and bottlenecks in logistics capacity. Close collaboration with strategic suppliers makes
a significant difference in helping us to anticipate and overcome potential shortages and delays
– Overall, procurement contributes to the competitiveness and productivity of our businesses
by managing CHF 2 billion third-party spend on operations and capital expenditure, with our
state-of the-art procurement operating model
– With tens of thousands of suppliers and around 80% local sourcing we continue to develop
more automated procedures. By applying online sourcing we can not only obtain market-
conformant prices, but also ensure full documentation and fit for purpose specifications.
We are currently sourcing 95 million CHF through online tenders
Management reportSGS | 2021 Integrated Annual Report 63
3 Progress during the year continued
Collaborate
with suppliers
continued
– We are also developing a ‘plug and play’ procurement model to help us integrate new
companies more efficiently following acquisitions, and to deliver further synergies
– On value for money, we have further increased incremental gross savings while optimizing
inventories where needed, as well as enabling the faster integration of acquisitions
– By ensuring we work efficiently, and comply with our processes and systems, we deliver
a better user experience and performance across the business. Through the management
of payment terms, we optimize our working capital
– Innovation is at the core of our procurement strategy, as we talk to suppliers every day that can
deliver fresh digital solutions and innovative technologies to our business. This approach started
as our Lab of the Future program, which was an important part of our procurement strategy
in 2020 and has now been embedded into this pillar of our updated Procurement and Supply
Chain Strategy
Use procurement
to drive
sustainability
– Driving sustainable sourcing in our supply chains support our 2023 and 2030 sustainability
ambitions, and will help us reduce the overall CO2 footprint across our value chain
– One third of our annual spend is now with suppliers who have signed the SGS Supplier
Code of Conduct. In particular, we ask our strategic suppliers to collaborate with us on
transforming the products and services we purchase into more sustainable ones
Support our
communities
– We continued to promote volunteering, pro bono work, corporate donations and
employee giving under our three community strategy pillars: empowerment, education
and environmental sustainability. This helps us to contribute towards our global priority
Sustainable Development Goals
– Although Covid-19 restrictions continue to limit the total number of volunteering hours,
our colleagues are all entitled to take a free day for voluntary work, paid for by the Company.
We are also committed to finding and supporting more online community volunteering
opportunities. Financial and other donations, such as pro bono services, remain strong.
Our affiliates continue participating in global initiatives that support local communities,
like the SGS People – 15 Day Challenge
4 Outcomes
Satisfaction score across all Voice of the Customer surveys
This is a satisfaction score on a 0-100% scale
Spend sourced online
Investment in community CHF MIO* on a constant currency basis
* Alternative Performance Measures (APM), refer to the ‘2021 Full year APM’ document.
2021
2020
2019
2018
88
4%
1.45
83
3%
1.25
91
3%
1.35
88
1%
1.38
– Reinforce our sense on community through our community program
and initiatives like the SGS People – 15 Day Challenge in 2022
– Enhance our global framework for community activities
5 Outlook 2022
– Deploy the new Voice of the Customer strategy
framework to become a more customer-
centric company
– Create a consistent program globally to measure
and improve customer satisfaction
– Increase the sample size to gather statistically
relevant results by affiliate and by division
– Fully deploy our 2023 Global Procurement Strategy
– Based on our supplier segmentation, further extend
our sustainability principles to our supply chain
by improving the Self-Assessment Questionnaire
process and increasing the accuracy of the Scope 3
emissions associated to our supply chain
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 64
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Social and
relationship capital
Prioritizing engagement, well-being and supporting
local communities at SGS has become all the
more important in these challenging times, and
our SGS People – 15 Day Challenge is bringing
our employees closer together and reinforcing our
positive impact on communities around the world.
SGS People – 15 Day
Challenge – strengthen
the SGS community
The challenge
With the ongoing pressures on our people
and their local communities due to the
pandemic, we wanted to extend the
support of the SGS family through our
SGS People – 15 Day Challenge, which
is now established as an annual event.
“ For SGS Poland it was a no brainer to
join the SGS People – 15 Day Challenge
again. Creating value for our colleagues,
their families and our local community is
a priority. We decided that the best way
to support our community was to directly
involve employees, so 5 local coordinators
promoted the food collection for people
in need in our 5 largest cities (Warsaw,
Pszczyna, Wrocław, Gdynia and Gdansk).
As a result, we managed to collect over
200 kg of food, several thousand zlotys,
which we directly transferred to food
banks, and, as a donation, we supported
the aims of the foundation that aim at
preventing food waste. SGS employees
responded enthusiastically to our
action, not to mention the food banks
themselves, when they learned the
scale of our assistance. We are proud
to work at SGS, which donated extra
to the food collection!”
Justyna Kania
Marketing and Communication Manager
SGS Poland
Our solution
The key objectives from last year’s program
– reinforcing our sense of community and
sustainability culture and our support for
local communities – were no less relevant
in 2021. The three pillars around which it
was organized were also unchanged, as
our focus continued to be on: (i) our people;
(ii) their families; and (iii) their communities.
During the year, we ran activities at both
a global and local level, involving people
centrally, and across more than 50 affiliates.
An important part of this activity was the
‘recognition challenge’, through which
our people were encouraged to publicly
recognize colleagues at SGS by sending
them kudos via SGS’s all-employee Yammer
group. More than 1 000 kudos were posted
in Yammer to acknowledge the efforts made
this year, and 20 affiliates organized other
local initiatives, such as awards for the best
employee and best team of the year.
To support both our people’s families and
our sustainability culture, we organized
two specific events – a drawing contest
for colleagues’ children that once again
attracted almost 2 000 entries, and a
global ‘Leaders in sustainability’ quiz,
which featured questions on sustainability
initiatives at SGS, our sustainability services,
and individuals’ personal commitments.
More than 1 700 people took the quiz.
Finally, the SGS People – 15 Day
Challenge, hosted by SGS’s mascot
Lëss the bear, was focused on supporting
local communities. More than 30 affiliates
organised activities to support local
communities, especially food banks.
The initiatives included fundraising,
donation of food and other items, as
well as volunteering. Many employees
participated in collecting and/or delivering
food and items to food banks and other
charities. More than CHF 100 000 was
raised globally, exceeding last year’s
figure. Corporate Sustainability donated
an extra amount to one of the local food
banks. This year the selected affiliate
was SGS Poland.
Management reportSGS | 2021 Integrated Annual Report
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Next steps
SGS People – 15 Day Challenge has
now become an annual event, and
will continue to strengthen our SGS
community at a global and local level
for years to come.
1 000+
kudos posted in Yammer
to acknowledge the efforts
made by colleagues this year
>CHF 100 000
raised for local food banks
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 66
Natural capital
We are a carbon neutral business in our own
operations, and preserve natural capital by
managing the Earth’s finite resources. We add
value to society through the services we provide
to our customers and by helping them transition
to a low-carbon economy, minimizing their
impact on the environment.
1 How we manage our natural capital
Our Climate
Change Strategy
– Our climate change strategy focuses on reducing energy consumption at source, using renewable
energy whenever possible, and off-setting residual emissions
– Our 2 600 offices and laboratories account for around 68% of our global energy consumption.
We have been running energy reduction projects for more than 10 years, in particular our Energy
Efficiency in Buildings (EEB) Program, which helps us design specific energy efficiency plans
for our highest consumption buildings
– With more than 10 000 SGS business cars in our network today, we believe we can make
a real difference by changing to new technologies or using different means of transportation
– Our employees are an essential part of this journey and we constantly develop environmental
awareness initiatives. We promote employee participation to strengthen their commitment and
take their initiatives and suggestions into account
– We are introducing renewable energy into our operations wherever possible. However, due to our
numerous sites around the world and the low availability of renewables in some countries, using
100% renewable energy at SGS is a complex challenge
– Our green IT strategy and IT activation plan includes actions to save energy and reduce emissions
from our IT assets
– Our priority is to reduce CO2 emissions from our operations, but this is not always possible, so any
residual emissions are compensated for through our carbon off-setting initiatives. This enables us
to attribute a specific cost to the carbon that we generate. Each SGS affiliate takes responsibility
for their emissions and the cost of off-setting them
Promote circular
economy
– The waste we produce is also relatively low, but we do need to consider the way we handle
chemicals, test samples, paper, plastic and organic waste at our offices and laboratories
2 Our inputs
Electricity consumed GWh
Fuel consumed GWh
2021
480
448
2020
441
422
2019
451
483
2018
446
498
3 Progress during the year
Build capabilities
that will enable
us to deliver on
our strategy
– SGS has maintained its Carbon Neutral status since 2014, and we were pioneers in setting
science-based targets for 2025 and 2030, approved by the Science Based Targets Initiative (SBTi).
Following our climate change strategy we are now committed to the Business Ambitions for
1.5º C and to Net Zero
– Evaluating and managing the risks associated with climate change remains a priority for SGS, and
we are supporters of the Task Force on Climate-related Financial Disclosures (TCFD). We have
adopted their recommendations around governance, strategy, risk management, and metrics
and targets
You can read more about our climate change strategy in our 2021 Sustainability Report
You can read more in our TCFD Report (available 1 March 2022)
Management reportSGS | 2021 Integrated Annual Report 67
3 Progress during the year continued
Reduce energy
consumption
– Despite Covid-19 restrictions we were able to provide new solutions to enhance our EEB Program.
We added a new IT tool to help us visualize data and analyze/compare buildings to our EEB
Program, and conducted a pilot energy audit in India
– By focusing our energy reduction efforts on our highest consumption buildings, we have
demonstrated that we can make a significant impact on our energy levels. We currently have 700
buildings in our EEB Program, which accounts for 83% of our electricity and of our non-transport
fuels consumption. We have now approved a global capex fund to support EEB measures and
incentivize local investments
– We have reviewed the SGS Vehicle Emission Policy this year to adapt it to our 2030 targets,
and this updated policy will come into force in 2022. One of our key initiatives to meet our new
sustainability ambitions is to cap and further reduce the CO2 emissions of the SGS vehicle fleet
by a further 40%, and transition 50% of the fleet to low-carbon technologies by 2030. We have
already introduced low-carbon technology vehicles into our fleet
– We delivered a comprehensive employee awareness campaign on climate action during COP26.
This included interactive graphics to inspire simple steps people can take in the home, office and
when shopping or traveling. The campaign promoted the actions SGS is taking for a low-carbon
economy, and discussed how every employee has a role to play
– We launched our Sustainable IT Activation Plan to ensure our global IT organization is ready
to engage and support the achievement of our 2030 Sustainability Ambitions
– We are investing in both Renewable Energy Certificates and on-site self-generation facilities
(solar panels). So far, 97% of the electricity consumed by SGS comes from renewable sources,
and we are working towards closing the gap as far as possible
– We have continued to develop our waste reduction initiatives, especially for plastic waste.
We are working towards embedding the circular economy into our operations – keeping resources
in use for as long as possible, extracting the maximum value from them, then recovering and
regenerating products and materials at the end of their service life
– We engage in various initiatives that help us monitor the amount of water we use and minimize
consumption across all our operations. As a company, we are not a highly intense consumer of
water, so this is not such a material topic for us. However, we remain committed to ensuring we
have efficient water management strategies in place. Within our EEB Program, which is primarily
focused on our energy reduction efforts, we also assess water consumption and installations,
so that we can make recommendations for site-specific water efficiency improvements
Reduce waste and
conserve water
4 Outcomes
CO2e Thousand metric tons
2021
2020
2019
2018
131 542
122 952
159 848
167 976
EEB program Energy conservations measures identified (cumulative)
694
471
446
295
*
Market-based figures. Excludes district heating and refrigerant gases emissions due to unavailability of data. Scope 3 emissions only include Category 3: business travel.
5 Outlook 2022
– Develop a policy to include circular economy principles
into our waste and water management
– Full implementation of our new Vehicle
Emissions Policy
– Continue deploying our Energy Efficiency
in Buildings program
– Reinforce our IT Activation Plan
– Increase our environmental awareness initiatives
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 68
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capital
We are adapting the capacity in our traditional
metallurgy business to service high-growth
industries that rely on green technologies.
Identifying the evolving
needs of the mining industry
at our Lakefield site
The challenge for our customer
The mining industry is constantly evolving
to meet the changing needs of the market.
Given the strong support for actions that
will mitigate climate change and improve
sustainability in mining, there is more
interest in wider, more diverse range of
commodities, including critical minerals
such as lithium, nickel, cobalt, graphite
and rare earth elements.
Our solution
This year, our Lakefield facility in
Ontario, Canada, celebrated 80 years
of excellence supporting the mining
industry. Our expertise ranges from
effective flowsheet development
to practical technical solutions.
Our metallurgy and mineralogy
teams at Lakefield have completed
over 21 000 projects, giving them
extensive experience in taking a project
from early exploration, providing a
comprehensive understanding of the
mineral deposit, through to optimizing
the flowsheet design of the extraction
process, to finally helping our customers
successfully reach production.
With environmental considerations
becoming more critical to our clients’
success, we also help them to ensure
their projects are environmentally
sustainable and support the circular
economy. For example, we have adapted
to support the development of new
processes, such as in lithium-ion battery
recycling and carbon capture. As a global
leader in metallurgy and mineralogy,
we continue to innovate, particularly
where we can add value to newly viable
projects to extract complex mineral
deposits that may have previously
been considered uneconomic.
Management reportSGS | 2021 Integrated Annual Report
“ As a leader in metallurgy and mineralogy, we
continue to innovate and add value to complex
mineral deposits. Projects previously considered
to be uneconomical are now becoming viable
with the metallurgical, sustainability and consulting
insights we provide across the mining value chain.”
Stephen Mackie
Metallurgy & Consulting NAM Director
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Next steps
The sustained growth at our Lakefield
site depends on our ability to identify
and meet the evolving needs of the
mining industry. Our metallurgical team
has shown it is able to successfully
adapt to shifting market demands,
including the interest in a wider and
more diverse range of commodities.
At the same time, we offer unrivaled
knowledge, local expertise and
experience across the entire mining life
cycle, allowing us to deliver sustainable,
technical and economical solutions.
80
number of years
70 000sq ft
metallurgical laboratory
21 000+
projects completed
The Lakefield laboratory dates back to 1941 when
a small group of researchers and engineers started
up a company focused on processing nepheline
syenite during the Second World War. Since its humble
beginnings, the Lakefield location has grown to become
one of the top metallurgical facilities in the world.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 70
Quantifying our
value to society
We are one of the few companies robustly
and transparently measuring total value
creation for society in economic terms.
In the last year, we continued to develop
our Impact Valuation Framework, adapting
to new regulations and standards.
The Framework helps us to make
better decisions, including non-
financial considerations. It is based
on six forms of capital, recognized by
the International Integrated Reporting
Council. Progress is measured through
32 indicators that support how we
track our measurable positive impact.
Applying our Impact Valuation Framework
methodology, in 2021 we calculated that our
total value to society was +CHF 5 496 MIO.
The value of our positive benefit to society
was +CHF 6 255 million.
This was primarily created through profit
generation, the paying of taxes and wages,
investment in training programs and
information security. We also generated
CHF 759 million of negative societal impacts,
primarily driven by the environmental
footprint of our supply chain.
For further information on our business
model, please see pages 18 to 20 of our
2021 integrated annual report
Find out more about our Value
for Society methodology
2020 SGS value to society (CHF MIO)1
Financial
capital
Manufactured
capital
Human
capital
5 206
471
(150)
Natural
capital
(303)
Intellectual
capital
216
Social and
relationship
capital
56
Our financial
capital results
are impacted
by profit,
revenue,
employment
costs and
taxes paid to
governments
Our manufactured
capital value
measures the
improvement
of capital assets
(directly controlled
and those of our
supply chain)
Our human capital
value is directly
influenced, among
others, by our
risk of having
human rights
non-compliances
in our value chain
and by our
suboptimal data
on gender equality
The most negative
impact in this capital
is related to the
footprint in the value
chain, especially in
our supply chain
Our intellectual
capital value is
mostly driven by
our training and
development
programs
This capital is
positively impacted
by the way we
improve our
relationships with
local communities,
creating trust to
customers and also
negatively impacted
due to the risk
of suppliers’
financial stress
Value to
society
5 496
The total value
to society of
SGS direct
operations and
supply chain
activities
Positive impacts
Supply chain 1 667
Supply chain 401
Supply chain 0
Supply chain 0
Supply chain 0
Supply chain 0
Value to society
Direct operations 3 539
Direct operations 124
Direct operations 66
Direct operations 7
Direct operations 265
Direct operations 187
Total
Negative impacts
Supply chain 0
Supply chain 0
Supply chain (94)
Supply chain (297)
Supply chain 0
Supply chain 0
Direct operations 0
Direct operations (54)
Direct operations (122)
Direct operations (13)
Direct operations (48)
Direct operations (131)
1. Value to society is calculated using 2020 figures. Within each capital we have identified positive and negative impacts. The values presented in each capital are the result
of adding the positive impacts and subtracting the negative impacts.
Management reportSGS | 2021 Integrated Annual Report 71
Our approach
to sustainability
reporting
At SGS, we are committed to providing
stakeholders with accurate and timely updates
on our sustainability activities and performance,
and we strive to produce a report that is fair,
transparent and balanced, and meets the
needs of stakeholders.
Scope and boundaries
The scope of the sustainability information
contained in this integrated annual report
covers all regions and business lines of
the SGS Group for the 2021 calendar year.
A list of SGS affiliates can be found on pages
175 to 177 of this report. Unless stated
otherwise, our reported data scope covers
the Group business and targets for the
period 1 January to 31 December 2021.
We have identified and prioritized the
most material impacts on our business
and on stakeholders across our value chain.
This integrated annual report includes
performance data for our direct operations,
as well as information on how we manage
the most material issues.
For more information on how we
define our material issues, please
see page 32 of this report
We disclose our past and present
performance over a five-year period in this
report. Sometimes historical data may differ
from that included in 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.
However, significant changes to prior year
data are disclosed where they first appear
in the report.
PwC provided limited assurance
over the following non-financial
performance indicators:
• Employees and training indicators
(Women in leadership positions on
pages 13, 19 and 59, Total number of
employees on page 18, Employees trained
in information security and data privacy
on page 53, Training ratios on pages 19
and 59 and Employees trained to Code
of Integrity on page 59)
• Operational integrity indicators
(Decrease in Lost Time incident Rate
(LTIR) on page 13 and Lost Time incident
Rate on pages 19 and 59)
• Energy consumption and emissions
indicators (Decrease in CO2 emissions
on page 13, Renewable energy sourced
on page 13, Lower-emission company
vehicles on page 13, Electricity consumed
on pages 18 and 66, Water consumed
on page 18, Fuel consumed on pages
18 and 66 and Metric tons of CO2
on pages 19 and 67)
• Customer satisfaction indicator
(Satisfaction score in the Voice of
the customer surveys on page 19)
• Community investment indicator
(on pages 13, 19 and 63)
• KPI’s embedded into the Long-Term
Incentive plan (on page 13)
• Locally sourced supplier rate indicator
(on page 19)
External standards
SGS has published a sustainability report
for more than 10 years, and since 2015,
we have integrated sustainability content
into our integrated annual report. We support
the principle of integrated reporting, and
continue to move towards a fully integrated
reporting structure in line with the Integrated
Reporting Framework. In 2019, we aligned
further to the 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 Corporate Sustainability Report.
Since 2013, our Sustainability Report
has been developed using the guidelines
for the AA1000 Accountability Principles
Standard and the Global Reporting Initiative’s
Standards. We also align our reporting
with the Sustainability Accounting Standard
(Standard) for the Professional & Commercial
Services Industry (SASB). Our reporting
approach is explained further in our
Sustainability Basis of Reporting.
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 2021, we appointed PricewaterhouseCoopers
(PwC) to provide independent assurance of our
sustainability performance. PwC’s Assurance
Report describes the work undertaken and
their conclusion for the reporting period to
31 December 2021. Documents relating to
independent external assurance in the years
prior to 2021 are available in our Reporting
Hub section on our website: www.sgs.com/
en/our-company/corporate-sustainability/
sustainability-at-sgs/reporting-hub.
Please see independent assurance for
further information about our assurance
process on pages 72 and 73 of this
integrated annual report
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 72
Independent Limited Assurance Report
on the 2021 non-financial performance reporting to the
Board of Directors of SGS SA, Geneva
We have been engaged to perform assurance procedures to provide limited assurance on the 2021 non-financial
performance reporting of SGS SA and its consolidated subsidiaries (“SGS”) included in the Integrated Report (“Report”)
for the year ended 31 December 2021. The non-financial performance indicators of SGS for the prior year-ends were
assessed by another firm whose report for year-end period 31 December 2020, dated 23 February 2021.
Scope and subject matter
Our limited assurance engagement focused on selected 2021 non-financial performance indicators in the Report of SGS
such as the Employees and training indicators, the Operational integrity indicators, the Energy consumption and
emissions indicators, the Customer satisfaction indicator, Community investment indicator, the Number of KPI’s
embedded into the Long-Term Incentive plan and the Locally sourced supplier rate indicator as detailed on page 71 of
the Report.
Criteria
The reporting criteria used by SGS are described in the SGS Basis of Reporting document defining those procedures, by
which the related non-financial performance indicators are internally gathered, collated and aggregated. The SGS Basis
of Reporting document is based on the GRI Sustainability Reporting Standards (GRI Standards) published by the Global
Reporting Initiative (GRI) (hereafter the “related GRI-Criteria”).
Inherent limitations
The accuracy and completeness of non-financial performance indicators are subject to inherent limitations given their
nature and methods for determining, calculating and estimating such data. Our assurance report should therefore be
read in connection with the SGS Basis of Reporting document, its definitions and procedures on non-financial
performance reporting therein. Further, the greenhouse gas quantification is subject to inherent uncertainty because of
incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of
different gases.
SGS responsibility
The Board of Directors of SGS is responsible for the Report as well as for selection, preparation and presentation of the
information in accordance with the related GRI-Criteria. This responsibility includes the preparation of the SGS Basis of
Reporting document and the design, implementation and maintenance of related internal control relevant to this
reporting process that is free from material misstatement, whether due to fraud or error and the appropriate record
keeping.
Our responsibility
Our responsibility is to express a limited assurance conclusion on selected 2021 non-financial performance indicators.
We conducted our limited assurance engagement in accordance with the International Standard on Assurance
Engagements 3000 (revised), “Assurance Engagements other than Audits or Reviews of Historical Financial
Information”, and, in respect of greenhouse gas emissions, with the International Standard on Assurance Engagements
3410, “Assurance Engagements on Greenhouse Gas Statements”, issued by the International Auditing and Assurance
Standards Board. These standards require that we plan and perform this engagement to obtain limited assurance about
on whether anything has come to our attention that causes us to believe that the non-financial performance indicators
are not free from material misstatement.
A limited assurance engagement undertaken in accordance with ISAE 3000 (revised) involves assessing the suitability in
the circumstances of SGS’ use of applicable criteria as the basis for the preparation of the non-financial performance
indicators, assessing the risks of material misstatement of the non-financial performance indicators whether due to fraud
or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of
the non-financial performance indicators. A limited assurance engagement is substantially less in scope than a
reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of
internal control, and the procedures performed in response to the assessed risks. The procedures selected depend on
the assurance practitioner’s judgement.
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, Téléfax: +41 58 792 91 10, www.pwc.ch
PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
Management reportSGS | 2021 Integrated Annual Report 73
Our independence and quality controls
We are independent of SGS in accordance with the International Code of Ethics for Professional Accountants (including
International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA
Code) that are relevant to our audit of the financial statements and other assurance engagements in Switzerland. We
have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
PricewaterhouseCoopers SA applies International Standard on Quality Control 1 and accordingly maintains a
comprehensive system of quality control including documented policies and procedures regarding compliance with
ethical requirements, professional standards and applicable legal and regulatory requirements.
Summary of the work performed
Our limited assurance procedures included, but were not limited to the following work:
• Reviewing the SGS Basis of Reporting document and the SGS Group Sustainability Manual and observing the
application
• Interviewing SGS representatives at Group and country level in Australia, Belgium, China, Spain, France, the
Netherlands and South Africa responsible for the data collection and reporting
• Inquiries of personnel involved in the preparation of the Report regarding the preparation process, the internal control
system relating to this process and selected disclosures in the Report
• Inspecting the relevant documentation on a sample basis
• Performing tests on a sample basis of evidence supporting the 2021 non-financial performance indicators concerning
completeness, accuracy, adequacy and consistency
We have not carried out any work on data other than outlined in the scope and subject matter section as defined above.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our assurance
conclusions.
Conclusion
Based on the procedures we performed, nothing has come to our attention that causes us to believe that the 2021 non-
financial performance indicators disclosed as described in the scope and subject matter section are not prepared and
disclosed in all material respects in accordance with the related GRI criteria.
Intended users and purpose of the report
Our report is prepared for, and only for, the Board of Directors of SGS SA, and solely for the purpose of reporting to
them on the 2021 non-financial performance indicators in the Integrated Report and no other purpose. We do not, in
giving our conclusion, accept or assume responsibility (legal or otherwise) or accept liability for, or in connection with,
any other purpose for which our report including the conclusion might be used, or to any other person to whom our
report will be shown or into whose hands it might come, and no other persons shall be entitled to rely on our conclusion.
We permit the disclosure of our report, in full only and in combination with the SGS Basis of Reporting document to
enable the Board of Directors to demonstrate that they have discharged their governance responsibilities by
commissioning an independent assurance report over the 2021 non-financial performance indicators in the Integrated
Report without assuming or accepting any responsibility or liability to any third parties on our part. To the fullest extent
permitted by law, we will not accept or assume responsibility to anyone other than the Board of Directors of SGS SA for
our work or this report.
PricewaterhouseCoopers SA
Guillaume Nayet
Raphael Rutishauser
Geneva, 21 February 2022
The maintenance and integrity of the SGS SA website is the responsibility of the Board of Directors; the work carried out by the
assurance providers does not involve consideration of the maintenance and integrity of the SGS SA website and, accordingly,
the assurance providers accept no responsibility for any changes that may have occurred to the reported non-financial
performance indicators or criteria since they were initially presented on the website.
SGS SA | Independent Limited Assurance Report
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 74
Corporate
governance
This Corporate governance report informs
shareholders, prospective investors and society
on SGS’ policies in matters of corporate
governance, such as: the structure of the
Group, shareholders’ rights, the 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.
1. Group structure
and shareholders
1.1. Group structure
1.2. Significant shareholders
1.3. Cross-shareholdings
2. Capital structure
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
76
76
77
77
77
77
77
77
77
77
77
77
4
Corporate governanceSGS | 2021 Integrated Annual Report 75
86
86
86
87
87
87
87
87
3. Board of Directors
77
5. Compensation,
shareholdings and loans
86
7.
Change of control
and defense measures
3.1. Members of the
Board of Directors
3.2. Other activities and
vested interests
3.3. Limits on external mandates
3.4. Elections and terms of office
3.5. Internal organizational structure
77
80
80
80
80
5.1. Content and method of
86
7.1. Duty to make an offer
determining the compensation
and the shareholding programs
7.2. Clauses on change of control
5.2. Rules on approbation by the
86
annual shareholders’ meeting
of executive pay
5.2.1. Rules on performance-
86
8. Auditors
8.1. Duration of the mandate
and term of office of
the lead auditor
3.5.1. Allocation of tasks within
80
the Board of Directors
related pay and allocation of
equity-linked instruments
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
3.6. Definition of areas
of responsibility
3.7. Information and control
instruments vis-à-vis
the management
4. Operations Council
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
5.2.2. Rules on loans,
credit facilities and
post-employment
benefits
5.2.3. Rules on vote on pay
6. Shareholders’
participation rights
6.1. Voting rights and
representation restrictions
6.1.2. Rules on instructions to
the independent proxy and
electronic participation in the
annual shareholders’ meeting
6.2. Statutory quorums
6.3. Convocation of general
meetings of shareholders
6.4. Inclusion of items
on the agenda
6.5. Registration in the
share register
81
82
82
83
84
84
85
85
85
85
8.2. Audit fees
86
8.3. Additional fees
8.4. Information instruments
pertaining to the external audit
9. Information Policy
87
86
86
86
86
86
86
86
86
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report
76
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 2021, market
capitalization was approximately CHF
22 837 million (2020: CHF 20 201 million).
The operations of the Group are divided
into seven regions, each led by a Chief
Operating Officer responsible for the
SGS businesses in that region and for the
local implementation of Group policies
and strategies.
At 31 December 2021, geographic
operations were organized as follows:
• North America
• Latin America
• Africa & Western Europe
• North & Central Europe
• Eastern Europe & Middle East
• North East Asia
• South East Asia & Pacific
The Group was structured into five business
lines with each business line 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 2021, the business
divisions were organized as follows:
• Connectivity & Products (C&P)
• Health & Nutrition (H&N)
• Industries & Environment (I&E)
• Natural Resources (NR)
• Knowledge (Kn)
Each line of business was 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.
1.1.2. 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 175
to 177 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 list of legal entities is limited
to entities whose contribution to the Group
revenues in 2021 represent at least 1% of
the consolidated revenues, and the main
operating entity in the jurisdictions where the
Group is active, even when annual revenues
do not reach 1% of consolidated revenues.
This definition of materiality excludes
dormant companies, pure sub-holding
companies or entities used solely for the
Geographic locations
At 31 December 2021, geographic operations are organized as follows:
Americas
18.9%
North America
Latin America
Europe, Africa, Middle East
Asia Pacific
46.1%
Africa & Western Europe
North & Central Europe
Eastern Europe & Middle East
35.0%
North East Asia
South East Asia & Pacific
Corporate governanceSGS | 2021 Integrated Annual Report 77
detention of assets. Details of acquisitions
and disposals made by the SGS Group
during 2021 are provided in note 3 of the
consolidated financial statements included
in the section 2021 Results on page 123
of this annual report.
1.2. Significant shareholders
To the knowledge of the Company the
shareholders owning more than 5% of its
share capital as at 31 December 2021, or
as the date of their last notification as per
Article 20 of the Swiss Stock Exchange Act
(SESTA) were Groupe Bruxelles Lambert
(acting through Serena SARL and URDAC)
with 19.11% (December 2020: 18.91%) of
the share capital and voting rights of the
Company. As at 31 December 2021, the
SGS Group held 0.04% of the share capital
of the Company (2020: 1.28%). During 2021,
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.
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 CHF
7 495 032 as of 31 December 2021
and comprises 7 495 032 fully, paid-
in, registered shares of a par value of
CHF 1. On 31 December 2021, SGS SA held
3 360 treasury shares through an affiliate
company (2020: 96 494). In 2021, SGS SA
proceeded to a capital reduction of 70 700
shares. During this period no shares were
repurchased whilst 22 434 shares were
released into circulation following vesting
of equity compensation plans.
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 7 495 032
shares would grow by approximately 6.7%
to 7 995 032 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 23 March 2023.
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 equity-
based remuneration 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 7 495 032 shares would increase by
approximately 14.7% to 8 595 032 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.
2.3. Changes in capital
The share capital of the Company was
reduced twice in the last three years, in 2019
and in 2021 to cancel shares purchased
by application of share buyback programs
initiated by the Company. In 2021, the
shareholders approved a reduction of the
share capital, by cancellation of 70 700
shares. Previously, in 2019, 68 000 shares
were cancelled for the same reason.
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 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 2021, no
options or similar instruments have been
issued by the Company or by any of the
Group’s subsidiaries.
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
Annual General Meeting.
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.
The Board 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 2020 and 2021. 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 to the Board of Directors,
the Company has due regards to the
experience, professional qualifications,
areas of expertise, age, gender and national
background as well as leadership style, so
that at all time, the Board and its committees
have the required skills. At the Annual
Shareholders Meeting of March 2021,
three members of the Board of Directors
did not stand for re-election. Consequently,
Mr François von Finck, Cornelius Grupp
and Gérard Lamarche stepped down from
the Board of Directors. Ms Janet Vergis
was appointed to the Board of Directors.
Corporate governanceManagement reportSGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration report 78
Biographical information on former members
of the Board of Directors is available in the
corporate governance reports of prior years.
degree in Electrical Engineering and
Automation from the Karlsruhe Institute
for Technology.
The members of the Board of Directors
at 31 December 2021 were as follows:
Calvin Grieder (1955)
Swiss
Function in SGS
Member:
• Chairman, Board of Directors
• Chairman, Corporate Governance
& Sustainability 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. He has
held various executive positions at Swiss
and German companies (Georg Fischer,
Bürkert, Mikron, SIG and Swisscom), all
active in the areas of control technology,
digital, cybersecurity, automation, system
engineering and services. In these roles, he
was primarily responsible for successfully
establishing and expanding international
businesses. In 2001, Calvin Grieder moved
from Swisscom (Head of Mobile & Internet
Business) to the Bühler Group, where he
acted as CEO for 15 years.
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
Carivel7 AG, Owner
Avenir Suisse, Zurich-Oerlikon (CH),
Member of the Board of Trustees
Advisory Board ETH – Department of
Mechanical & Process Engineering
Sami Atiya (1964)
German
Function in SGS
Member:
• Board of Directors
• Corporate Governance &
Sustainability Committee
Initial appointment to the Board
March 2020
Professional background
ABB Ltd (CH, SE), Member of the Group
Executive Committee since 2016 and
President of ABB’s Robotics & Discrete
Automation business. Dr. Sami Atiya
holds a Master of Business Administration
(MBA) from the Massachusetts Institute
of Technology (MIT), USA, and a master’s
* Listed company.
He also holds a PhD in Electrical Engineering
(Robotics, Artificial Intelligence and Sensors)
from the University of Wuppertal/Karlsruhe
Institute for Technology, Germany. Prior to his
current role, he held various senior leadership
positions in the Siemens Group, Harald Balzer
& Partner, Robert Bosch – Blaupunkt and
the Fraunhofer Institute Karlsruhe Institute
of Technology. His experience covers a
range of industry sectors including medical
technology, robotics and automation, software
and logistics and transportation. Dr. Atiya has
strong intercultural skills with experience
in managing businesses in international
organizations, covering China, the Middle East,
India, Japan, the USA and Europe. He has a
proven track record in managing international
acquisitions and business integration. He will
bring to the Board of SGS strong experience of
leadership in sectors which will undoubtedly
contribute to the future development of
SGS. He will be an independent member
of the Board of Directors of the Company,
with no ties to its management or
significant shareholders.
Paul Desmarais, Jr. (1954)
Canadian
Function in SGS
Member:
• Board of Directors
Initial appointment to the Board
July 2013
Professional background
Chairman, 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 Financial Corporation
to consolidate creation of 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, as Executive Co-Chairman
from 2008 to 2020 and as Chairman from
2020. Mr. Desmarais is Chairman of Power
Corporation, a position he has held since
1996. He previously served as Co-Chief
Executive Officer of Power Corporation
from 1996 until his retirement in February
2020. 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; and from 2003
to 2019, he was Co-Chief Executive Officer.
Mr. Desmarais was a Director of Pargesa from
1992 until November 2020, when Pargesa’s
reorganization was completed. He also served
as Chairman of the Board from 2013 to 2020.
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)
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)
Past Chairman and a Member of the Business
Council of Canada (CAN)
Ian Gallienne (1971)
French, Belgian
Function in SGS
Member:
• Board of Directors
• Corporate Governance & Sustainability
• Remuneration Committee
Initial appointment to the Board
July 2013
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*, (DE), Member of the Supervisory
Board, Member of the General Committee,
Member of the Nomination Committee
Imerys*, (FR), Member of the Board,
Chairman of the Strategic Committee,
Member of the Compensation Committee,
Member of the Appointments Committee
Pernod Ricard SA*, (FR), Member of the
Board, Member of the Strategic Committee
and Member of the Remuneration Committee
Corporate governanceSGS | 2021 Integrated Annual Report Compagnie Nationale à Portefeuille SA, (BE),
Member of the Board
Carpar SA, (BE), Member of the Board
Financière de la Sambre SA, (BE), Member
of the Board Société Civile du Château
Cheval Blanc, (FR), Member of the Board
Marnix French ParentCo (Webhelp group),
(FR)
Tobias Hartmann (1972)
German, American
Function in SGS
Member:
• Board of Directors
• Audit Committee
Initial appointment to the Board
March 2020
Professional background
Chief Executive Officer of Scout24, an
operator of digital real estate marketplaces
based in Munich/Berlin, Germany.
Tobias Hartmann has a Master of Business
Administration (MBA) and a Bachelor of Arts
(BA) degree from Clark University, Worcester,
MA, USA. He has extensive experience of
senior executive and Board positions in both
public and private companies in the USA
and Germany.
He brings over two decades of senior
management experience in several industries,
including retail, technology, operations,
logistics and eCommerce. He also has
considerable expertise in IT security and
cybersecurity. He has worked for various
digital companies including eBay Inc.
Mr. Hartmann has a proven track record of
developing, expanding and optimizing existing
business models, services and product
offerings for both public and private companies
with B2B and B2C business models. He is
an independent member of the Board of
Directors of the Company, with no ties to
its management or significant shareholders.
Other activities and functions
Expondo GmbH (DE), Member of the
Advisory Board, since 2021
Shelby R. du Pasquier (1960)
Swiss
Function in SGS
Member:
• Board of Directors
Chairman:
• 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
* Listed company.
(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*, (CH),
Member of the Board since 2012
Stonehage Fleming Family & Partners
Limited, (SA), Member of the Board
since 2012
Pictet and Cie Group SCA, (CH), Chairman
of the Supervisory Board since 2013
Fondation du Grand Théâtre de Genève,
(CH), Member of the Board since 2020
Kory Sorenson (1968)
British
Function in SGS
Member:
• Board of Directors
• Remuneration Committee
Chair:
• Audit Committee
Initial appointment to the Board
March 2019
Professional background
Kory Sorenson holds a post-graduate (DESS)
degree in corporate finance from l’Institut
d’études politiques de Paris, a master’s in
applied economics from the University of
Paris-Dauphine, a bachelor’s in econometrics
and political science from the American
University in Washington, D.C. and has
completed governance programs with
Harvard Executive Education, INSEAD and
the Stanford Graduate School of Business.
Ms. Sorenson has 30 years of experience
in finance with a particular focus on
financial services, capital efficiency and risk
management. She was Managing Director,
Head of Insurance Capital Markets of Barclays
Capital and held senior positions in the
investment banking and capital markets
divisions of Credit Suisse, Lehman Brothers
and Morgan Stanley.
Ms. Sorenson has been a non-executive
director of several major listed companies
for almost a decade, providing extensive
experience in leadership and governance in
both financial services and industrial, private
and public, and profit and not-for-profit entities,
across Europe as well as in North America.
She currently serves as chair of audit and
remuneration committees for her various
companies. Ms Sorenson is a member of the
sustainability committees at both Phoenix
Group Holdings and SCOR SE. ESG objectives
are now a significant part of her responsibility
for remuneration committees and she is also
a participant in the Chapter Zero initiatives in
France and the UK.
She is an independent member of the Board
of Directors of the Company, with no ties to
its management or significant shareholders.
79
Other activities and functions
SCOR SE*, (FR), Member of the Board and
Chair of the Audit Committee, member
of the Risk, Strategic, Corporate Social
Responsibility and Crisis Committees
Phoenix Group Holdings PLC*, (UK),
Member of the Board and Chair of the
Remuneration Committee, member of
the Risk and Sustainability Committees
Pernod Ricard SA*, (FR), Member of the
Board and Chair of the Remuneration
Committee, member of the Audit Committee
Bank Gutmann, (AU), privately owned,
Member of the Supervisory Board
Comgest, (FR), Member of the Board
of Partners
Janet S. Vergis (1964)
American
Function in SGS
Member:
• Board of Directors
• Audit Committee
Initial appointment to the Board
March 2021
Professional background
Janet S. Vergis earned a B.S. degree in
Biology and an M.S. degree in Physiology
from The Pennsylvania State University.
She has over 30 years of experience in the
healthcare industry and served from 2013
to 2019 as an executive advisor to
various private equity firms, including,
Warburg Pincus, Deerfield Mgmt., Water
Street Healthcare Partners and Vatera
Healthcare Partners.
From 2011 to 2012, she served as the
Chief Executive Officer of OraPharma, Inc.,
a specialty pharmaceutical company. In that
role she led the turnaround of the business
and its subsequent successful sale.
Preceding her role at OraPharma, Ms.
Vergis managed a multi-billion portfolio at
Johnson & Johnson as President of Janssen
Pharmaceutica, McNeil Pediatrics, and Ortho-
McNeil Neurologics. Ms. Vergis contributed
to a number of Johnson & Johnson
companies during her career, serving as a
member of company management boards
for over a decade and holding positions of
increasing responsibility in research and
development, new product development,
sales and marketing.
She previously served on the boards
of MedDay Pharmaceuticals, Amneal
Pharmaceutical, Lumara Health and
OraPharma, Inc.
She is an independent member of the Board
of Directors of the Company, with no ties to
its management or significant shareholders.
Corporate governanceManagement reportSGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration report 80
Other activities and functions
Teva Pharmaceutical Industries*, (US),
Member of the Board, Member of the
Human Resources/Compensation and
Compliance Committees
Dentsply Sirona*, (US), Member of the
Board, Chair of the Science & Technology
Committee, and Member of the Audit
& Finance Committee
Church and Dwight Company*, (US),
Member of the Board, Member of the
Audit and Governance Committees
Eberly College of Science, The Pennsylvania
State University, (US), Dean’s Advisory
Board Member
National Association of Corporate Directors,
(US), Member
The Pennsylvania State University, (US),
Biotechnology Advisory Board Chair
The Pennsylvania State University, (US),
Corporate Engagement Advisory Board
Vice-Chair
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
expertise in the areas of finance, commercial
law, digital, cybersecurity, innovation,
strategy and sustainability, 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. In line with this review, the
Board has set a target stating that at least
60% of its members and members of its
committees will be independent and to plan
the succession of members accordingly.
The Board of Directors 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;
* Listed company.
4. The Director is not acting (and must
not be affiliated with a Company that
is acting in material manner) as an
advisor or consultant to the Company
or a member of the Company’s
Senior Management;
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; and
10. Any Director who has served for more
than 12 consecutive terms is no longer
considered as independent.
The board has concluded that its members
are independent on the basis of these
criteria, with the exception of Shelby du
Pasquier (whose tenure exceeds 12 yearly
terms), Ian Gallienne and Paul Desmarais
(both being representatives of a significant
shareholder owning more than 10% of the
shares of the Company).
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
and vested interest
Other activities and vested interests of
the members of the Board of Directors
are indicated in 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 10 board memberships in
entities outside the Group, out of which a
maximum of five memberships in boards
of companies whose shares are 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
limit to 10 the permissible participations in
boards of associations and other nonprofit
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 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 in 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 General Meeting. 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
Remuneration Committee, who are elected
by the shareholders, the members of other
committees are appointed by the Board.
Corporate governanceSGS | 2021 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 31 December 2021:
Remuneration
Audit
Corporate Governance & Sustainability
81
Sami Atiya
Ian Gallienne
Calvin Grieder
Tobias Hartmann
Shelby R. du Pasquier
Kory Sorenson
Janet S. Vergis
Chair
Member
Calvin Grieder, Chairman of the Board of
Directors, attends the meetings of the
Remuneration and Audit Committees, with
a consultative vote. He chairs the Corporate
Governance & Sustainability Committee.
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.
Remuneration Committee
Members of the Remuneration Committee
are elected individually during the Annual
General Meeting, with the chairman of the
Committee designated among them by
the Board of Directors. The Remuneration
Committee is focused on matters of
executive remuneration. The Remuneration
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
reviews regularly, at least once a year,
the compensation of each member of
the Operations Council. The Committee
drafts the SGS Remuneration report.
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.
Corporate Governance &
Sustainability Committee
The Corporate Governance & Sustainability
Committee assists the Board in the
succession planning, selection and
nomination of candidates to positions to
the Board of Directors and to the Senior
Management (Operations Council) of
the Group. The Committee supports the
Board of Directors and Management in
establishing policies relating to professional
conduct and compliance and oversees their
implementation. The Group’s compliance
policies are embodied in the Code of
Integrity, which sets out the principles
governing business conduct, which are
applied across the whole SGS Group.
The Committee assists the Board in defining
the Group policies and strategies relating to
sustainability, including matters relevant to
the Group reputation and non-financial risks.
During the course of 2021, as in 2020, the
ability of the Board and its Committee to hold
physical meetings was curtailed by measures
implemented to limit the contagion of
Covid-19. In response to this circumstance,
the Board and Committee held meetings
by telephone and videoconference.
The table below does not make any
distinction between physical and remote
meetings of the Board and its committees.
Meetings of
Board of Directors
Remuneration Committee
Audit Committee
Corporate Governance & Sustainability Committee
Frequency
Average duration
6 times
3 times
6 times
2 times
3 hours
1.5 hours
3 hours
2 hours
Corporate governanceManagement reportSGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration report 82
Attendance to Board and Committee meetings
The Board of Directors expect its members to attend and participate actively to its meetings and meetings of its committees and has set
a minimum target of attendance at 75% of meetings. The chart below summarizes the attendance by each Board member in 2021 at the
meetings of the Board and the respective standing committees.
Member
Calvin Grieder
Sami Atiya
Paul Desmarais, Jr.
Ian Gallienne
Tobias Hartmann
Shelby R. du Pasquier
Kory Sorenson
Janet S. Vergis*
François von Finck**
Cornelius Grupp**
Gérard Lamarche**
* Elected in March 2021.
** Stepped down in March 2021.
Board meetings
Remuneration
Audit
Corporate Governance
& Sustainability
2/2
2/2
2/2
6/6
6/6
6/6
6/6
6/6
5/6
6/6
4/5
2/2
2/2
1/2
3/3
3/3
3/3
6/6
6/6
5/5
1/1
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 Chair 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 Corporate
Governance & Sustainability Committee
and the Remuneration Committee meet
at least once a year.
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
• 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 (see Section 1.1.)
• The Executive Vice Presidents (EVPs)
are entrusted with the management and
development of the Group’s five business
divisions (see Section 1.1.)
• The Senior Vice Presidents (SVPs)
represent the principal Group support
functions (Finance, Human Resources,
Corporate Communication, Sustainability
& Investor Relations, Digital & Innovation
and Legal and Compliance)
The composition, role and organization of the
Operations Council are detailed in Section 4.
Corporate governanceSGS | 2021 Integrated Annual Report 83
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.
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 attend the meetings of the
Board of Directors and the Audit Committee.
The Group Controller and the Head of the
Internal Audit Function attend the meetings
of the Audit Committee.
The SVP of Human Resources attends the
meetings of the Remuneration Committee,
and Corporate Governance & Sustainability
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. The Board and each
of its committees meet from time to time
in private sessions, outside of the presence
of management.
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.
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 reports
to the Corporate Governance & Sustainability
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 Corporate
Governance & Sustainability Committee.
The Committee monitors disciplinary
actions taken and the implementation
of corrective actions.
Corporate governanceManagement reportSGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration report 84
4. Operations Council
The Operations Council (as defined in
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.
During 2021, travel restrictions and
limitations on public gatherings imposed
by the Covid-19 pandemic have limited
the ability of the Operations Council to
meet physically. Meetings were held
largely by video conference, with a
limited number of participants attending
the meetings physically.
4.1. Members of the
Operations Council
Members of the Operations Council
bring to the Group years of experience
and expertise 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
2021 were as follows:
Frankie Ng (1966)
Swiss/Chinese
Chief Executive Officer
BA in Economics and
Electronics Engineering
Joined SGS in 1994
Previous responsibilities
2011–2015: EVP, Industrial Services
2005–2011: EVP, Consumer
Testing Services
2002–2004: Managing Director,
US Testing
Dominik de Daniel (1975)
Swiss/German
Chief Finance Officer
Degree in Banking, CEFA
Investment Analyst
Joined SGS in 2019
Previous responsibilities
2015–2018: CFO and Chief Operating
Officer, IWG plc. UK, the global leader
for flexible workspace
2006–2015: CFO Adecco Group, Switzerland
Olivier Merkt (1962)
Swiss
Fabrice Egloff (1969)
French
Chief Compliance Officer
COO, Africa & Western Europe
Doctorate in Law, admitted to the bar
in Switzerland
Master of Business Administration
in International Business Affairs
Joined SGS in 2001
Joined SGS in 1995
Previous responsibilities
2006–2008: VP, Corporate Development
Previous responsibilities
2017–2019: COO Africa
2001–2006: Senior Counsel
2009–2017: Managing Director, France
Teymur Abasov (1972)
Azerbaijani
COO, Eastern Europe & Middle East
Degree in Electrical Engineering
Joined SGS in 1994
Previous responsibilities
2006–2007: Managing Director, Kazakhstan
and Caspian Sub-Region
2004–2006: Managing Director, Azerbaijan
and Georgia
2003–2004: Managing Director, Georgia
Olivier Coppey (1972)
Swiss
EVP, Health & Nutrition
MSc Economics
Joined SGS in 1994
Previous responsibilities
2015–2020: EVP, Agriculture Food and Life
2013–2015: EVP, Agriculture
2009–2013: Vice President Seed and
Crop, Agricultural Services
Steven Du (1972)
Chinese
COO North East Asia, since August 2021
2004–2008: Managing Director,
Hong Kong
Luis Felipe Elias (1959)
Peruvian
COO, Latin America
Industrial Engineering Degree and MBA
Joined SGS in 2004
Previous responsibilities
2012–2018: Managing Director,
Ecuador and Peru
2004–2012: Deputy Managing
Director, Peru
Derick Govender (1970)
South African
EVP, Natural Resources
Diploma in Analytical Chemistry
Postgraduate in Business Management
Joined SGS in 2002
Previous responsibilities
2015–2020: EVP Minerals Services
2014–2015: Minerals Manager, Chile
2010–2014: VP Minerals, Africa
José María Hernández-Sampelayo (1961)
Spanish
MSc Logistics & Supply Chain Management
SVP, Human Resources
Joined SGS in 1999
Bachelor in Law
Previous responsibilities
2019 – Jul 2021: Managing Director
Mainland China and Hong Kong SAR
2016 – 2019: Managing Director
Mainland China
2014 – 2016: Managing Director Vietnam
Master of Business Administration
Joined SGS in 1996
Previous responsibilities
2010–2017: Managing Director, Spain
2001–2010: HR Manager, Western Europe
1996–2010: HR Manager, Spain
Corporate governanceSGS | 2021 Integrated Annual Report 85
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)
4.3. Changes in the
Operations Council
During 2021, Helmut Chik, COO North East
Asia left the Group.
With effect as of 31 December 2021,
José María Hernández-Sampelayo, SVP
Human Resources, stepped down from
the Operations Council to assume other
management responsibilities within the
Group. Starting in January 2022, Ms Jessica
Sun joined the group and the Operations
Council as SVP Human Resources in
January 2022. Biographical information on
former members of the Operations Council
may be found in prior years’ Corporate
governance reports.
4.4. Limits on external mandates
The Articles of Association of the Company,
in compliance with the 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 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 10
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.
Charles Ly Wa Hoi (1966)
French
Malcolm Reid (1963)
British
EVP, Connectivity and Products
COO, South East Asia & Pacific
Degree in Electronics Engineering
from ENSEIRB-MATMECA
Initially joined SGS in 1992, rejoined
in 2008
Previous responsibilities
2018-2020: EVP Consumer
and Retail Services
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, Knowledge
Postgraduate Diploma in Education
Joined SGS in 1995
Previous responsibilities
2015–2020: EVP Certification
and Business Enhancement
2007–2015: COO, North America
2004–2007: EVP, Systems and
Services Certification
2003: Global Project Manager, Systems
and Services Certification
Stephen Nolan (1960)
American/Irish
COO North America, since January 2021
B.Comm in Finance
Joined SGS in 2019
Previous responsibilities
2013–2018: Hudson Global, USA Chief
Executive Officer/Chief Financial Officer
2004–2012: Managing Director of Adecco
North America
Toby Reeks (1976)
British
SVP, Corporate Communications,
Sustainability & Investor Relations
BA in Economics
Joined SGS in 2018
Previous responsibilities
2013–2018: Executive Director,
Morgan Stanley
2011–2013: Director, Merrill Lynch
2005–2011: Vice President, Merrill Lynch
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, Industries & Environment
PhD in Science
Joined SGS in 1993
Previous responsibilities
2013–2020: EVP, Oil, Gas and Chemicals
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
Wim Van Loon (1966)
Belgian
COO Northern & Central Europe
Engineering degree in Industrial Electro
Mechanic and Master’s degree in
Business Management
Joined SGS in 1989
Previous responsibilities
2018–2020: EVP, Industrial Services
2015–2018: Managing Director, Benelux
2011–2015: Executive Director, Industrial
Services, Benelux
2003–2015: Business Manager for
Industrial, Minerals and Consumer
Testing Services, Benelux
Siddi Wouters (1973)
Dutch
SVP, Digital & Innovation
Master’s degree in Applied Physics
Joined SGS in 2020
Previous responsibilities
2018–2020: Rabobank, Executive Vice
President and Head of Digital Innovation
2015–2017: TechnipFMC, Digital Officer
2007–2014: Kongsberg Gruppen Norcontrol,
Chief Technology Officer
Corporate governanceManagement reportSGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration report 86
5. Compensation,
shareholdings and loans
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:
The voting of resolutions by electronic votes
is authorized by the Articles of Association,
within the modalities defined by the Board
of Directors.
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 Remuneration
Committee, which is elected by the
Annual General Meeting.
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
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 page 91 to 93 for a description of the
Company’s rules in the matter.
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.
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. As at 31 December
2021 (same as at 31 December 2020),
no loan or advance is granted by the Group
to members of the 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
• It approves the total aggregate 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 Shareholder 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.
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. As authorized
by the Covid-19 ordinance of the Swiss
Federal Council, shareholders were required
to issue voting instructions for the 2021
Annual General Meeting to the independent
representatives as physical attendance of the
meeting was not possible to shareholders.
6.4. Inclusion of items
on the agenda
The agenda of the Annual General Meeting
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 Annual General Meeting, provided that
such a request reaches the Company at least
40 days prior to the meeting.
6.5. Registration in the
share register
The Company does not impose any deadline
for registering shares prior to a Annual
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.
Corporate governanceSGS | 2021 Integrated Annual Report 87
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. 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 SGS main registered
office and contact details by phone and
email can be found on page 178 of the
annual 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. In 2021 the
Committee has issued a policy on non-
audit services which define restrictively the
type of admissible services excluding from
the admissible scope most tax advisory
services and services related to prospective
acquisitions and disposal. The policy also
sets an approval process requiring prior
approval of the Audit Committee for any
assignment for non-audit service above
defined thresholds. As part of the transition
of the audit mandate between Deloitte and
PwC, advisory services previously provided
by PwC to the SGS Group and its affiliates
have been discontinued in an orderly
fashion during 2021.
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 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.
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.
8. Auditors
8.1. Duration of the mandate and
term of office of the lead auditor
Following a competitive process held in
2020/2021, PwC was elected as auditor
of the Company and the SGS Group
by the Annual General Meeting upon
recommendation of the Board of Directors,
in replacement of the incumbent Deloitte
who had served in this capacity for the
previous 20 years. The auditors of the
Company are subject to re-election at
the Annual General Meeting every year.
PwC with Guillaume Nayet as the lead
auditor have audited the 2021 Group
financial statements for the first time.
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.
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 the auditors for
the audit of the Company and the Group
financial statements in 2021 amounted
to CHF 6.2 million (2020: CHF 6.8 million).
8.3. Additional fees
An aggregate amount of CHF 1 million was
paid to PWC (2020: CHF 1 million 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 2021, the Audit Committee met four
times with the external auditors.
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.
Corporate governanceManagement reportSGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration report 88
Remuneration
report
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 2021 business year. The SGS Remuneration
report has been prepared in compliance with
the Ordinance against Excessive Compensation
at Listed Joint-Stock Companies (OaEC), in
effect as of 1 January 2014, the Swiss Code
of Best Practice for Corporate Governance of
economiesuisse, revised on 29 February 2016,
and the Swiss Exchange (SIX) Directive on
Information relating to Corporate Governance,
revised on 18 June 2021, and according to the
Articles of Association of SGS SA, as approved
by the shareholders at the Annual General
Meeting in 2015.
Remuneration reportSGS | 2021 Integrated Annual Report 89
1. Introduction by the
Remuneration Committee
90
4. Remuneration awarded 101
to the Board Of Directors
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. Remuneration
Committee
2.3.2. Shareholders’
engagement
3. Remuneration model
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
ownership guidelines
3.2.7. Employment contracts
3.2.8. Timeline of remuneration
91
5. Remuneration awarded 103
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
5.5. Remuneration mix
5.6. Other compensation elements
5.6.1. Severance payments
5.6.2. Other compensation
to members or
former members
of governing bodies
103
104
105
107
108
108
108
108
5.6.3. Loans to members
108
or former members
of governing bodies
91
91
91
92
92
93
93
94
94
94
94
98
100
100
100
101
Financial statementsRemuneration reportCorporate governanceManagement reportShareholder informationSGS | 2021 Integrated Annual Report
90
1. Introduction by the
Remuneration Committee
The Remuneration Committee is pleased to present its 2021
Remuneration report.
In 2021 the Company started its journey towards the 2021-2023
business strategy, with the purpose of enabling a better, safer and
more interconnected world for employees, customers, shareholders
and for society. The operational structure has been simplified into
six new focus areas composed of four divisions: Connectivity &
Products, Health & Nutrition, Industries & Environment and Natural
Resources and two cross-divisional strategic units: Knowledge and
Digital & Innovation.
Building on the success of the Sustainability Ambitions 2020, the
Group also defined and published its Sustainability Ambitions 2030,
together with short-term 2023 sustainability targets aligned with
the 2023 business strategy. As of 2021, the variable compensation
plans of the Operations Council members, both short term and long
term, include Environmental, Social and Governance (ESG) metrics,
testifying the strong commitment of the Group’s leadership towards
these ambitions. Details on the short-term and long-term incentive
programs and their ESG metrics are disclosed in Sections 3.2.3.
and 3.2.4. of this report.
The new long-term incentive approach for Operations Council
members and selected senior managers of the Group, with the
shift from one grant every three years to a system with annual
grants, started to be implemented with the 2021 transition plan.
Details on the 2021 grants are disclosed in Section 5.3. of this report.
The Committee reviewed and approved the contractual terms and
conditions, including remuneration, of two new members of the
Operations Council, appointed during 2021; the changes in the
composition of the Operations Council are disclosed in Section 4.
of the Governance Report.
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 2021,
and will continue with the same ‘say-on-pay’ vote structure at the
forthcoming Annual General Meeting 2022:
• 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 2021
• Binding vote on the prospective maximum fixed remuneration
amount of the Operations Council members for 2023
• Binding vote on the prospective maximum value of the grants
awarded under the Long-Term Incentive plan to the Operations
Council members in 2022
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 2021. We hope that you find this
report informative. We are confident that our approach to executive
pay is fully aligned with the purpose and the strategy of the Group,
its short-term and long-term performance, the interests of our
shareholders, and relevant market practices.
Shelby R. du Pasquier
Chairman of the Remuneration Committee
The table below summarizes the votes of the Annual General Meeting on the remuneration matters in the last five years:
(% of votes for)
2017
2018
2019
2020
Consultative vote on the Remuneration report
92.44
89.79
94.50
93.05
2021
92.70
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
1. Until 2020, The SGS Long-Term Incentive plan provided a grant every three years.
98.24
98.72
98.09
98.13
95.51
80.11
75.61
80.28
95.58
94.37
96.87
95.97
97.17
97.39
96.95
–
96.63
–
–
96.40
Remuneration reportSGS | 2021 Integrated Annual Report 91
In line with its Anti-Discrimination and Dignity at Work policy,
SGS is committed to promoting a workplace that provides equal
opportunity for all employees and an environment in which
all members of the workplace treat all individuals both in the
workplace and in other work-related settings at all times with
dignity, consideration and respect.
All employment related decisions, including compensation, benefits
and promotions, will be solely made on the basis of an individual’s
qualifications, performance and behavior or other legitimate business
considerations. SGS does not tolerate any discriminatory practices,
in particular based on age, civil partnership, disability, ethnicity, family
status, gender, gender identity, ideological views, marital status,
nationality, political affiliation, pregnancy, religion, sexual orientation,
social origin or any other status that is protected as a matter of
local law.
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:
ALS, Applus+, Bureau Veritas, Eurofins, Intertek, Mistras, Team
(the peer group of companies considered for the performance
conditions of the Long-Term Incentive plan, see Section 3.2.4.)
• The SMI-listed companies not belonging to the Capital Markets,
Insurance and Pharmaceuticals sectors
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 half 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.
2.3. Remuneration governance
The Annual General Meeting approves every year the maximum
aggregate amount of remuneration of the Board of Directors.
Within that limit, the Board of Directors is responsible for determining
the remuneration of the Chairman and the Directors of the Board.
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. 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 long-term sustainable value for our shareholders
and society.
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)
Fixed remuneration
Short-term variable
remuneration
Long-term variable
remuneration
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 support of the Company’s purpose of adding
value to society by enabling a better, safer and more interconnected
world, its business strategy of profitable growth, and in line with its
business principles: Integrity, Health, Safety & Environment, Quality
& Professionalism, Respect, Sustainability, Leadership.
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 skillset required to perform the job
• Pay for performance
– A substantial portion of remuneration is directly linked
to business and individual performance
• Long-term value creation and alignment to shareholders’ interests
– Part of remuneration is delivered in equity subject to a multi-year
vesting period
Financial statementsRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual ReportShareholder information 92
2.3.1. Remuneration Committee
The Board of Directors is assisted in its work by a 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.
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 and may use third-
party consultants that specialize in compensation matters. In 2021,
neither the Committee nor the Board of Directors had recourse
to such external advisors.
CEO
Remuneration
Committee
Board of
Directors
AGM
Subject matter
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 to Operations Council members
Individual remuneration of the CEO
Individual remuneration of the Operations Council members
Remuneration report
Recommendation
Approval
Binding Vote
Consultative Vote
The following Directors served on the Committee during their
mandate from AGM 2021 to AGM 2022:
• Shelby R. du Pasquier (Chairman)
• Ian Gallienne
• Kory Sorenson
In 2021, the Committee met in 3 meetings, attended by all
members, and handled several matters pertaining to remunerations
outside scheduled meetings. The Chairman of the 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 Vice President Human Resources may be asked to attend the
meetings in an advisory capacity. They do not attend the meeting
when their own compensation or performance are being discussed.
2.3.2. Shareholders’ engagement
As has been the case since the 2015 Annual General Meeting,
the Company 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 OaEC, 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.
Remuneration reportSGS | 2021 Integrated Annual Report 93
A summary of the shareholders’ votes on remuneration is described in the chart below:
Shareholders’ Votes on Remuneration Summary
Shareholders’ vote
at the 2022 AGM
2021
2022
2023
Consultative vote on
Remuneration report
Remuneration
report
Binding vote on maximum
remuneration of the Board
of Directors
Binding vote on maximum
fixed remuneration of
the Operations Council
Remuneration
Fixed
remuneration
Binding vote on variable
remuneration of the
Operations Council
Short-term variable
remuneration
Binding vote on maximum
value of the grants awarded
under any Long-Term
Incentive Plan to the
Operations Council
Long-term
incentive grant
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 2022
AGM 2023
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,
part of the remuneration of the Chairman of the Board may be
settled as 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.
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)
Chairman
Board
Members
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 of 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
installments, 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.
Financial statementsRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual ReportShareholder information
94
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 50% in cash and 50% 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
Benefits
Contributions
to pension plans
and insurances,
other contributions,
allowances,
benefits in kind
Variable remuneration
Short-Term Incentive
50% cash
50% restricted
shares
Position and experience,
market practice
(benchmarking)
Market practice
n/a
n/a
Attract and retain
key executives
Continuous
Protect executives
against risks,
attract and retain
Continuous
Annual financial
performance, individual
performance
against leadership
competency model
and ESG1 metrics
Group revenue, Group
NPAT2, Group ROIC3,
Group free cash flow,
regional and business
line profit, regional
NWC4, business
operating free cash
flow, leadership
multiplier
Relative TSR5,
ESG1 metrics
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
Long-Term Incentive
Performance
Share Units
(PSUs)
Long-term financial
and non-financial
performance
1. ESG: Environmental, Social and Governance.
2. NPAT: Net Profit After Tax.
3. ROIC: Return On Invested Capital. 4. NWC: Net Working Capital.
5. 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.
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, skillsets, experience required to
perform the job, and relevant market practice in the industry.
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
behaviors in line with the SGS competency model and the Group’s
sustainability ambitions.
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. Each participant can choose between three levels
of employee contributions (‘Standard’, ‘Plus 2’ and ‘Maxi’), defined
based on the participant’s age; the Company contributes an amount
equal to one and a half times the participant’s contribution at the
‘Standard’ level. Flexibility is granted to employees who wish to
fund a potential retirement before the normal age, and to those
who wish to continue working after the age of 65.
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 behaviors
Remuneration reportSGS | 2021 Integrated Annual Report 95
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
CEO
Annual
Other Operations
Council members
Annual
0%
0%
0%
0%
as % of base salary
100%
65%–90%
Maximum incentive opportunity
as % of target incentive
opportunity
as % of base salary
250%
250%
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.
The table below summarizes the key performance indicators applicable to the CEO and the other members of the Operations Council.
Group
results
Division
results
Regions
results
Profitability
(bottom-line)
Growth
(top-line)
Efficient use
of capital
Cash
generation
Profitability
(bottom-line)
Cash
generation
Profitability
(bottom-line)
Cash
generation
CEO
Group NPAT
25%
Group Revenue
25%
Heads of corporate
functions (SVPs)
Heads of divisions
(EVPs)
Heads of regions
(COOs)
Group NPAT
25%
Group Revenue
25%
Group NPAT
25%
Group NPAT
25%
Group Revenue
25%
Group Revenue
25%
Group ROIC (Organic)
25%
Group ROIC (Organic)
25%
Group Free Cash
Flow (Organic)
25%
Group Free Cash
Flow (Organic)
25%
–
–
–
–
–
–
–
–
–
–
Business-line Profit
40%
Business Operating
Free Cash Flow
(Organic) 1
10%
–
–
–
–
–
–
Regional Profit
40%
Regional NWC
10%
1. Due to the new Business Lines organization implemented in 2021, the Business Operating Free Cash Flow (Organic) 2021 performance for the EVPs was assessed based on estimates
on the opening balances as at January 1, 2021.
For each key performance indicator, a payout curve is defined according to the following principles:
• A threshold (minimum level of performance to trigger a payout, and below which the payout is zero), a target (expected level
of performance that triggers a payout equivalent to the target incentive), and a maximum (level of performance that triggers the
highest payout, and above which the payout is capped) are defined
• The lowest payout (triggered by the threshold performance) and the highest payout (triggered by the maximum performance) are defined
• The payout for performances between threshold and target and between target and maximum are calculated by linear interpolation
Financial statementsRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual ReportShareholder information 96
The chart below shows the payout 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 performance (payout curve)
250%
200%
%
t
u
o
y
a
P
150%
100%
50%
0%
80%
100%
133.3%
200%
Performance %
The payout 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
payout curve to determine a payout factor. The weighted average of the payout factors of each key performance indicator corresponds
to the overall financial performance payout factor.
An example of the calculation of the financial performance payout factor for an Executive Vice President is described in the chart below.
Financial performance payout factors for an executive vice president
Group NPAT
weight 25%
Group revenue
weight 25%
Business
operating
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 0.10
Payout
130%
130%
x 0.40
122%
Leadership multiplier
The members of the Operations Council are also rewarded for the demonstration of leadership behaviors in line with the SGS competency
model and with the SGS sustainability ambitions. These criteria encompass a broader range of values than the three metrics used for the
determination of vesting of the LTI. Their final incentive amount is calculated by multiplying the financial performance payout factor by a
leadership multiplier.
The leadership multiplier is determined for each executive based on an assessment of their behaviors against: i) the leadership competency
model of SGS in the areas of innovation, people management and change management, and ii) Environmental, Social and Governance (ESG)
metrics aligned with the Group’s sustainability ambitions. 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 and approved by the Remuneration
Committee. The assessment leads to a leadership multiplier that can range between 70% and 125%.
Remuneration reportSGS | 2021 Integrated Annual Report
An example of the calculation of the final incentive amount for an OC member is described in the chart below.
Final incentive amount for an OC member
Target
incentive
Financial performance
payout factor
Leadership
multiplier
Final incentive
amount
97
CHF 100 000
122%
125%
CHF 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 29.
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.
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.
If employment ceases due to 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.
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)
Zero
Termination
reason
Termination
for cause
Resignation
Zero
Incentive
payout
Payment
date
Payment
vehicle
Zero
Zero
–
–
–
–
Death or
disability
Retirement,
termination
not for cause
Pro-rated
on calendar
days
Pro-rated
on calendar
days
Based
on estimated
performance
Shortly after
the termination
date
100%
cash
Based
on actual
performance
After the
AGM approval
100%
cash
Incentive
opportunity
(target
incentive)
Zero
Full
Full
Full
Incentive
payout
Zero
Payment
date
–
Payment
vehicle
–
Based
on actual
performance
After the
AGM approval
100%
cash
Based
on actual
performance
Shortly after
the termination
date
100%
cash
Based
on actual
performance
After the
AGM approval
100%
cash
Financial statementsRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual ReportShareholder information 98
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). Until 2020, a PSUs grant was done once every three
years; specifically in 2018 and in 2015. As of 2021, PSUs grants
are done every year, in line with prevalent market practices.
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, is expressed as a percentage of the
annual base salary and varies depending on the job.
For the annual plans 2022 onwards, the value of the grant will be
167% of the annual base salary for the CEO, and between 100%
and 133% of the annual base salary for the other members of the
Operations Council; this represents one third of the value of the
grants done in 2018 and 2015.
For the transition plan 2021 the value of the grant was two thirds
of the value of the grants done in 2018 and 2015.
The table below summarizes the value of the incentive opportunity of the transition plan 2021 and of the annual plan 2022 onwards.
Incentive frequency
Minimum incentive
opportunity value
Target incentive
opportunity value
Maximum incentive
opportunity value
CEO
Annual
Other Operations
Council members
Annual
Transition plan
2021
Annual plans
(2022 onwards)
Transition plan
2021
Annual plans
(2022 onwards)
as % of base salary
as % of target incentive opportunity
as % of base salary
as % of target incentive opportunity
as % of base salary
0%
0%
333%
150%
500%
0%
0%
0%
0%
0%
0%
167%
200–267%
100–133%
150%
250%
150%
150%
300–400%
150–200%
The PSUs granted under the Long-Term Incentive vest after a performance period of three years, conditionally upon the achievement
of pre-defined performance objectives and subject to continuity of employment of the beneficiaries during the vesting period.
Performance conditions
The performance conditions of the Long-Term Incentive consist
of the following key performance indicators:
• Total Shareholder Return (TSR1) (relative SGS performance
compared with the peer group), accounting for 80% of the
incentive opportunity
• Environmental, Social and Governance (ESG) metrics,
accounting for 20% of the incentive opportunity
The TSR of the Group will be compared to the TSR of a group of
seven peer companies, selected by the Board of Directors as the
main listed competitors on the Testing, Inspection and Certification
industry. 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.
ALS
Intertek
Applus+
Mistras
Bureau Veritas Eurofins
Team
The vesting level for the TSR is defined as follows: 150% vesting
if SGS is ranked first among the eight companies (including SGS)
composing the peer group, 125% vesting if SGS is ranked second,
100% vesting if SGS is ranked third, 50% vesting if SGS is ranked
fourth, and zero vesting if SGS is ranked fifth or worse.
The ESG metrics have been selected by the Board of Directors
in line with the Company’s sustainability ambitions, in the areas
of Diversity and Inclusion (women in leadership positions),
Health and Safety (Lost Time Incident Rate), and Environment
protection (CO2 emissions).
The vesting level for the ESG metrics is defined based on the
Company’s achievements against pre-defined performance levels,
and can range between zero (in case the performance of two of
the metrics is below target) and 150% (in case the performance
of all three metrics is at maximum or above).
1. Total shareholder return: (Ending stock price - Beginning stock price) + Sum of all dividends received during the measurement period.
Remuneration reportSGS | 2021 Integrated Annual Report The graphics below summarize the key performance indicators of the Long-Term Incentive and their vesting levels:
Relative TSR vesting formula
99
%
g
n
i
t
s
e
V
175%
150%
125%
100%
75%
50%
25%
0%
8th
7th
6th
5th
4th
3rd
2nd
1st
Relative TSR Ranking
ESG metrics vesting formula
%
g
n
i
t
s
e
V
175%
150%
125%
100%
75%
50%
25%
0%
2 or all 3 metrics
below target
2 metrics at target
all 3 metrics at target
(or 2 metrics above target)
all 3 metrics at max
The overall vesting level of the PSUs granted will be calculated as a weighted average of each of the respective vesting levels for Relative
TSR (80%) and ESG metrics (20%), and ranges between 0% and 150%.
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%)
Number of shares
allocated at vesting
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 29.
Termination of employment
In case of termination of employment, all unvested PSUs are as a rule 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
SGS | 2021 Integrated Annual ReportFinancial statementsRemuneration reportCorporate governanceManagement reportShareholder information
100
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 estimation of
performance by the Board
of Directors
Other reasons
Forfeiture
–
–
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.
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
payout), at target (both Short-Term and Long-Term Incentives at
100% payout) and at maximum (both Short-Term and Long-Term
Incentives at maximum payout).
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 and other shares that are owned by the Operations
Council member directly or indirectly (by ‘closely related persons’).
The 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.
Remuneration mix for the CEO and other Operations Council members in three cases (%)
CEO
100
90
80
70
60
50
40
30
20
10
0
Other Operations Council members (on average)
100
90
80
70
60
50
40
30
20
10
0
Minimum
Target
Maximum
Minimum
Target
Maximum
Base salary (Cash)
Short-Term Incentive (Cash)
Short-Term Incentive (Restricted Shares)
Long-Term Incentive (PSUs)
Remuneration reportSGS | 2021 Integrated Annual Report 101
3.2.8. Timeline of remuneration
The following chart outlines the timeline of payment of each remuneration element that was earned in 2021:
• The annual base salary is paid during 2021
• The cash portion of the Short-Term Incentive is paid in March 2022, shortly after the Annual General Meeting
• The share portion of the Short-Term Incentive is allocated in April 2022 and will be unblocked in April 2025
• The PSUs granted under the Long-Term Incentive in 2021 will be earned over the performance period from 2021 to 2023 and will vest,
subject to performance conditions and continuity of employment, in February 2024
Timeline of remuneration
Timeline (performance period, time of payment)
Performance KPIs
Long-Term
Incentive
2021 grant
Short-Term
Incentive
Annual
base
salary
and
benefits
50%
in restricted shares
50%
in cash
Vesting
shares
allocation
Relative TSR (80%)
ESG metrics (20%)
Unblocking
Group revenue (25%)
Group NPAT (25%)
Role specific Profit, Cash Generation,
Efficient Use of Capital (50%)
Multiplied by leadership multiplier
Fixed remuneration
2021
2022
2023
2024
2025
Shareholding Ownership Guideline
4. Remuneration awarded to the Board of Directors
For the mandate from AGM 2021 to AGM 2022, the annual board retainer was CHF 500 000 for the Chairman of the Board of Directors
and CHF 150 000 for the other Board of Directors members (unchanged from prior mandate). The Chairman of the Audit Committee
was entitled to an additional fee of CHF 70 000; Directors serving as Audit Committee members were entitled to an additional fee
of CHF 50 000 (unchanged from prior mandate). The Chairman of the Remuneration Committee was entitled to an additional fee of
CHF 40 000; Directors serving as Remuneration Committee members were entitled to an additional fee of CHF 30 000 (unchanged
from prior mandate). Directors serving on the Governance & Sustainability Committee were entitled to an additional fee of CHF 30 000
(unchanged from prior mandate).
(CHF thousand)
Chairman
Membership
Board
Retainer
500
150
Audit
Committee fee
Remuneration
Committee fee
Governance & Compliance
Committee fee
70
50
40
30
–
30
The total remuneration of the Board of Directors for the mandate from AGM 2021 to AGM 2022 is equal to CHF 1 880 000, within the
amount approved by the AGM 2021 (CHF 2 300 000).
Each Board member can choose to receive up to 50% of his/her 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 pro-rata temporis basis.
The shares or restricted shares are granted in the next fiscal year, after the publication of the Group’s results.
SGS | 2021 Integrated Annual ReportFinancial statementsRemuneration reportCorporate governanceManagement reportShareholder information 102
The table below details the remuneration elements and the settlement vehicle of the Directors for the mandate AGM 2021 to AGM 2022.
(CHF thousand)
Chairmanship
Board
membership
Audit
Committee
membership
Remuneration
Committee
membership
Governance
& Compliance
Committee
membership
Total
remuneration
Proportion
to be settled
in cash
Proportion
to be settled
in shares1
Proportion
to be settled
in restricted
shares1
C. Grieder
S. Atiya
P. Desmarais, Jr.
I. Gallienne
T. Hartmann
S. R. du Pasquier
K. Sorenson
J. S. Vergis
Total
500
–
–
–
–
–
–
–
–
150
150
150
150
150
150
150
500
1 050
–
–
–
–
50
–
70
50
170
1. Shares and restricted shares will be granted during fiscal year 2022.
–
–
–
30
–
40
30
–
–
30
–
30
–
–
–
–
500
180
150
210
200
190
250
200
100%
100%
100%
100%
100%
75%
50%
100%
100
60
1 880
–
–
–
–
–
–
–
–
–
–
–
–
–
25%
50%
–
The table below details the remuneration elements and the settlement vehicle of the Directors for the mandate AGM 2020 to AGM 2021.
(CHF thousand)
Chairmanship
Board
membership
Audit
Committee
membership
Remuneration
Committee
membership
Governance &
Sustainability
Committee
membership
Total
remuneration
Proportion
to be settled
in cash
Proportion
to be settled
in shares1
Proportion
to be settled
in restricted
shares1
C. Grieder
S. Atiya
P. Desmarais, Jr.
A. F. von Finck
I. Gallienne
C. Grupp
T. Hartmann
G. Lamarche
S. R. du Pasquier
K. Sorenson
Total
500
–
–
–
–
–
–
–
–
–
–
150
150
150
150
150
150
150
150
150
500
1 350
1. Restricted shares were granted during fiscal year 2021.
–
–
–
–
–
–
50
70
–
50
170
–
–
–
–
30
–
–
–
40
30
100
–
30
–
30
30
–
–
–
–
–
500
180
150
180
210
150
200
220
190
230
100%
100%
100%
100%
100%
100%
100%
100%
75%
100%
90
2 210
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25%
–
The remuneration of the Board of Directors is subject to employer social charges according to Swiss legislation.
The following table details the remuneration elements granted to each of the Directors for their tenure in fiscal year 2021. It includes both
pro-rata temporis elements of remuneration for the mandate AGM 2020 to AGM 2021 and pro-rata temporis elements or remuneration for
the mandate AGM 2021 to AGM 2022.
Board
retainer
Representation
fees
Committee
fees
Total
remuneration
(CHF thousand)
C. Grieder
S. Atiya
P. Desmarais, Jr.
A. F. von Finck1
I. Gallienne
C. Grupp1
T. Hartmann
G. Lamarche1
S. R. du Pasquier
K. Sorenson
J. S. Vergis2
Total
1. Until the AGM 2021.
2. As of the AGM 2021.
501
150
150
35
150
35
150
35
150
110
116
1 582
–
–
–
–
–
–
–
–
–
–
–
–
–
30
–
7
61
–
50
16
40
68
39
501
180
150
42
211
35
200
51
190
178
155
Cash
501
180
150
42
211
35
200
51
142
178
155
311
1 893
1 845
Shares
value
Shares
NB
Restricted
shares value
Restricted
shares NB
Employer
social
charges
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48
–
–
48
–
–
–
–
–
–
–
–
18
–
–
18
–
16
11
4
19
2
–
5
17
16
14
104
Remuneration reportSGS | 2021 Integrated Annual Report The following table details the remuneration elements granted to each of the Directors for their tenure in fiscal year 2020. It includes both
pro-rata temporis elements of remuneration for the mandate AGM 2019 to AGM 2020 and pro-rata temporis elements or remuneration
for the mandate AGM 2020 to AGM 2021.
103
Board
retainer
Representation
fees
Committee
fees
Total
remuneration
Shares
value
Shares
NB
Restricted
shares value
Restricted
shares NB
Employer
social
charges
(CHF thousand)
C. Grieder
P. Kalantzis1
S. Atiya2
P. Desmarais, Jr.
A. F. von Finck
L. von Finck1
I. Gallienne
C. Grupp
T. Hartmann2
G. Lamarche
S. R. du Pasquier
K. Sorenson
Total
1. Until the AGM 2020.
2. As of the AGM 2020.
418
113
115
190
149
34
149
149
115
149
146
190
1 917
–
–
–
–
–
–
–
–
–
–
–
–
–
25
–
23
–
41
–
53
7
39
65
44
87
443
113
138
190
190
34
202
156
154
214
190
277
Cash
443
113
138
115
190
34
202
156
154
214
190
177
–
–
–
75
–
–
–
–
–
–
–
–
–
–
–
27
–
–
–
–
–
–
–
–
384
2 301
2 126
75
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
36
36
–
9
13
14
17
3
18
11
14
19
17
23
158
The overall remuneration paid to the Board of Directors in 2021 is lower than the overall remuneration paid in 2020, due to the change in the
composition of the Board.
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 2021. All amounts disclosed in this section include the Short-Term
Incentive cash amount and restricted shares that will be granted in April 2022 with respect to performance in 2021 (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 2021.
(CHF thousand)
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
Base
salary
Other cash
allowances
Contributions
to pension
plans
Other
contributions
and benefits
in kind
Total fixed
remuneration
7 599
1 019
–
–
–
–
7 599
1 019
2 278
–
–
2 278
1 200
–
–
1 200
145
–
–
145
64
–
–
64
–
804
–
804
–
259
–
259
–
112
–
112
–
340
–
340
–
22
–
22
–
9
–
9
8 618
1 144
–
9 762
2 423
281
–
2 704
1 264
121
–
1 385
The aggregate total fixed remuneration of the members of the Operations Council did not exceed the maximum amount approved by the
Annual General Meeting in 2020 (CHF 14 000 000). For 2022, the 2021 Annual General Meeting already approved a maximum aggregate
total fixed remuneration for the members of the Operations Council (CHF 14 000 000).
SGS | 2021 Integrated Annual ReportFinancial statementsRemuneration reportCorporate governanceManagement reportShareholder information 104
The table below summarizes the fixed remuneration paid to the Operations Council, Senior Management and the Chief Executive Officer
in 2020.
(CHF thousand)
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
Base
salary
Other cash
allowances
Contributions
to pension
plans
Other
contributions
and benefits
in kind
Total fixed
remuneration
7 969
1 024
–
–
–
–
7 969
1 024
2 078
–
–
2 078
1 000
–
–
1 000
138
–
–
138
64
–
–
64
–
1 044
–
1 044
–
257
–
257
–
101
–
101
–
320
–
320
–
21
–
21
–
8
–
8
8 993
1 364
–
10 357
2 216
278
–
2 494
1 064
109
–
1 173
The decrease in fixed remuneration compared with 2020 reflects the change in the composition of the Operations Council.
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 behaviors.
In 2021, the achievement of financial targets at Group level, in the businesses and in the regions ranges from 88.0% to 133.3%
(2020: 47.3% to 108.7%).
The chart below summarizes the 2021 performance achievements against targets for the financial objectives (revenue, profitability,
cash generation and capital efficiency) used in the Short-Term Incentive.
2021 performance achievements against targets
Threshold
Target
Maximum
Performance level
Group revenue
Group NPAT
Group ROIC
Group free cash flow
Regional and business profit
Regional and business
cash generation
Achievement
Median achievement
Performance range
The overall Short-Term Incentive payout amounts to 121.9% of the target incentive opportunity for the CEO (2020: 60.9%) and ranges
from 79.1% to 157.1% of the target incentive opportunity for the other members of the Operations Council (2020: 12.4% to 86.4%).
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 2021, SGS restricted shares will be allocated to the members of the
Operations Council in April 2022, after the approval of the total Short-Term Incentive amount by the Annual General Meeting (in April
2021, 530 restricted shares were granted in settlement of the equity portion of the Short-Term Incentive 2020). 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, 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 2021 performance year, and its comparison with the incentive opportunity.
Remuneration reportSGS | 2021 Integrated Annual Report
(CHF thousand)
Minimum
Target
Maximum
105
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
–
–
–
–
–
–
–
–
–
–
–
–
3 195
–
2 893
6 088
1 059
–
1 059
2 118
600
–
600
1 200
7 988
–
7 233
15 220
2 648
–
2 648
5 295
1 500
–
1 500
3 000
3 783
–
3 448
7 231
1 296
–
1 296
2 592
732
–
732
1 464
The total short-term remuneration amount will be submitted for approval to the Annual General Meeting of 2022, 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 2020 performance year, 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
–
–
–
–
–
–
–
–
–
–
–
–
3 651
–
2 908
6 559
959
–
959
1 918
500
–
500
1 000
9 128
–
7 270
16 398
2 398
–
2 398
4 796
1 250
–
1 250
2 500
1 711
–
1 409
3 120
569
–
569
1 138
304
–
304
608
The total 2020 short-term remuneration amount was approved by the Annual General Meeting of 2021, and the settlement for both the
cash and the equity part were implemented shortly after.
The increase in short-term variable remuneration compared to 2020 reflects the 2021 recovery after the impact of Covid-19 pandemic
on the 2020 financial performance of the Group.
5.3. Long-term variable remuneration
In 2021, the Group implemented a Long-Term Incentive plan for the performance period 2021-2023. Under the Long-Term Incentive plan
2021-2023, a total of 6 003 Performance Share Units (PSUs) were granted to the members of the Operations Council; this includes 2 462
PSUs granted to Senior Management, of which 1 481 granted to the Chief Executive Officer.
The PSUs awarded under the Long-Term Incentive 2021-2023 vest after the three-year performance period 2021-2023, in early 2024,
subject to the performance conditions (relative total shareholder return and Environmental, Social and Governance metrics; see Section
3.2.4. of this Report for detailed explanations on the performance conditions) and to continuity of employment of the beneficiaries during
the vesting period.
The number of PSUs granted is calculated dividing the value of the grant, as disclosed in Section 3.2.4. of this report, by the average
closing price of the share during a 20-trading day period preceding the grant date, rounded up to the nearest integer.
The 2021-2023 Long-Term Incentive plan is a transition plan, from the past practice (until the 2018-2020 plan), with one grant every three
years, to the new practice, with one grant every year. The value of the 2021 grant is two thirds of the value granted under the past practice;
the value of the future annual grants, 2022 onwards, will be one third of the value granted under the past practice.
SGS | 2021 Integrated Annual ReportFinancial statementsRemuneration reportCorporate governanceManagement reportShareholder information
106
A cash Long-Term Incentive plan was implemented in 2021 for one Operations Council member who was newly appointed. This incentive
mirrors the Long-Term Incentive PSUs plan 2021-2023, with exact same vesting and performance conditions, from the date of the
appointment to 31 December 2023.
In 2020, the Group did not implement any Long-Term Incentive plan for the Operations Council members.
The table below summarizes the value of the long-term variable remuneration awarded to the Operations Council, Senior Management
and the Chief Executive Officer in 2021.
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
Number of
PSUs granted
Total value
of the grant1
(CHF thousand)
–
–
6 003
6 003
–
–
2 462
2 462
–
–
1 481
1 481
382
–
16 216
16 598
–
–
6 651
6 651
–
–
4 001
4 001
1. The 2021-2023 LTI plan is a transition plan between the past practice (one grant every three years) and the new practice (annual grant); the value of the grant is two thirds of the past plans,
while as of 2022 the value of the grant will be one third of the past plans. Details on the value of the incentive opportunity of the transition plan 2021 and the annual plans 2022 onwards are
disclosed in Section 3.2.4. of this Report.
The table below summarizes the 2020 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)
Annualized value
of the grant
(CHF thousand)1
2019 Annualized
value of the grant
(CHF thousand)2
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 172
–
7 777
8 949
980
–
1 837
2 817
–
–
1 500
1 500
1 042
–
8 469
9 511
898
–
2 317
3 215
–
–
1 500
1 500
1. The annualized value of the grant for the year 2020 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 2019 grant corresponding to the period from 1 January 2020 to 31 December 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 31 December 2019.
Remuneration reportSGS | 2021 Integrated Annual Report
107
5.4. Total remuneration
The tables below present all components of the remuneration earned in 2021 and 2020 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 remuneration 2021
(CHF thousand)
Total fixed
remuneration
Total
short-term
variable
remuneration
Total 2021
remuneration
before LTI
Total
long-term
variable
remuneration1
Total 2021
remuneration
Employer
social
charges
Operations Council (including Senior Management)2
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior Management (including Chief Executive Officer)3
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Chief Executive Officer
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
8 618
1 144
–
9 762
2 423
281
–
2 704
1 264
121
–
1 385
3 783
–
3 448
7 231
1 296
–
1 296
2 592
732
–
732
1 464
12 401
1 144
3 448
16 993
3 719
281
1 296
5 296
1 996
121
732
2 849
382
–
16 216
16 598
–
–
6 651
6 651
–
–
4 001
4 001
12 783
–
1 144
2 637
19 664
33 591
–
2 637
3 719
281
7 947
11 947
1 996
121
4 733
6 850
–
878
–
878
–
518
–
518
1. The 2021-2023 LTI plan is a transition plan between the past practice (one grant every three years) and the new practice (annual grant); the value of the grant is two thirds of the past plans,
while as of 2022 the value of the grant will be one third of the past plans. Details on the value of the incentive opportunity of the transition plan 2021 and the annual plans 2022 onwards are
disclosed in Section 3.2.4. of this Report.
2. 19 FTE (Full-Time Equivalent).
3. 3 FTE.
Total and annualized remuneration 2020
(CHF thousand)
Total fixed
remuneration
Total
short-term
variable
remuneration
Total 2020
remuneration
before LTI
Total
long-term
variable
remuneration1
Annualized
long-term
variable
remuneration1
Total 2020
remuneration
2020
Annualized
remuneration
Employer
social
charges
Operations Council (including Senior Management)2
Cash (including
allowances)
Contributions and
benefits in kind
Equity
Total
8 993
1 711
10 704
1 364
–
10 357
–
1 409
3 120
1 364
1 409
13 477
Senior Management (including Chief Executive Officer)3
Cash (including
allowances)
Contributions and
benefits in kind
Equity
Total
Chief Executive Officer
Cash (including
allowances)
Contributions and
benefits in kind
Equity
Total
2 216
278
–
2 494
1 064
109
–
1 173
569
2 785
–
569
1 138
304
–
304
608
278
569
3 632
1 368
109
304
1 781
–
–
–
–
–
–
–
–
–
–
–
–
1 172
10 704
11 876
–
–
7 777
8 949
1 364
1 409
13 477
1 364
9 186
1 378
–
22 426
1 378
980
2 785
3 765
–
1 837
2 817
–
–
1 500
1 500
278
569
3 632
278
2 406
6 449
1 368
1 368
109
304
1 781
109
1 804
3 281
–
359
–
359
–
174
–
174
1. The annualized value of the grant for the year 2020 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 2019 grant corresponding to the period from 1 January 2020 to 31 December 2020.
2. 21 FTE (Full-Time Equivalent).
3. 3 FTE.
SGS | 2021 Integrated Annual ReportFinancial statementsRemuneration reportCorporate governanceManagement reportShareholder information
108
5.5. Remuneration mix
In 2021, the part of remuneration at risk (Short-Term Incentive and Long-Term Incentive) for the CEO represents 74% of the total
remuneration (2020: 68%); the part of remuneration settled in equity instruments (Restricted Shares and PSUs) represents 59% of the
total remuneration (2020: 58%). For the other members of the Operations Council, the part or remuneration at risk represents, on average,
65% of the total remuneration (2020: 56%); the part of remuneration settled in equity instruments represents, on average, 48% of the
total remuneration (2020: 48%).
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.
The charts below show the remuneration mix for the CEO and for the other members of the Operations Council in 2021 and 2020.
Remuneration mix for the CEO and other Operations Council members (%)
CEO
100
90
80
70
60
50
40
30
20
10
0
Other Operations Council members (on average)
100
90
80
70
60
50
40
30
20
10
0
2020
2021
2020
2021
Base salary (Cash)
Short-Term Incentive (Cash)
Short-Term Incentive (Restricted Shares)
Long-Term Incentive (PSUs)
5.6. Other compensation elements
5.6.1. Severance payments
No severance payments were made in 2021 to members of the Operations Council (unchanged from prior year).
5.6.2. Other compensation to members or former members of the governing bodies
In 2021 no other payment was made to any member or former member of the governing bodies (consideration for non-compete
of CHF 240 000 was paid in 2020 to a former member of the Operations Council).
5.6.3. Loans to members or former members of the governing bodies
As at 31 December 2021, no loan, credit or outstanding advance was due to the Group from members or former members of its
governing bodies or related parties (unchanged from prior year).
Remuneration reportSGS | 2021 Integrated Annual Report 109
Report of the statutory auditor
to the General Meeting of SGS SA
Geneva
We have audited the remuneration report of SGS SA for the year ended 31 December 2021. The audit was limited to the
information according to articles 14-16 of the Ordinance against Excessive Compensation in Stock Exchange Listed
Companies (Ordinance) contained in sections 4 and 5 (pages 101 to 108) of the report.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance
with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The
Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the remuneration report. We conducted our audit in accordance with Swiss
Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of the Ordi-
nance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with
regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report,
whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value compo-
nents of remuneration, as well as assessing the overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the remuneration report of SGS SA for the year ended 31 December 2021 complies with Swiss law and arti-
cles 14–16 of the Ordinance.
Other matter
The remuneration report of SGS SA for the year ended 31 December 2020 was audited by another firm of auditors whose
report, dated 23 February 2021, expressed an unmodified opinion on this report.
PricewaterhouseCoopers SA
Guillaume Nayet
Audit expert
Auditor in charge
Geneva, 21 February 2022
Louise Rolland
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, Téléfax: +41 58 792 91 10, www.pwc.ch
PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
SGS | 2021 Integrated Annual ReportFinancial statementsRemuneration reportCorporate governanceManagement reportShareholder information 110
2021
results
1. SGS Group
112
1.1. Consolidated
Income Statement
1.2. Consolidated Statement
of Comprehensive Income
1.3. Consolidated Statement
of Financial Position
1.4. Consolidated Statement
of Cash Flows
1.5. Consolidated Statement
of Changes in Equity
1.6. Notes to Consolidated
Financial Statements
1. Activities of the Group
2.
Significant accounting
policies and exchange rates
3. Business combinations
4.
5.
Information by business
and geographical segment
Revenues from contracts
with customers
6. Government grants
7. Other operating expenses
8. Financial income
9. Financial expenses
10. Taxes
112
112
113
114
115
116
116
116
123
124
126
127
127
127
128
128
Financial statementsSGS | 2021 Integrated Annual Report
111
171
171
172
173
173
174
175
2. SGS SA
160
3. Historical Data
2.1. Income Statement
160
3.1. SGS Group – Five-Year
2.2. Statement of Financial Position
2.3. Notes
161
162
1. Significant accounting policies 162
2. Subsidiaries
3. Bank short term loans
4. Corporate bonds
5. Total equity
6. Share capital
7.
Financial income and
financial expenses
162
162
162
163
163
164
8. Guarantees and comfort letters 164
9. Remuneration
10. Shares and options held by
members of governing bodies
164
165
11. Significant shareholders
166
Statistical Data Consolidated
Income Statements
3.2. SGS Group – Five-Year
Statistical Data of
Financial Position
3.3. SGS Group – Five-Year
Statistical Share Data
3.4. SGS Group share information
3.5. Closing prices for SGS and
the SMI 2020-2021
4. Material Operating
Companies and
Ultimate Parent
11. Earnings per share
12. Property, plant
and equipment
13. Right-of-use assets
and lease liabilities
14. Goodwill
15. Other intangible assets
16. Other non-current assets
17. Trade receivables
18. Other receivables
and prepayments
19. Cash and cash equivalents
20. Cash flow statement
21. Acquisitions
22. Financial risk management
23. Share capital and
treasury shares
24. Loans and other
financial liabilities
25. Defined benefit obligations
26. Provisions
27. Trade and other payables
28. Contingent liabilities
29. Equity compensation plans
30. Related-party transactions
31. Significant shareholders
32. Approval of financial
statements and
subsequent events
129
130
131
132
134
135
135
136
136
136
137
138
142
143
144
150
150
150
151
152
153
153
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report
112
1. SGS Group
1.1. Consolidated Income Statement
For the years ended 31 December
(CHF million)
Revenue
Salaries and wages
Subcontractors’ expenses
Notes
4
Depreciation, amortization and impairment
12 to 15
Gain on business disposals
Other operating expenses
Operating income (EBIT)1
Financial income
Financial expenses
Share of profit of associates and joint ventures
Profit before taxes
Taxes
Profit for the period
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.
3
7
4
8
9
10
11
11
1.2. Consolidated Statement of Comprehensive Income
For the years ended 31 December
(CHF million)
Actuarial gains on defined benefit plans
Income tax on actuarial (losses)
Items that will not be subsequently reclassified to income statement
Exchange differences
Items that may be subsequently reclassified to income statement
Notes
25
10
Other comprehensive loss for the period
Profit for the period
Total comprehensive income for the period
Attributable to:
Equity holders of SGS SA
Non-controlling interests
2021
6 405
(3 180)
(385)
(499)
–
(1 364)
977
16
(69)
–
924
(269)
655
613
42
81.91
81.79
2021
57
(6)
51
(32)
(32)
19
655
674
629
45
2020
5 604
(2 797)
(352)
(517)
63
(1 206)
795
12
(66)
1
742
(237)
505
480
25
64.05
63.82
2020
14
(4)
10
(182)
(182)
(172)
505
333
311
22
Financial statementsSGS | 2021 Integrated Annual Report 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
Trade and other payables
Contract liabilities
Current tax liabilities
Loans and other financial liabilities
Lease liabilities
Provisions
Other creditors and accruals
Total current liabilities
Total liabilities
Total equity and liabilities
113
Notes
2021
2020
12
13
14
15
10
16
5
17
18
19
23
24
13
10
25
26
27
5
24
13
26
925
605
1 778
382
26
164
173
4 053
59
175
928
204
108
–
1 480
2 954
7 007
7
1 118
(8)
1 117
85
1 202
2 889
481
92
84
90
3 636
687
221
169
282
155
60
595
2 169
5 805
7 007
872
590
1 651
333
34
161
154
3 795
57
160
856
188
77
9
1 766
3 113
6 908
8
1 282
(230)
1 060
74
1 134
2 390
470
53
136
88
3 137
658
189
140
863
151
85
551
2 637
5 774
6 908
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 114
1.4. Consolidated Statement of Cash Flows
For the years ended 31 December
(CHF million)
Profit for the period
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
Disposal of property, plant and equipment and other intangible assets
Acquisition of businesses
Proceeds from disposal of businesses
Cash paid on other non-current assets
Proceeds received from investments in joint ventures,
associates and other companies
Interest received
Proceeds from marketable securities
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 paid on treasury shares
Proceeds from corporate bonds
Payment of corporate bonds
Interest paid
Payment of lease liabilities
Proceeds from borrowings
Payment of borrowings
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
20.1
20.2
21
20.3
20.3
20.3
20.3
20.3
20.3
19
2021
655
828
(44)
(270)
1 169
(336)
5
(214)
–
(2)
1
17
9
(520)
(599)
(41)
(12)
–
824
(276)
(66)
(179)
–
(555)
(904)
(31)
(286)
1 766
(286)
1 480
2020
505
748
186
(253)
1 186
(259)
13
(492)
71
(4)
1
15
–
(655)
(598)
(37)
(1)
(208)
499
–
(63)
(161)
542
(154)
(181)
(50)
300
1 466
300
1 766
Financial statementsSGS | 2021 Integrated Annual Report 115
1.5. Consolidated Statement of Changes in Equity
For the years ended 31 December
(CHF million)
Share
capital
Treasury
shares
Capital
reserve
Attributable to:
Cumulative
translation
adjustments
Cumulative
(losses)/gains
on defined
benefit plans
net of tax
Retained
earnings
and
Group
reserves
Equity
Holders
of SGS SA
Non-
controlling
Interests
Total
Equity
Balance at 1 January 2020
8
(30)
146
(1 128)
(251)
2 769
1 514
Profit for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Dividends paid
Share-based payments
Movement in
non-controlling interests
Movement on treasury shares
Balance at 31 December 2020
Balance at 1 January 2021
Profit for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Dividends paid
Share-based payments
Movement in
non-controlling interests
–
–
–
–
–
–
–
8
8
–
–
–
–
–
–
–
–
–
–
–
–
(200)
(230)
–
–
–
–
17
–
(3)
160
–
–
–
–
–
–
–
–
–
–
12
–
(42)
130
–
(179)
(179)
–
–
–
–
–
(35)
(35)
–
–
–
–
–
480
480
81
25
1 595
505
10
–
(169)
(3)
(172)
10
480
311
22
333
(598)
(598)
(37)
(635)
–
–
–
–
–
20
17
20
(1)
(204)
–
8
17
28
–
(204)
74
1 134
74
42
1 134
655
–
613
613
51
–
16
3
19
51
613
629
45
674
–
–
–
–
(599)
(599)
(41)
(640)
–
14
(178)
12
14
1
–
7
–
12
21
1
Movement on treasury shares
Balance at 31 December 2021
(1)
7
222
(8)
(1 342)
(190)
2 520
1 117
85
1 202
(1 307)
(241)
2 670
1 060
(230)
160
(1 307)
(241)
2 670
1 060
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report
116
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 2021.
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 2020 consolidated financial statements,
except for the Group’s adoption of new IFRSs effective 1 January 2021.
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.
COVID-19 pandemic
Although economic indicators have risen over the past months, the duration and extent of the pandemic, together with the related financial,
social and public health impacts of Covid-19 remain uncertain.
Consequently, these 2021 consolidated financial statements were prepared considering the continued impact of the pandemic, as well
as future uncertainties, with particular attention to the below specific areas:
• Impairment of non-current assets: the Group has analyzed whether any triggering event could be identified that would indicate
an impairment of its assets and none were identified (2020: nil)
• Goodwill impairment test: the Group ran the annual impairment test with no impairment required (2020: CHF 37 million)
• Appropriateness of expected credit loss allowance for trade receivables, unbilled revenue and work in progress: applying the simplified
approach for IFRS 9 expected credit loss model, the Group reviewed its impairment matrix to ensure it continues to reflect current and
future credit risks and assessed it as adequate
• Accounting for government grants: at 31 December 2021, the Group recognized CHF 16 million as deduction of salaries and wage
expenses (2020: CHF 36 million)
Business segment financial restatement
As of 1 January 2021, the SGS operational structure has been simplified into new focus areas including the following five divisions:
Connectivity & Products, Health & Nutrition, Industries & Environment, Natural Resources and Knowledge.
The integration of this divisional structure resulted in improving SGS’s market approach while increasing cooperation and agility across
our global network. Other than creating more operational synergies, the Group expects to reinvigorate the growth profiles of its services.
Previously reported 2020 segment disclosures have been restated to reflect this change and are disclosed in note 4.
This reorganization led the Group to adjust its management of goodwill and to reassess its Cash Generating Units (CGU) and groups of
CGUs to better reflect the new divisional structure. The restatement of goodwill and CGU allocation has been done in accordance with
IAS 36, which defines a CGU as the lowest level of a group of assets generating cash inflows that are largely independent from other
assets or groups of assets, as disclosed in note 14.
Adoption of new and revised International Financial Reporting Standards and Interpretations
Several new amendments and interpretations were adopted effective 1 January 2021 but have no material impact on the Group’s
consolidated financial statements. There are no 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
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 175 to 177.
Financial statementsSGS | 2021 Integrated Annual Report 117
Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Initially they are measured at the non-
controlling 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.
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 exchange rate at the average exchange rate for the year, or at the rate on the date of the
transaction for significant items. 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 judgment, 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 customer 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 invoices are usually issued per contractually agreed installments and prices. Payments are due upon invoicing
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 118
Segment information
The Group reports its operations by business segment, according to the nature of the services provided.
The Group operates in five business segments:
• Connectivity & Products (C&P): end-markets covered include Electrical and Electronic goods, Softlines, Hardlines and Trade Facilitation
• Health & Nutrition (H&N): end-markets covered include Food, Crop Science, Health Science and Cosmetics & Hygiene
• Industries & Environment (I&E): end-markets covered include Field Services and Inspection, Technical Assessment and Advisory,
Industrial and Public Health & Safety, Environmental Testing and Public Mandates
• Natural Resources (NR): end-markets covered include Trade and Inspection of minerals, oil and gas and agricultural commodities,
Laboratory Testing, Metallurgy and Consulting and Market Intelligence
• Knowledge (Kn): end-markets covered include Management System Certification, Customized Audits, Consulting and Academy
The chief operating decision maker evaluates segment performance and allocates resources based on several factors, of which revenue,
adjusted operating income and capital expenditures 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 5–10 years
• Other tangible assets 5–10 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, 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.
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 interests 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.
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 acquired as part of business combinations is tested for possible impairment annually and whenever events or changes
in circumstances indicate their value may not be fully recoverable.
Financial statementsSGS | 2021 Integrated Annual Report 119
For the purpose of impairment testing, the Group has adopted a uniform method for assessing goodwill 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 CGUs 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 CGUs or the group of CGUs’ 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 CGUs or groups of CGUs, a value-in-use calculation is performed using cash flow projections covering the next five years and
including a terminal growth assumption. These cash flow projections take into account the most recent financial results and outlook
approved by management.
If the recoverable amount of the CGU or of the group of CGUs 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.
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. The following useful lives are used in the calculation of amortization:
• Trademarks 5–20 years
• Customer relationships 2–20 years
• Computer software 3–5 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 fair value less cost of sale 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.
Government grants
IAS 20 sets out the principle for the recognition, measurement, presentation and disclosure of government grants. Government grants that
are not related to assets are credited to the income statement as a deduction of the related expenses. Government grants are recognized
when there is a reasonable assurance that the grant will be received and all attached conditions will be met.
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 forward looking and 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).
Cash and cash equivalents
Cash and cash equivalents include cash and deposits held with banks 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.
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 120
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 remeasured at fair value at each balance sheet date.
The gains and losses resulting from the fair value remeasurement 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.
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 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 judgment 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.
Financial statementsSGS | 2021 Integrated Annual Report 121
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 off-set where there is a legally enforceable right to off-set. 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 estimates and judgments
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.
Business combinations
In a business combination, the determination of the fair value of the identifiable assets acquired, particularly intangibles, requires estimations
which are based on all available information and in some cases on assumptions with respect to the timing and amount of future revenues and
expenses associated with an asset. The purchase price is allocated to the underlying acquired assets and liabilities based on their estimated
fair value at the time of acquisition. The excess is reported as goodwill. As a result, the purchase price allocation impacts reported assets and
liabilities, future net earnings due to the impact on future depreciation and amortization expense and impairment charges. The purchase price
allocation is subject to a maximum period of 12 months adjustment.
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
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.
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 122
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.
Legal and warranty claims on services rendered
The Group is subject to litigation and other claims. Management bases its judgment 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 judgment 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.
Judgments
In the process of applying the entity’s accounting policies described above, management has made the following judgment that has a
significant effect on the amounts recognized in the financial statements.
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 judgment 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.
Exchange rates
The most significant currencies for the Group were translated at the following exchange rates into Swiss Francs:
Statement of financial position
period-end rates
Income statement
period average rates
Australia
Canada
Chile
China
Eurozone
Korea
AUD
CAD
CLP
CNY
EUR
KRW
United Kingdom GBP
Russia
Taiwan
USA
RUB
TWD
USD
100
100
100
100
100
100
100
100
100
100
2021
66.59
71.65
0.11
14.40
103.78
0.08
123.57
1.24
3.32
91.72
2020
67.66
69.12
0.12
13.54
108.42
0.08
119.75
1.19
3.15
88.45
2021
68.67
72.93
0.12
14.17
108.16
0.08
125.72
1.24
3.27
91.42
2020
64.75
70.05
0.12
13.60
107.04
0.08
120.47
1.31
3.19
93.92
Financial statementsSGS | 2021 Integrated Annual Report 123
3. Business combinations
The following business combinations occurred during 2021 and 2020:
Business combinations 2021
In 2021, the Group completed 9 business combinations for a total purchase price of CHF 237 million (note 21).
• 100% of Analytical & Development Services (ADS), a company providing food testing in the UK (effective 7 January 2021)
• 55.92% majority stake into BZH GmbH Deutsches Beratungszentrum für Hygiene, a German based subsidiary of SYNLAB Analytics
& Services (A&S) food testing laboratory (effective 29 January 2021)
• 100% of Autoscope/CTOK, a provider of vehicle testing services in France (effective 2 February 2021)
• 100% of International Service Laboratory (ISL), a company providing regulated analytical laboratory and stability testing services for
a broad variety of pharmaceutical products (effective 1 April 2021)
• 100% of Brightsight, a company operating in cybersecurity in the Netherlands (effective 4 May 2021)
• 100% of Metair Lab, a company providing air sampling and asbestos testing services in France (effective 1 June 2021)
• 100% of Groupe IDEA TESTS (IDEA), a provider of clinical, microbiological and in-vitro testing services in France (effective
1 December 2021)
• 66.67% of Sulphur Experts Inc. a company supporting customers in the amine treating and sulfur recovery industries in Canada (effective
1 December 2021)
• 100% of Quay Pharmaceuticals Limited (Quay Pharma), a leading innovative Formulation Research and Development Organization with
a comprehensive and flexible range of services, in the UK (effective 6 December 2021)
These companies were acquired for an amount of CHF 237 million and the total goodwill generated on these transactions amounted to
CHF 163 million.
All the above transactions contributed a total of CHF 46 million in revenue and CHF 5 million in operating income in 2021. Had all acquisitions
been effective 1 January 2021, the revenue for the period from these acquisitions would have been CHF 93 million and the operating income
would have been CHF 12 million.
On 4 May 2021 SGS has acquired Brightsight. This acquisition will significantly strengthen Group’s presence in the cybersecurity sector.
Brightsight has contributed CHF 13 million to Group’s revenue and CHF 1 million operating income in 2021. Had the company been acquired
on 1 January 2021 the revenue for the year would have been CHF 20 million and the operating income would have been CHF 2 million.
On 6 December 2021 SGS has acquired Quay Pharmaceuticals Limited. This acquisition supports Group’s strategy of increasing the scope
of services to support our customers across the Health Science supply chain. Quay Pharmaceuticals Limited has contributed CHF 1 million
to Group’s revenue and nil to operating income in 2021. Had the company been acquired on 1 January 2021 the revenue for the year would
have been CHF 20 million and the operating income would have been CHF 4 million.
None of the goodwill arising on these acquisitions is expected to be tax deductible.
Divestment 2021
There were no significant disposals in 2021.
Business combinations 2020
In 2020, the Group completed 6 business combinations for a total purchase price of CHF 536 million (note 21).
• 100% of Thomas J. Stephens & Associates, Inc., a company providing clinical research serving the cosmetic and personal care industry
in the USA (effective 8 January 2020)
• 100% of CTA Gallet, a company operating vehicle inspection services in France and providing road safety inspections (effective
2 June 2020)
• 100% of Groupe Moreau, a company providing vehicle inspection services in France (effective 28 August 2020)
• 100% of Engineering Control Limited, a consultancy company focusing on process automation and functional safety of process systems
in New Zealand (effective 4 November 2020)
• 80% of Ryobi Geotechnique International Pte Ltd a company specializing in providing geoengineering solutions in Singapore (effective
31 December 2020)
• 100% of SYNLAB Analytics & Services, a leading European environmental, food testing, life activities and tribology services company
(effective 31 December 2020)
These companies were acquired for an amount of CHF 536 million and the total goodwill generated on these transactions amounted to
CHF 481 million.
All the above transactions contributed a total of CHF 16 million in revenue and CHF 2 million in operating income in 2020. Had all acquisitions
been effective 1 January 2020, the revenue for the period from these acquisitions would have been CHF 254 million and the operating
income would have been CHF 30 million.
On 31 December 2020 SGS has acquired SYNLAB Analytics & Services. This acquisition will strengthen Group’s presence in North-Western
Europe in environmental testing, food testing, life activities and oil condition monitoring as well as allowing SGS to enter new markets in
the Nordics. SYNLAB Analytics & Services has not contributed to Group’s revenue and operating income in 2020. Had the company been
acquired on 1 January 2020 the revenue for the year would have been CHF 207 million and the operating income CHF 22 million.
On 31 December 2020 SGS has acquired Ryobi Geotechnique International Pte Ltd.. This acquisition supports Group’s strategic evolution
following TIC megatrends as well as the presence of Industrial business in Singapore. Ryobi Geotechnique International Pte Ltd. has not
contributed to Group’s revenue and operating income in 2020. Had the company been acquired on 1 January 2020 the revenue for the
year would have been CHF 25 million and the operating income CHF 4 million.
None of the goodwill arising on these acquisitions is expected to be tax deductible.
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 124
Divestment 2020
The Group has disposed of Pest management and fumigation operations in Belgium and Netherlands for a total purchase price of
CHF 68 million, generating a gain on disposal of CHF 63 million.
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
Gain on business disposals
Transaction and integration costs
Operating income
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Analysis of revenue and operating income
2021
1 055
(39)
(15)
–
–
(24)
977
2020
900
(31)
(84)
(37)
63
(16)
795
2021
(CHF million)
C&P
H&N
I&E
NR
Kn
Total
Revenue
1 288
861
2 120
1 473
663
6 405
Adjusted
operating
income*
Amortization
of acquisition
intangibles
Restructuring
costs
Transaction
and integration
costs
Operating
income
by business
316
149
240
210
140
1 055
(5)
(7)
(21)
–
(6)
(39)
(2)
(2)
(5)
(6)
–
(15)
(1)
(9)
(11)
(1)
(2)
(24)
308
131
203
203
132
977
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Segment information restatement
The SGS operational structure has been simplified into new focus areas including five divisions: Connectivity & Products, Health & Nutrition,
Industries & Environment, Natural Resources and Knowledge effective since 1 January 2021.
The previously reported 2020 segment disclosures have been restated to reflect this change and are disclosed in the table below.
2020 restated
(CHF million)
Revenue
Adjusted
operating
income*
Amortization
of acquisition
intangibles
Restructuring
costs
Goodwill
impairment
Gain on
business
disposals
Transaction
and integration
costs
Operating
income
by business
C&P
H&N
I&E
NR
Kn
Total
1 175
658
1 798
1 397
576
5 604
287
102
178
225
108
900
(1)
(5)
(14)
(1)
(10)
(31)
(2)
(6)
(65)
(8)
(3)
(84)
(5)
(16)
(8)
–
(8)
(37)
–
–
–
63
–
63
(1)
(4)
(11)
–
–
(16)
278
71
80
279
87
795
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
Financial statementsSGS | 2021 Integrated Annual Report 2020 published
(CHF million)
Revenue
Adjusted
operating
income*
Amortization
of acquisition
intangibles
Restructuring
costs
Goodwill
impairment
Gain on
business
disposals
Transaction
and integration
costs
Operating
income
by business
125
(16)
63
AFL
MIN
OGC
CRS
CBE
IND
EHS
GIS
Total
996
639
776
1 054
429
847
471
392
175
111
76
264
82
72
42
78
5 604
900
(4)
(1)
–
(2)
(10)
(7)
(4)
(3)
(31)
(5)
(7)
(5)
(3)
(3)
(13)
(3)
(45)
(84)
–
–
–
(8)
(10)
–
(3)
(37)
–
–
–
–
–
–
–
(4)
–
(2)
(1)
–
(2)
(6)
(1)
209
103
69
258
61
40
29
26
795
63
(16)
* Alternative Performance Measures (APM), refer to the ‘2021 Full Year APM’ document.
All segment revenues reported are from external customers. The adjusted operating income* represents the profit earned by each segment.
This is the main measure reported to the chief operating decision makers for the purpose of resource allocation and assessment of
segmental performance.
Restructuring costs
The Group incurred a pre-tax restructuring charge of CHF 15 million (2020: CHF 84 million, out of which CHF 45 million was recognized
for I&E activities (formerly attributed to GIS activities), mainly driven by the termination of the single-window contract with the Government
of Ghana and the vehicle inspection contract with the Government of Uganda).
Total restructuring costs comprised personnel reorganization of CHF 13 million (2020: CHF 44 million) as well as fixed asset impairment
of CHF nil million (2020: CHF 25 million) and other charges of CHF 2 million (2020: CHF 15 million).
Revenue from external customers by geographical area
(CHF million)
Europe/Africa/Middle East
Americas
Asia Pacific
Total
2021
2 954
1 212
2 239
6 405
%
46.1
18.9
35.0
100.0
2020
2 508
1 102
1 994
5 604
%
44.8
19.7
35.5
100.0
Revenue in Switzerland from external customers for 2021 amounted to CHF 160 million (2020: CHF 149 million). No country represented
more than 20% of revenues from external customers in 2021 nor 2020.
Major customer information
In 2021 and 2020, no external customer represented 5% or more of the Group’s total revenue.
Specific non-current assets by geographical area
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
2021
2 317
819
643
3 779
%
61.3
21.7
17.0
100.0
2020
2 102
806
628
3 536
%
59.4
22.8
17.8
100.0
Specific non-current assets in Switzerland for 2021 amounted to CHF 162 million (2020: CHF 164 million). No country represented more than
20% of non-current assets in 2021 nor 2020.
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
2021
3 779
164
104
6
4 053
2020
3 536
161
90
8
3 795
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 126
Capital additions¹ by business segment
(CHF million)
C&P
H&N
I&E
NR
Kn
Total
2021
96
62
97
75
6
336
%
28.6
18.4
28.9
22.3
1.8
100.0
2020 restated
84
40
80
51
4
259
1. Capital additions represent the total cost incurred to acquire land, buildings and equipment as well as other intangible assets.
(CHF million)
2020 published
AFL
MIN
OGC
CRS
CBE
IND
EHS
GIS
Total
1. Capital additions represent the total cost incurred to acquire land, buildings and equipment as well as other intangible assets.
Average number of employees by geographical area
(Average number of employees)
Europe/Africa/Middle East
Americas
Asia Pacific
Total
Number of employees at year end
5. Revenues from contracts with customers
Group’s revenue from contracts with customers by timing of recognition
%
32.4
15.5
30.9
19.7
1.5
100.0
%
15.4
10.9
15.8
31.7
1.5
11.6
8.1
5.0
40
28
41
82
4
30
21
13
259
100.0
2021
39 239
18 092
35 966
93 297
96 216
2020
36 350
17 878
34 870
89 098
91 698
(CHF million)
C&P
H&N
I&E
NR
Kn
Total
2021
2020 restated
Services
transferred at
a point in time
Services
transferred
over time
Services
transferred at
a point in time
Services
transferred
over time
81%
84%
70%
85%
93%
80%
19%
16%
30%
15%
7%
20%
83%
84%
65%
84%
96%
79%
17%
16%
35%
16%
4%
21%
Financial statementsSGS | 2021 Integrated Annual Report (CHF million)
AFL
MIN
OGC
CRS
CBE
IND
EHS
GIS
Total
Assets and liabilities related to contracts with customers
(CHF million)
Unbilled revenue and work in progress
Trade receivables
Contract liabilities
127
2020 published
Services
transferred at
a point in time
Services
transferred
over time
89%
72%
81%
81%
96%
57%
76%
91%
79%
2021
175
928
221
11%
28%
19%
19%
4%
43%
24%
9%
21%
2020
160
856
189
Revenue evolution, timing and project maturity are the main factors impacting assets and liabilities related to contracts with customers.
In 2021, SGS has recognized revenue of CHF 125 million related to contract liabilities at 31 December 2020. In 2020, the revenue recognized
from contract liabilities at 31 December 2019 amounted to CHF 93 million. Revenue recognized from performance obligations satisfied in
previous periods were immaterial in 2021 and 2020.
The remaining performance obligations (unsatisfied or partially satisfied) expected to be recognized for long-term contracts amount
to CHF 828 million at 31 December 2021, out of which CHF 465 million are expected to be recognized in revenue within one year,
CHF 215 million between one year and two years and CHF 148 million after the next two years.
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 2021 and 2020 were not significant, while amortization and impairment losses were nil.
6. Government grants
Government grants for the period amount to CHF 16 million (2020: CHF 36 million), presented as a deduction of salaries and wages
expenses. The outstanding balance recognized in the statement of financial position amounted to CHF 4 million (2020: CHF nil million).
7. 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 on disposal of property, plant and equipment
Miscellaneous operating expenses
Total
8. Financial income
(CHF million)
Interest income
Foreign exchange gains/(losses)
Total
2021
534
269
146
119
103
64
(3)
–
132
1 364
2021
12
4
16
2020
446
246
136
105
91
66
3
(2)
115
1 206
2020
11
1
12
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 128
9. Financial expenses
(CHF million)
Interest expense
Loss on derivatives at fair value
Other financial expenses
Total
10. Taxes
Major components of tax expense
(CHF million)
Current taxes
Deferred tax (credit) relating to the origination and reversal of temporary differences
Total
2021
46
8
15
69
2021
258
11
269
2020
46
11
9
66
2020
251
(14)
237
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:
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 effect on losses not currently treated as being recoverable in future years
Tax effect on losses previously considered irrecoverable, now expected to be recoverable
Non-creditable foreign withholding taxes
Minimum taxes
Prior period adjustments
Rate changes
Other
Tax charge
Deferred tax after netting
(CHF million)
Deferred tax assets
Deferred tax liabilities
Total
2021
924
178
17
9
(4)
42
6
12
7
2
269
2021
164
(92)
72
2020
742
139
24
21
(12)
39
6
11
6
3
237
2020
161
(53)
108
Components of deferred income tax balances
(CHF million)
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
2021
2020
Assets
Liabilities
Assets
Liabilities
–
44
25
13
59
132
2
51
326
126
9
6
22
12
–
79
–
254
–
42
26
15
56
135
2
47
323
128
8
5
9
–
–
65
–
215
Financial statementsSGS | 2021 Integrated Annual Report
Net change in deferred tax assets/(liabilities)
(CHF million)
Net deferred income tax asset (liability) at 1 January 2020
Acquisition of subsidiaries
(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 2020
Acquisition of subsidiaries
(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 2021
The Group has unrecognized tax losses carried forward amounting to CHF 161 million (2020: CHF 152 million).
Unrecognized tax losses carryforwards at 31 December 2021
(CHF million)
Expiring in the next 3 years
Expiring in 4-10 years
Available without limitation
Total unrecognized tax losses
129
Total
151
(42)
14
(4)
(11)
108
(22)
(11)
(6)
3
72
8
41
112
161
At 31 December 2021, the unrecognized deferred tax assets amount to CHF 48 million (2020: CHF 47 million).
At 31 December 2021, the retained earnings of subsidiaries and foreign incorporated joint ventures consolidated by the Group include
approximately CHF 2 805 million (2020: CHF 2 621 million) of undistributed earnings that may be subject to tax if remitted to the parent
company. As set out in note 22, the nature of the Group’s business requires keeping a significant part of the cash reserves in the operating
units. The Group takes the view that a deferred tax liability is required when it is probable that unremitted earnings will be distributed in the
foreseeable future.
11. 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)
2021
613
7 488
81.91
2020
480
7 489
64.05
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 29):
Profit attributable to equity holders of SGS SA (CHF million)
Diluted weighted average number of shares (‘000)
Diluted earnings per share (CHF)
2021
613
7 500
81.79
2020
480
7 516
63.82
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 130
12. Property, plant and equipment
(CHF million)
2021
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 2021
(CHF million)
2020
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 2020
Land &
buildings
Machinery
& equipment
Other tangible
assets
Total
464
17
6
(20)
(4)
463
271
16
1
1
(19)
(3)
267
196
2 142
151
15
(72)
91
2 327
1 692
179
–
7
(71)
19
1 826
501
715
130
8
(56)
(78)
719
486
54
–
5
(53)
(1)
491
228
Land &
buildings
Machinery
& equipment
Other tangible
assets
478
6
5
(11)
(14)
464
256
15
15
1
(10)
(6)
271
193
2 154
135
45
(93)
(99)
2 142
1 677
164
7
24
(86)
(94)
1 692
450
743
90
14
(59)
(73)
715
516
53
3
4
(57)
(33)
486
229
3 321
298
29
(148)
9
3 509
2 449
249
1
13
(143)
15
2 584
925
Total
3 375
231
64
(163)
(186)
3 321
2 449
232
25
29
(153)
(133)
2 449
872
Included in the other tangible assets are leasehold improvements, office furniture and IT hardware as well as construction-in-progress assets
amounting to CHF 63 million (2020: CHF 37 million).
At 31 December 2021, the Group had commitments of CHF 8 million (2020: CHF 7 million) for the acquisition of land, buildings
and equipment.
Financial statementsSGS | 2021 Integrated Annual Report 13. Right-of-use assets and lease liabilities
(CHF million)
At 1 January
Additions
Acquisition
Depreciation expense
Interest expense
Payment of lease liabilities and interests
Exchange difference and other
At 31 December 2021
Analysed as:
Current liabilities
Non-current liabilities
Total
(CHF million)
At 1 January
Additions
Acquisition
Depreciation expense
Interest expense
Payment of lease liabilities and interests
Exchange difference and other
At 31 December 2020
Analysed as:
Current liabilities
Non-current liabilities
Total
131
Right-of-use assets
Total
Lease liabilities
Land &
buildings
Machinery
& equipment
Other tangible
assets
516
141
8
(135)
–
–
(2)
528
68
50
1
(44)
–
–
(4)
71
6
4
–
(4)
–
–
–
6
590
195
9
(183)
–
–
(6)
605
621
190
9
–
22
(198)
(8)
636
2021
155
481
636
Right-of-use assets
Total
Lease liabilities
Land &
buildings
Machinery
& equipment
Other tangible
assets
539
92
37
(125)
–
–
(27)
516
67
34
8
(38)
–
–
(3)
68
5
3
–
(2)
–
–
–
6
611
129
45
(165)
–
–
(30)
590
644
123
46
–
20
(181)
(31)
621
2020
151
470
621
Included in machinery & equipment are mainly vehicles for CHF 67 million (2020: CHF 62 million).
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 132
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)
Canadian Dollar (CAD)
Australian Dollar (AUD)
Indian Rupee (INR)
Korean Won (KRW)
Singapore Dollar (SGD)
Russian Ruble (RUB)
British Pound Sterling (GBP)
Mexican Peso (MXN)
New Zealand Dollar (NZD)
Turkish Lira (TRY)
Other
Total
2021
257
99
77
30
21
20
11
11
8
7
7
6
6
5
71
636
2020
229
94
93
29
15
21
12
7
5
7
7
4
8
7
83
621
The Group leases mainly offices, laboratory spaces and vehicles. During the year ended 31 December 2021, an additional CHF 6 million
(2020: CHF 4 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
Total expense recognized in income statement
14. Goodwill
(CHF million)
Cost
At 1 January
Additions
Consideration/fair value adjustments on prior years’ acquisitions
Disposal
Impairment
Exchange differences
At end of the period
2021
2020
3
3
6
2
2
4
2021
2020
1 651
163
3
–
–
(39)
1 778
1 281
481
(5)
(6)
(37)
(63)
1 651
In response to a constantly changing business environment and to align SGS more closely to the TIC megatrends and customer demand, the
Group has changed its divisional structure. This reorganization resulted in a change in management of goodwill and thus the reassessment
of Cash Generating Units (CGU) and groups of CGUs.
The restatement of goodwill and CGU allocation has been done in accordance with IAS 36, which defines a CGU as the lowest level of
a group of assets generating cash inflows that are largely independent from other assets and groups of assets.
In the case of the following two divisions, 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:
– Connectivity & Products (C&P)
– Natural Resources (NR)
• The Health & Nutrition (H&N) business is split into two worldwide CGUs to reflect the global nature of customer activities and drivers
of cash inflows in each sub-division: Nutrition, Health Science and Cosmetics & Hygiene.
• The Industry & Environment (I&E) division includes newly integrated Vehicle Compliance (previously reported under Governments
and Institutions) and Upstream activities (previously reported under Oil, Gas and Chemicals business division). To best reflect the
interdependency of the cash inflows, Vehicle Compliance has been split into two distinct CGUs regrouping regulated services
activities in Spain and in France since customers in this sector are country specific. Upstream services is assessed as one separate
CGU regrouping the worldwide Upstream activities for which cash inflows are independent from the rest of the I&E activities.
Financial statementsSGS | 2021 Integrated Annual Report
133
For the remaining I&E activities (excluding Vehicle Compliance and Upstream services), business is driven primarily by regional or local
customer activities, therefore cash inflows are largely independent from each other. Consequently, a CGU organization by region has
been maintained, split regionally into four CGUs in line with the Group’s regional reporting structure.
• The Knowledge (Kn) division is split into two CGUs, one regrouping the Technical Consultancy business in the USA for which cash inflows
remain largely independent from the rest of the division’s activities and the other regrouping the remaining worldwide Knowledge activities
for which there are synergies across the Group’s network, generating interdependent cash inflows.
SYNLAB Analytics & Services goodwill allocation
The acquisition of SYNLAB Analytics & Services, completed on 31 December 2020, generated additional goodwill of CHF 439 million.
Given the completion date of the acquisition, the goodwill was left unallocated at 31 December 2020.
Following the Group’s division restatement, the goodwill arising from SYNLAB Analytics & Services acquisition has now been allocated
by division as follow:
(CHF million)
H&N
I&E
Total
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)
C&P
H&N1
I&E2
NR
Kn
Total
2020 Restated
132
307
439
2021
173
462
924
119
100
2020 Restated
118
369
948
118
98
1 778
1 651
1. Within H&N, goodwill allocated to Nutrition CGU was CHF 192 million (2020: CHF 179 million) and goodwill allocated to Health Science and Cosmetics & Hygiene CGU was CHF 270 million
(2020: CHF 190 million).
2. Within I&E, goodwill allocated to I&E Europe/Africa/Middle East CGU was CHF 476 million (2020: CHF 491 million).
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 thus
resulting in no goodwill impairment in 2021. 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 2020, following the closure of certain activities within the business lines and restructuring as a result of the global downturn and ongoing
economic uncertainty, the Group recognized an impairment loss of CHF 37 million.
Pre-tax discount rate used in 2021 for the main CGUs or group of CGUs impairment testing
C&P
H&N1
I&E2
NR
Kn
2021
10.5%
7.6%–8.5%
6.2%–14.5%
10.2%
8.7%–10.8%
1. Nutrition pre-tax discount rate was 8.5%, while Health Science and Cosmetics & Hygiene pre-tax discount rate was 7.6%.
2. Within I&E, I&E Europe/Africa/Middle East pre-tax discount rate was 7.9%.
The cash flow projections for the first five years were based upon financial plans, approved by the Group, for each CGU or group of CGUs.
The overall assumptions used in the cash flow projections are consistent with the expected average growth rates of the segments served
by the Group. For the subsequent years, the Group assumes a long-term growth rate in the range of 0%–2% (1% for CGUs where goodwill
allocated is significant) and stable operating margins depending on each CGU or group of CGUs.
Sensitivity to changes in assumption
Sensitivity analyses were conducted using the following key assumptions:
• Reducing the expected annual revenue growth rates for the first five years by 2 pp1
• Reducing the operating margin by 0.25 pp1
• Increasing the discount rate assumption by 1 pp1
For all impairment tests, changing the key assumptions retained in the scenario using the sensitivity analyses described above would not
result in any additional impairment.
1. Percentage points.
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report
134
Technical consultancy USA goodwill impairment test assumptions
Due to a slower recovery from unfavorable economic environment created by the Covid-19 pandemic the following key assumptions have
been used in the impairment test for this CGU:
• Pre-tax discount rate of 10.8% assuming a risk size premium of 3.49% reflecting uncertain future revenue development for
consultancy businesses
• Continued recovery in 2022, supported by increasing transactional activity towards the second half of the year ending 2021, with a 2022
revenue growth rate of approximately 50%. Pre-Covid-19 pandemic levels are expected to be reached by 2026 assuming an average
growth rate of 14% from 2023 to 2026
• Average EBITDA margin to gradually reach its historical trend prior Covid-19 pandemic in the mid 20s by 2026
• Long-term growth rate of 2% after 2026
Based on the above assumptions, the recoverable amount exceeds the carrying amount for this CGU for which the Group’s share of goodwill
is CHF 82 million.
The Group has assessed the sensitivity of the value-in-use to the changes in the assumptions as follows:
• Missing the annual revenue target by 3 pp¹ for the years 2022 to 2026 would reduce the value-in-use by CHF 17 million
• Decreasing the average EBITDA margin by 2 pp¹ would reduce the value-in-use by CHF 19 million
• Decreasing the long-term growth rate by 1 pp¹ would reduce the value-in-use by CHF 15 million
Based on the above sensitivity analyses, the recoverable amount exceeds the carrying value of the CGU and therefore would not result in
an impairment.
15. Other intangible assets
(CHF million)
2021
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 2021
Trademarks
and Other
Customer
relationships
Internally
generated
Purchased
Total
Computer software
and Other assets
91
–
9
–
(8)
92
65
5
–
–
(4)
66
26
388
–
63
–
3
454
144
34
–
–
(2)
176
278
182
21
–
(5)
4
202
147
14
1
(5)
2
159
43
262
17
2
(85)
4
200
234
12
–
(85)
4
165
35
923
38
74
(90)
3
948
590
65
1
(90)
–
566
382
1. Percentage points.
Financial statementsSGS | 2021 Integrated Annual Report 135
Trademarks
and Other
Customer
relationships
Internally
generated
Purchased
Total
Computer software
and Other assets
93
–
10
(9)
(3)
91
68
6
–
2
(9)
(2)
65
26
238
1
165
(9)
(7)
388
137
23
3
(1)
(10)
(8)
144
244
158
14
1
(3)
12
182
137
12
–
–
(3)
1
147
35
302
13
–
(37)
(16)
262
262
11
3
–
(36)
(6)
234
28
2021
6
104
63
173
791
28
176
(58)
(14)
923
604
52
6
1
(58)
(15)
590
333
2020
8
90
56
154
(CHF million)
2020
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
Acquisition of subsidiaries
Disposals
Exchange differences and other
At 31 December
Net book value at 31 December 2020
16. Other non-current assets
(CHF million)
Non-current loans or amounts receivable from third parties
Retirement benefit asset
Other non-current assets
Total
Other non-current assets are measured at fair value through profit and loss except non-current loans or amounts receivable from third parties
that are measured at amortized cost.
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 8%.
In 2021, other non-current assets included deposits for guarantees and restricted cash of CHF 37 million (2020: CHF 36 million).
Typical examples of restricted cash are cash deposits for performance bonds, rentals and other operating obligations.
At 31 December 2021 and 2020, the fair value of the Group’s other non-current assets approximates their carrying value.
17. 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
Decrease/(Increase) in allowance recognized in the income statement
Utilizations
Exchange differences
Total at 31 December
2021
1 090
(162)
928
2021
(176)
–
2
9
3
2020
1 032
(176)
856
2020
(209)
(1)
(3)
19
18
(162)
(176)
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 136
18. Other receivables and prepayments
(CHF million)
Accrued income, prepayments
Derivative assets
Other receivables
Total
2021
78
11
115
204
2020
69
8
111
188
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.
19. Cash and cash equivalents
(CHF million)
Cash and short-term deposits
Short-term loans
Total
20. Cash flow statement
20.1. Non-cash and non-operating items
(CHF million)
Depreciation of property, plant 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
ECL1 on trade receivables, unbilled revenues and work in progress
Net financial expenses
(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
1. Expected Credit Losses
20.2. (Increase)/decrease in working capital
(CHF million)
(Increase)/decrease in unbilled revenues and inventories
(Increase)/decrease in trade receivables
(Increase)/decrease in other receivables and prepayments
Increase in trade and other payables
Increase in other creditors and accruals
(Decrease)/increase in other provisions
(Increase)/decrease in working capital
Notes
12
12 and 15
13
15
14
8 and 9
10
2021
1 479
1
1 480
2020
1 766
–
1 766
2021
249
2
183
65
–
(3)
53
(2)
12
–
–
269
828
2021
(14)
(74)
(27)
37
61
(27)
(44)
2020
232
31
165
52
37
3
54
(14)
17
(65)
(1)
237
748
2020
17
71
25
23
37
13
186
Financial statementsSGS | 2021 Integrated Annual Report 137
20.3. Changes in liabilities arising from financing activities
(CHF million)
2021
Corporate bonds
Bank loans
Put option on acquisition
Lease liabilities
Other financial liabilities
Total
Cash impact
Non cash impact
1 January
Financing cash
flows
Equity
movement
Acquisition and
disposals
New Leases
Other
movements1
31 December
2 600
556
62
621
23
3 862
548
(555)
–
(179)
(12)
(198)
–
–
(27)
–
13
(14)
–
4
–
9
–
13
–
–
–
190
–
190
(48)
–
(2)
(5)
2
(53)
3 100
5
33
636
26
3 800
1. Other movements include interest accruals and payments, amortization under effective rate method, currency effects and other contingent consideration movements.
(CHF million)
2020
Corporate bonds
Bank loans
Put option on acquisition
Lease liabilities
Other financial liabilities
Total
Cash impact
Non cash impact
1 January
Financing cash
flows
Equity
movement
Acquisition and
disposals
New Leases
Other
movements1
31 December
2 105
8
89
644
25
2 871
499
388
–
(161)
(1)
725
–
–
(23)
–
1
(22)
–
162
–
46
–
208
–
–
–
123
–
123
(4)
(2)
(4)
(31)
(2)
(43)
2 600
556
62
621
23
3 862
1. Other movements include interest accruals and payments, amortization under effective rate method, currency effects and other contingent consideration movements.
21. 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
Prepayment on
acquisitions
Net cash outflow
on acquisitions
Fair value on
Brightsight
Fair value on Quay
Pharmaceuticals
Limited
Fair value on Other
acquisitions
Total fair value on
aquisitions 2021
Total fair value on
aquisitions 2020
2
3
30
–
4
4
4
(10)
(10)
–
27
57
84
(4)
–
–
–
10
4
30
–
3
2
6
(8)
(12)
–
35
76
111
(6)
–
–
–
80
105
4
2
14
2
5
2
10
(17)
(5)
(5)
12
30
42
(10)
(3)
–
–
29
16
9
74
2
12
8
20
(35)
(27)
(5)
74
163
237
(20)
(3)
–
–
214
35
45
175
1
34
31
44
(72)
(234)
(4)
55
481
536
(44)
(3)
2
1
492
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report
138
In compliance with IFRS 3, fair value on acquisition remains provisional for a twelve-month period following the date of acquisition, during
which the Group can finalise the purchase price allocation.
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 8 million (2020: CHF 14 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.
22. 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.
(CHF million)
2021
2020
2021
2020
Notional amount
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
(8)
(25)
11
(26)
(7)
(3)
186
(141)
(20)
2
(1)
(4)
2
(11)
(15)
(4)
2
3
(237)
(17)
(24)
(337)
(9)
(31)
11
(24)
17
(3)
(59)
(36)
12
2
(1)
(3)
2
(7)
(14)
(3)
(4)
2
(106)
(19)
(19)
(292)
–
1
–
1
–
–
–
(2)
–
–
–
–
–
–
–
–
–
(1)
2
1
–
2
–
(2)
–
(2)
–
–
(2)
–
–
–
–
–
–
–
–
–
–
–
2
(1)
(5)
Financial statementsSGS | 2021 Integrated Annual Report
139
Credit risk management
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 2021, the Group has unbilled revenue and work in progress of CHF 175 million (2020: CHF 160 million) which is net of an
allowance for expected credit losses of CHF 15 million (2020: CHF 15 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 aging of
trade receivables as of invoice date at 31 December 2021:
(CHF million)
0 – 90 days
91 – 120 days
121 – 180 days
181 – 240 days
241 – 300 days
301 – 360 days
> 360 days
Total
Expected credit
loss range
Gross
carrying amount
Expected
credit loss
0%-5%
10%-25%
20%-50%
35%-75%
50%-75%
75%-100%
100%
863
43
36
20
11
7
110
1 090
4
8
14
12
8
6
110
162
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 2020:
(CHF million)
0 – 90 days
91 – 120 days
121 – 180 days
181 – 240 days
241 – 300 days
301 – 360 days
> 360 days
Total
Expected credit
loss range
Gross
carrying amount
Expected
credit loss
0%-5%
10%-25%
20%-50%
35%-75%
50%-75%
75%-100%
100%
781
40
36
21
14
10
130
1 032
3
6
11
9
9
8
130
176
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 2021 is the
carrying amount of financial assets including derivatives.
In addition, the Group has issued CHF 178 million (2020: CHF 193 million) financial guarantees to certain financial institutions that have
provided credit facilities and foreign exchange lines to its subsidiaries. Management believes the likelihood that a material payment will
be required under these guarantees is remote.
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 140
Analysis of financial assets by class and category at 31 December 2021:
Amortized
cost
At fair value through Equity
At fair value
through P&L
Total
Fair value
(CHF million)
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Cash and cash-equivalents
1 480
1 480
Trade receivables
Other receivables¹
Unbilled revenues and work
in progress
Loans to third parties – non-
current
Derivatives
928
132
175
6
–
928
132
175
6
–
Total financial assets
2 721
2 721
–
–
–
–
–
–
–
1. Excluding VAT and Other tax related items.
Analysis of financial assets by class and category at 31 December 2020:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11
11
11
11
1 480
1 480
928
132
175
6
11
928
132
175
6
11
2 732
2 732
Amortized
cost
At fair value through Equity
At fair value
through P&L
Total
Fair value
(CHF million)
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Cash and cash-equivalents
1 766
1 766
Trade receivables
Other receivables¹
Unbilled revenues and work
in progress
Loans to third parties – non-
current
Marketable securities
Derivatives
856
114
160
8
–
–
856
114
160
8
–
–
Total financial assets
2 904
2 904
1. Excluding VAT and Other tax related items.
–
–
–
–
–
9
–
9
–
–
–
–
–
9
–
9
–
–
–
–
–
–
8
8
–
–
–
–
–
–
8
8
1 766
1 766
856
114
160
8
9
8
856
114
160
8
9
8
2 921
2 921
In the fair value hierarchy, Level 1 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). Marketable securities, CHF nil million (2020: CHF 9 million) qualify as Level 1, fair value measurement category.
Derivative assets (2021: CHF 11 million; 2020: CHF 8 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.
Financial statementsSGS | 2021 Integrated Annual Report
141
Analysis of financial liabilities by class and category at 31 December 2021:
Fair value
Amortized cost
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
368
152
368
152
3 119
3 185
636
4 275
636
4 341
–
–
33
–
33
–
–
33
–
33
–
–
19
–
19
–
–
19
–
19
368
152
368
152
3 171
3 237
636
4 327
636
4 393
(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 3 166 million (2020: CHF 2 718 million).
Other financial liabilities include CHF 33 million qualifying as fair value Level 3 (2020: CHF 62 million), 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.
Subsequent changes in the valuation of the redemption amount to acquire the remaining non-controlling interests of acquisitions if the put/
call option is exercised shall be recognized directly in equity attributable to owners, including the unwinding of the discount.
As at 31 December 2021, a decrease of CHF 29 million of the fair value of the redemption amount to acquire the remaining 40% of Maine
Pointe LLC has been recognized directly in equity. Slower recovery from unfavorable economic environment due to Covid-19 pandemic has
reduced 2021 revenue projections. Consequently, although the long-term projections remain unchanged, the short-term triggering criteria of
the put/call option has been assessed as not attainable.
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 2020:
Fair value
Amortized cost
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
322
160
322
160
3 174
3 292
621
4 277
621
4 395
–
–
62
–
62
–
–
62
–
62
–
–
17
–
17
–
–
17
–
17
322
160
322
160
3 253
3 371
621
4 356
621
4 474
(CHF million)
Trade payables
Other payables¹
Loans and other financial
liabilities
Lease liabilities
Total financial liabilities
1. Excluding VAT and Other tax related items.
Undiscounted contractual maturities of financial liabilities including interest payments at 31 December 2021:
(CHF million)
Trade payables
Gross settled
derivative
financial
instruments
outflows
Gross settled
derivative
financial
instruments
inflows
Other
payables¹
Loans and
Other financial
liabilities
Lease
liabilities
On demand or within one year
368
152
1 167
(1 165)
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.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
285
535
274
250
710
171
135
98
73
57
Total
978
670
372
323
767
1 189
189
1 378
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report
142
Undiscounted contractual maturities of financial liabilities including interest payments at 31 December 2020:
(CHF million)
Trade payables
Gross settled
derivative
financial
instruments
outflows
Gross settled
derivative
financial
instruments
inflows
Other
payables¹
Loans and
Other financial
liabilities
Lease
liabilities
On demand or within one year
322
160
1 259
(1 263)
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.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
863
285
546
269
254
167
125
98
70
53
Total
1 508
410
644
339
307
1 122
175
1 297
The Group economically hedges its foreign exchange exposure on a net basis. The net position of the gross settled derivative financial
instruments of CHF 2 million (2020: CHF (4) million) represents the net nominal value expressed in CHF of the Group’s foreign currency
contracts outstanding at 31 December 2021.
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 2021 and 2020 with all other variables remaining constant.
Sensitivity analysis based on net hedged positions at 31 December 2021 and 2020:
(CHF million)
US Dollar (USD)
Euro (EUR)
CFA Franc BEAC (CFA)
Taiwanese Dollar (TWD)
Canadian Dollar (CAD)
2021
2020
Income statement
impact income/(expense)
Equity impact
increase/(decrease)
Income statement
impact income/(expense)
Equity impact
increase/(decrease)
4
(2)
2
–
–
(2)
–
–
–
2
1
(3)
3
–
–
(2)
–
–
1
2
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 2021 would increase/decrease by CHF nil
(2020: CHF nil).
23. Share capital and treasury shares
Balance at 1 January 2020
Treasury shares released into circulation
Treasury shares purchased for equity
compensation plans
Treasury shares purchased for cancellation
Balance at 31 December 2020
Treasury shares released into circulation
Treasury shares cancelled
Balance at 31 December 2021
Shares In circulation
Treasury shares
Total shares issued
Total share capital
(CHF million)
7 552 390
3 382
(15 834)
(70 700)
7 469 238
22 434
–
7 491 672
13 342
(3 382)
15 834
70 700
96 494
(22 434)
(70 700)
3 360
7 565 732
–
–
–
7 565 732
–
(70 700)
7 495 032
8
–
–
–
8
–
(1)
7
Issued share capital
SGS SA has a share capital of CHF 7 495 032 (2020: CHF 7 565 732) fully paid in and divided into 7 495 032 (2020: 7 565 732) 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 2021, SGS SA held 3 360 treasury shares (2020: 96 494 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 2021, 22 434 treasury shares were sold or given in relation with the equity compensation plans and 70 700 shares were cancelled.
Financial statementsSGS | 2021 Integrated Annual Report
143
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 23 March 2023.
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.
24. Loans and other financial liabilities
(CHF million)
Bank loans
Corporate bonds
Put option on acquisition
Other financial liabilities
Derivatives
Total
Current
Non-current
2021
5
3 100
33
26
7
3 171
282
2 889
2020
556
2 600
62
23
12
3 253
863
2 390
Depending on the nature of the loan, currency and date of maturity, interest rates on long-term loans from third parties range between 0.13%
and 2.99% and on short-term loans from third parties range between 0.68% and 13.00%.
The loans from third parties exposed to fair value interest rate risk amounted to CHF 3 104 million (2020: CHF 3 156 million) and
the loans from third parties exposed to cash flow interest rate risk amounted to CHF less than 0.5 million million (2020: CHF less
than 0.5 million).
SGS SA issued the following corporate bonds listed on the SIX Swiss Exchange:
Date of issue
27.02.2014
27.02.2014
25.04.2014
08.05.2015
08.05.2015
03.03.2017
29.10.2018
29.10.2018
16.04.2020
16.04.2020
Face value in
CHF million
Coupon in %
Year of
maturity
Issue
price in %
Redemption
price in %
138
250
112
325
225
375
225
175
175
325
1.375
1.750
1.375
0.250
0.875
0.550
0.750
1.250
0.450
0.950
2022
2024
2022
2023
2030
2026
2025
2028
2023
2026
100.517
101.019
101.533
100.079
100.245
100.153
100.068
101.157
100.117
100.182
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 144
SGS Nederland Holding BV has issued the following corporate bond, which is guaranteed by SGS SA and which is listed on the Luxembourg
Stock Exchange:
Date of issue
21.04.2021
Face value in
EUR million
750
Coupon in %
0.125
Year of
Maturity
2027
Issue
price in %
99.761
Redemption
price in %
100.000
The currency composition of bank loans, corporate bonds and other financial liabilities is as follows:
Bank loans and corporate bond
Put option and other financial liabilities
(CHF million)
Swiss Franc (CHF)
Euro (EUR)
Singapore Dollar (SGD)
Brazilian Real (BRL)
US Dollar (USD)
British Pound Sterling (GBP)
Canadian Dollar (CAD)
New Zealand Dollar (NZD)
Other
Total
2021
2 325
775
5
–
–
–
–
–
–
3 105
2020
2 601
548
–
4
–
–
–
–
3
3 156
2021
15
20
13
–
1
1
4
3
2
59
2020
30
18
–
–
31
1
–
3
2
85
25. 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 2021 of CHF 11 million (2020: CHF 12 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 5 million to this plan in 2022.
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.
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.
Financial statementsSGS | 2021 Integrated Annual Report
145
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 13 years.
The Group expects to contribute CHF 8 million to this plan in 2022.
United Kingdom
The Group operates a defined benefit plan through a trust, with the assets of the plans held separately from the Group and trustees who
ensure the plan’s rules are strictly adhered to. This plan has been closed to new entrants since 2002, and effective 31 October 2020, all
remaining participants ceased accruing any additional benefits in the defined benefit plan. Employees are now offered membership in
defined contribution plans operated by the Group.
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 19 years.
The Group expects to contribute CHF nil million to this plan in 2022.
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 7 million to those plans
in 2022.
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)
2021
Fair value of plan assets
Present value of funded defined benefit obligation
Funded/(unfunded) status
Present value of unfunded defined benefit obligation
Unrecognised asset due to asset ceiling
Net asset/(liability) at 31 December
(CHF million)
2020
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
CH
UK
USA
Other
Total
485
(445)
40
(11)
–
29
255
(194)
61
–
–
61
201
(193)
8
(4)
–
4
85
(100)
(15)
(57)
(2)
(74)
1 026
(932)
94
(72)
(2)
20
CH
UK
USA
Other
Total
454
(446)
8
(11)
(3)
253
(203)
50
–
50
196
(201)
(5)
(4)
(9)
48
(70)
(22)
(62)
(84)
951
(920)
31
(77)
(46)
The net asset of CHF 20 million (2020: net liability of CHF 46 million) includes CHF 104 million (2020: CHF 90 million) of pension fund assets
recognized in the item other non-current assets in note 16 and CHF 84 million (2020: CHF 136 million) of pension fund liability recognized in
the item Defined Benefit Obligation in statement of financial position.
Amounts recognized in the income statement:
(CHF million)
2021
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
CH
UK
USA
Other
Total
9
–
–
9
9
–
9
–
(1)
1
–
1
(1)
–
2
–
1
3
3
–
3
5
1
–
6
5
1
6
16
–
2
18
18
–
18
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 146
(CHF million)
2020
Service cost expense
Administrative expenses
Total expense due to defined benefit obligation at 31 December
Expense charged in:
Salaries and wages
Total expense due to defined benefit obligation at 31 December
Amounts recognized in the statement of other comprehensive income:
(CHF million)
2021
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
Asset ceiling
Total recognized in the statement of other comprehensive income
at 31 December
(CHF million)
2020
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
Movements in the net asset/(liability) during the period:
(CHF million)
2021
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
(CHF million)
2020
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
CH
UK
USA
Other
Total
9
–
9
9
9
(5)
–
(5)
(5)
(5)
(1)
1
–
–
–
9
–
9
9
9
12
1
13
13
13
CH
UK
USA
Other
Total
–
(13)
6
(30)
–
(37)
(1)
(9)
–
1
–
(9)
1
(10)
(4)
4
–
(9)
(1)
(3)
34
(33)
1
(2)
(1)
(35)
36
(58)
1
(57)
CH
UK
USA
Other
Total
–
6
14
(19)
1
(1)
21
1
(29)
(8)
(2)
14
(3)
(19)
(10)
1
(1)
3
–
3
(2)
40
15
(67)
(14)
CH
UK
USA
Other
Total
(3)
(9)
37
(2)
6
–
–
29
50
–
9
–
1
–
1
61
(9)
(3)
9
–
8
–
(1)
4
(84)
(6)
2
–
11
1
2
(74)
(46)
(18)
57
(2)
26
1
3
21
CH
UK
USA
Other
Total
1
(9)
(1)
6
–
–
(3)
38
(30)
5
8
1
–
(2)
50
–
10
8
–
3
(9)
(82)
(9)
(3)
8
2
–
(73)
(13)
14
23
2
1
(84)
(46)
Financial statementsSGS | 2021 Integrated Annual Report 147
Change in the defined benefit obligation is as follows:
(CHF million)
2021
CH
UK
USA
Other
Total
Opening present value of the defined benefit obligation
457
203
205
132
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
9
–
4
–
8
(15)
–
(13)
6
–
–
3
–
–
–
(10)
(1)
(9)
–
8
Defined benefit obligation at 31 December
456
194
2
5
–
–
–
(10)
1
(10)
(4)
8
197
6
1
–
(1)
–
(7)
(1)
(3)
34
(2)
159
997
17
9
4
(1)
8
(42)
(1)
(35)
36
13
1 005
(CHF million)
2020
CH
UK
USA
Other
Total
Opening present value of the defined benefit obligation
443
207
224
127
1 001
Current service cost
Interest cost
Plan participants’ contributions
Past service cost
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
Change in fair value of plan assets is as follows:
(CHF million)
2021
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
Net increase/(decrease) in assets from acquisitions
Exchange differences
9
1
5
–
(21)
–
6
14
–
457
1
4
–
(6)
(11)
(1)
21
1
(13)
203
1
6
1
(2)
(13)
(2)
14
(3)
(21)
205
9
1
–
–
(7)
1
(1)
3
(1)
132
20
12
6
(8)
(52)
(2)
40
15
(35)
997
CH
UK
USA
Other
Total
454
–
30
6
4
(15)
–
6
–
253
4
(1)
1
–
(10)
(1)
–
9
196
5
(4)
8
–
(10)
(1)
–
7
48
–
33
12
–
(7)
–
–
(1)
85
951
9
58
27
4
(42)
(2)
6
15
1 026
Fair value of plan assets at 31 December
485
255
201
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 148
(CHF million)
2020
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
CH
UK
USA
Other
Total
444
1
19
6
5
(21)
–
–
454
245
4
29
1
–
(11)
–
(15)
253
194
6
19
8
1
(13)
(1)
(18)
196
45
1
–
10
–
(7)
–
(1)
48
928
12
67
25
6
(52)
(1)
(34)
951
There are no reimbursement rights included in plan assets. The actual return on plan assets was a gain of CHF 67 million (2020: gain
of CHF 79 million).
The major categories of plan assets at the balance sheet date are as follows:
(CHF million)
2021
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)
2020
Cash and cash equivalents
Equity securities
Debt securities
Assets held by insurance company
Properties
Investment funds
Other
Total plan assets at 31 December
CH
UK
USA
Other
Total
26
176
56
3
175
46
3
485
19
36
200
–
–
–
–
1
25
175
–
–
–
–
18
–
1
66
–
–
–
64
237
432
69
175
46
3
255
201
85
1 026
CH
UK
USA
Other
Total
33
153
55
–
174
37
2
454
3
60
170
–
–
20
–
253
–
25
171
–
–
–
–
16
–
1
31
–
–
–
196
48
52
238
397
31
174
57
2
951
Financial statementsSGS | 2021 Integrated Annual Report 149
In 2021 and 2020, 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,
whilsttaking 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 2021 and 2020 are as follows:
(Weighted average %)
2021
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
(Weighted average %)
2020
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
CH
0.3
UK
1.9
LPP 2020 CMI
2019 1.25%
SNA03M104%/
F94% CMI 2020
1.25%
1.5
–
3.0
3.0
CH
0.1
2.6
3.2
–
–
UK
1.4
LPP 2015 CMI
2016 1.25%
SPA03M104%/
SPAF94% CMI
2019 1.25%
1.5
–
3.0
3.0
2.1
2.7
–
–
USA
Other
3.0
PRI 2012 MP
2021
3.3
–
7.0
4.5
2 030
1.6
–
2.7
0.5
–
–
USA
Other
2.6
PRI 2012 MP
2019
3.3
–
7.5
4.5
2 030
1.0
–
2.4
0.3
–
–
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 13 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 4 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 19 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 8 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 2021 was CHF 78 million (2020: CHF 61 million).
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 150
26. Provisions
(CHF million)
At 1 January 2021
Charge to income statement
Release to income statement
Payments
Exchange differences
At 31 December 2021
Analysed as:
Current liabilities
Non-current liabilities
Total
Legal and warranty
claims on services
rendered
Demobilization and
reorganization
Other provisions
38
15
(4)
(14)
3
38
80
17
(11)
(33)
(3)
50
55
9
–
(2)
–
62
2021
60
90
150
Total
173
41
(15)
(49)
–
150
2020
85
88
173
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.
Demobilization and reorganization provisions 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.
27. Trade and other payables
(CHF million)
Trade payables
Other payables
Total
2021
368
319
687
2020
322
336
658
Trade accounts and other payables principally comprise amounts outstanding for trade purchases and ongoing operating costs.
At 31 December 2021 and 2020, the fair value of the Group’s trade accounts and other payables approximates the carrying value.
28. 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
2021
553
205
758
2020
829
230
1 059
The Group has issued unconditional guarantees of CHF 553 million (2020: CHF 829 million), as well as performance bonds and bid bonds of
CHF 205 million (2020: CHF 230 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.
Financial statementsSGS | 2021 Integrated Annual Report 151
29. Equity compensation plans
Selected employees of the SGS Group are eligible to participate in equity compensation plans.
i) Grants to members of the Board of Directors
In 2021, a total of 18 restricted shares were granted to members of the Board of Directors, in settlement of part of their remuneration for
the mandate from the 2020 AGM to the 2021 AGM. The restricted shares are blocked for a period of three years from the grant date, until
January 2024. The value at grant date of the restricted shares granted, being defined as the closing price of the share on the date of the
publication of the annual results, was CHF 49 212.
ii) Grants to members of the Operations Council
In 2021, a total of 6,003 Performance Share Units (PSUs) under the Long-Term Incentive plan 2021-2023 were granted to members of the
Operations Council. The PSUs vest after a three-year performance period 2021-2023, in February 2024, subject to performance conditions
and to continuity of employment of the beneficiaries during the vesting period. The value at grant date of the PSUs granted, being defined as
the average closing price of the share during a 20-day period preceding the grant date, was CHF 16 216 204.
More information on the Long-Term Incentive plan for the members of the Operations Council is disclosed in the SGS Remuneration report.
In 2021, a total of 530 restricted shares were granted to members of the Operations Council, in settlement of 50% of the annual incentive
related to the 2020 performance. The restricted shares are blocked for a period of three years from the grant date, until April 2024. 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 2021 Annual General Meeting, was CHF 1 440 832.
50% of the annual incentive related to the 2021 performance will be settled in restricted shares. The grant of the restricted shares will be
done after the 2022 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 2022
Annual General Meeting, rounded up to the nearest integer. The restricted shares will be blocked for a period of three years from the grant
date, until April 2025.
More information on the Short-Term Incentive for the members of the Operations Council in disclosed in the SGS Remuneration report.
iii) Grants to other employees
In 2021, a total of 10 334 Performance Share Units (PSUs) under the Long-Term Incentive plan 2021-2023 were granted to selected senior
managers. The PSUs vest after a three-year performance period 2021-2023, in February 2024, subject to performance conditions and to
continuity of employment of the beneficiaries during the vesting period. The value at grant date of the PSUs granted, being defined as the
average closing price of the share during a 20-day period preceding the grant date, was CHF 27 915 751.
In 2021, a total of 1 935 Restricted Share Units (RSUs) were granted to selected key employees under the Restricted Share Units Plan 2021.
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 5 227 112.
Performance share unit (PSU) and restricted share unit (RSU) plans
Description
SGS-PSU-18
SGS-PSU-21
SGS-RSU-18
SGS-RSU-19
SGS-RSU-20
SGS-RSU-21
Total
Vesting
period
from
Feb.21
Feb.24
Apr.21
Apr.22
Apr.23
Apr.24
Units
Outstanding at
31 December
2020
Granted
Forfeited
Vested
Units
Outstanding at
31 December
2021
24 453
–
(4 348)
(20 105)
–
–
16 337
1 807
1 822
2 291
–
30 373
–
–
–
1 935
18 272
(345)
(26)
(144)
(143)
(70)
–
15 992
(1 781)
–
–
–
–
1 678
2 148
1 865
(5 076)
(21 886)
21 683
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 2021, the equity overhang, defined as the total number of unvested share units, (21 683 units) divided by the total
number of outstanding shares (7 495 032 shares) amounted to 0.29%.
The company’s burn rate, defined as the number of equities (shares, restricted shares and share units) granted in 2021 (18 820 units) divided
by the total number of outstanding shares, was 0.25%.
The Group recognized during the year a total expense of CHF 14 million (2020: CHF 17 million) in relation to equity compensation plans.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 152
Shares available (required) for future plans:
At 1 January 2020
Repurchased shares
Granted SGS-RSU-20-plan
Shares for PSU forfeited
Shares for RSU forfeited
Shares used for restricted shares plan as settlement of Short-Term Incentive
At 31 December 2020
Repurchased shares
Granted SGS-RSU-21 plan
Granted SGS-PSU-21 plan
Shares for PSU forfeited
Shares for RSU forfeited
Shares used for restricted shares plan as settlement of Short-Term Incentive
At 31 December 2021
At 31 December, the Group had the following shares available to satisfy various programs:
Number of shares held
Shares allocated for 2018 PSU plan
Shares allocated for 2018 RSU plan
Shares allocated for 2019 RSU plan
Shares allocated for 2020 RSU plan
Shares allocated for 2021 RSU plan
Shares allocated for 2021 PSU plan
Shares required for future equity compensation plans at 31 December
Total
(18 371)
15 834
(2 338)
1 483
390
(1 577)
(4 579)
–
(1 935)
(16 337)
4 693
383
(548)
(18 323)
2021 Total
2020 Total
3 360
–
–
(1 678)
(2 148)
(1 865)
(15 992)
(18 323)
25 794
(24 453)
(1 807)
(1 822)
(2 291)
–
(4 579)
30. 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 payments1
Total
2021
2020
17
1
20
38
14
1
2
17
1. 2021 represents the value at grant of restricted share units and performance share units granted in 2021 while 2020 represents the value at grant of restricted share units granted in 2020.
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 2021 and 2020, 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 29.
The total compensation, including social charges, received by the Board of Directors amounted to CHF 1 997 000 (2020: CHF 2 459 000).
The total compensation (cash and shares/options), including social charges, received by the Operations Council (including senior
management) amounted to CHF 36 228 000 (2020: CHF 14 855 000).
Financial statementsSGS | 2021 Integrated Annual Report 153
Loans to members of governing bodies
As at 31 December 2021, no loan, credit or outstanding advance was due to the Group from members or former members of its governing
bodies (unchanged from previous year).
Transactions with other related parties
In 2021 and in 2020, the Group did not perform any activity generating revenue for the other related parties.
During 2021 and 2020, neither related trade receivable balances unpaid nor expense in respect of any bad or doubtful debts due from these
related parties were recognized.
31. Significant shareholders
As at 31 December 2021, Groupe Bruxelles Lambert (acting through Serena SARL and URDAC) held 19.11% (December 2020: 18.91%) of
the share capital and voting rights of the Company. At the same date, the Group held 0.04% of the share capital of the Company (December
2020: 1.28%).
32. 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 21 February 2022, and will be submitted for approval on 29 March 2022 during the
Annual General Meeting. There are no subsequent events to be reported in these consolidated financial statements.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 154
Report of the statutory auditor
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 income statement and consolidated statement of comprehensive income for the year ended 31 December
2021, the consolidated statement of financial position as at 31 December 2021, the consolidated statement of cash flows
and consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial state-
ments, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements, presented on pages 113 to 153 and 175 to 177, give a true and
fair view of the consolidated financial position of the Group as at 31 December 2021 and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with the 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 responsibili-
ties 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
au-dit profession, as well as the International Code of Ethics for Professional Accountants (including International
Independ-ence Standards) of the International Ethics Standards Board for Accountants (IESBA Code), and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have ob-tained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
Overview
Overall Group materiality: CHF 46 million
We concluded full scope audit work at 22 reporting units and audits of specific
balances were performed on a further 18 reporting units. Our audit scope ad-
dressed over 69% of the Group's revenue.
As key audit matters the following areas of focus have been identified:
• Testing the Technical Consultancy USA CGU for impairment
• Unbilled revenue and work in progress (WIP)
• Taxation
Materiality
Audit scope
Key audit
matters
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Financial statementsSGS | 2021 Integrated Annual Report 155
Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable
assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due
to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influ-
ence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial
statements as a whole.
Overall Group materiality
CHF 46 million
Benchmark applied
Profit before tax
Rationale for the materiality bench-
mark applied
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured, and it is a generally accepted benchmark.
We agreed with the Audit Committee that we would report to them misstatements above CHF 2 million identified during
our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
Audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consoli-
dated financial statements as a whole, taking into account the structure of the Group, the accounting processes and
controls, and the industry in which the Group operates.
Due to the nature of its business and its organisation, the Group has a decentralised structure and operates in 112
countries in three main regions (Asia Pacific, Europe/Africa/Middle East and Americas). We instructed audit teams in
18 countries to perform a full scope audit and audit teams in another 10 countries to perform an audit of specific bal-
ances (principally revenue, accounts receivable, work in progress and unbilled revenue). These teams audit the re-
spective account balances as well as classes of transactions and report to us on their audit results in response to the
audit instructions we sent to them.
As Group auditor, we ensure the quality of the audit teams' work by means of planning presentations with all teams,
conducting a detailed review of their audit plans and final memorandums as well as holding closing calls with teams
auditing all significant entities. In addition, procedures performed by us at Group level include analytical procedures on
entities not covered by Group reporting requirements to ensure that material risks are identified and addressed. We
also assess the appropriateness of Group accounting policies and the accounting for material or unusual transactions
that is prepared centrally, and audit the consolidation. The latter includes, in particular, the central consolidation adjust-
ments, the treatment of share-based compensation, tax balances, equity and intercompany eliminations as well as
business combination accounting. Finally, we assess the compliance of the consolidated financial statements with
IFRS and Swiss law.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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.
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 156
Testing the Technical Consultancy USA CGU for impairment
Key audit matter
How our audit addressed the key audit matter
The Group’s share of goodwill allocated to the Technical
Consultancy USA CGU (cash generating unit) amounts to
CHF 82 million as at 31 December 2021.
We identified the valuation and recoverability of goodwill
and other intangible assets allocated to the Technical
Consultancy USA CGU as a key audit matter because the
results of this CGU’s operations declined significantly
from 2019 to 2020 and a rebound in sales growth had
been anticipated for 2021.
The discounted cash flow model is based on the value-
in-use methodology and on a five-year plan.
The assessment of the recoverability of the Technical
Consultancy USA CGU's goodwill balance is dependent
on the estimation of future cash flows.
Management’s judgement is required to determine the as-
sumptions relating to the future business results, the long-
term growth rate after the forecast period and the dis-
count rate applied to the forecasted cash flows.
Refer to the corresponding accounting policy in note 2 –
Significant accounting policies and exchange rates and
note 14 – Goodwill in the notes to the consolidated finan-
cial statements.
We obtained the Group’s impairment test for the Tech-
nical Consultancy USA CGU and, in particular:
• We assessed the appropriateness of the impairment
testing methodology;
• We reconciled the five-year cash flow projections to the
budget and long-term plan that have been approved by
management;
• We challenged management to substantiate the key as-
sumptions used in the cash flow projections of the Tech-
nical Consultancy USA CGU's business during the fore-
casted period;
• We obtained comfort over the appropriateness of cash
flow assumptions by performing substantive detail test-
ing on a sample of the 2021 backlog and on the 2022
opportunity pipeline;
• We tested, with the support of PwC's valuation experts,
the reasonableness of the long-term growth rate after
the forecast period and the discount rate;
• We tested the mathematical accuracy of the model;
• We assessed the quality of the cash flow projections by
comparing the actual results of the CGU to the prior
year's budget to identify in retrospect whether any of the
assumptions might have been too optimistic;
• We evaluated the Group’s sensitivity analysis of key as-
sumptions to ascertain the effect of changes in those
assumptions on the value-in-use;
• We assessed the adequacy of the disclosures included
in note 14 related to goodwill.
On the basis of the procedures performed, we conclude
that management’s impairment test of the Technical Con-
sultancy USA CGU was acceptable.
Unbilled revenue and work in progress (WIP)
Key audit matter
How our audit addressed the key audit matter
The amounts on the balance sheet related to unbilled rev-
enue and work in progress total CHF 175 million.
Unbilled revenue is recognised for services completed but
not yet invoiced and is measured at the net selling price.
WIP is recognised for partially completed performance
obligations under a contract. The measure of progress is
based on observable output or input methods. A propor-
tion of the expected margin on completion is recognised
based on the actual costs incurred in proportion to total
expected costs, provided that the project is expected to
be profitable once completed.
We reviewed SGS's revenue recognition policy and ob-
tained an understanding of how unbilled revenue and
WIP are accounted for. Our audit approach consisted of
the following procedures, in particular:
• We assessed the design and implementation of the key
controls relating to the monitoring of unbilled revenue
and WIP balances.
• We selected samples of unbilled revenue and WIP bal-
ances and traced them to underlying contracts and in-
voices with customers.
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsSGS | 2021 Integrated Annual Report 157
The assessment of the degree of progress and the esti-
mated margin requires judgement by management.
Given the significance and relevance of their impact on
the consolidated financial statements and because the
progress and the expected margin on completion must be
estimated at the end of each reporting period, we deemed
the measurement of unbilled revenue and work in pro-
gress to be a key audit matter.
Refer to the corresponding accounting policy in note 2 –
Significant accounting policies and exchange rates and to
note 5 – Revenues from contracts with customers in the
notes to the consolidated financial statements.
Taxation
Key audit matter
The Group is subject to taxation in many jurisdictions and
management makes judgements about the incidence and
magnitude of tax liabilities that are subject to the future
outcome of assessments by the relevant tax authorities.
Accordingly, the calculation of tax expense and the re-
lated liability are subject to inherent uncertainty.
To make these judgements, the Group has a structured
process whereby management systematically monitors
and assesses the existence, development and settlement
of tax risks in each of its jurisdictions.
The Group’s main tax risks are i) that the tax authorities
might not accept the transfer prices applied and ii) poten-
tial adverse results of ongoing tax audits.
In accordance with its methodology, provisions for uncer-
tain tax positions are calculated and included within cur-
rent tax liabilities (CHF 169 million as at 31 December
2021).
Refer to the corresponding accounting policy in note 2 –
Significant accounting policies and exchange rates and to
note 10 – Taxes in the notes to the consolidated financial
statements.
• We obtained comfort over the degree of progress from
discussions with project managers and performed rec-
onciliations to actual numbers recognised in the finan-
cial statements in selected cases.
• We selected samples of unbilled revenue and WIP bal-
ances recorded at the previous period-end and com-
pared them to subsequent invoices and cash received
from clients in order to evaluate the reliability of man-
agement's estimation process.
• We analysed the aging of the open balances and as-
sessed the appropriateness of provisions recognised in
accordance with the Group’s provision grid.
• For entities with significant unbilled or WIP balances not
subject to our Group audit, we performed central audit
procedures.
On the basis of the procedures performed, we consider
management’s estimates and disclosures regarding un-
billed revenue and work in progress balances to be rea-
sonable.
How our audit addressed the key audit matter
Our audit approach consisted of the following procedures,
in particular:
• We assessed the existence of tax exposures by means
of inquiry with local and Group management.
• We discussed management’s process to assess the risk
of tax liabilities in the different jurisdictions as a result of
potential challenges to the tax positions, and tested the
measurement and timing of recognition of the provision
when applicable.
• With the support of PwC's internal tax experts, we ex-
amined the documentation outlining the matters in dis-
pute or at risk and the benchmarks relied upon for trans-
fer pricing, and used our knowledge of the tax laws and
other similar taxation matters to assess the available ev-
idence, management’s judgemental processes and the
provisions.
On the basis of the procedures performed, we conclude
that management’s tax estimates were reasonable.
Other matter
The consolidated financial statements of SGS SA for the year ended 31 December 2020 were audited by another firm of
auditors whose report, dated 23 February 2021, expressed an unmodified opinion on those statements.
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 158
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, the remuneration report of SGS SA 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.
Responsibilities 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 mis-
statement, 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, 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.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise professional judg-
ment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrep-
resentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri-
ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal
control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made.
• Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast sig-
nificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial state-
ments or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsSGS | 2021 Integrated Annual Report 159
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclo-
sures, and whether the consolidated financial statements represent the underlying transactions and events in a man-
ner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safe-
guards applied.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and 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.
PricewaterhouseCoopers SA
Guillaume Nayet
Audit expert
Auditor in charge
Geneva, 21 February 2022
Louise Rolland
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 160
2. SGS SA
2.1. Income Statement
For the years ended 31 December
(CHF million)
Operating income
Dividends from subsidiaries
Total operating income
Operating expenses
Other operating & administrative expenses
Other operating 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
Extraordinary (costs)/Income
Profit before taxes
Taxes
Withholding taxes
Profit for the year
Notes
7
7
2021
734
734
(6)
–
(6)
728
46
1
47
(41)
(1)
(42)
5
(8)
725
(1)
(10)
714
2020
592
592
(5)
–
(5)
587
39
–
39
(48)
(1)
(49)
(10)
–
577
–
(10)
567
Financial statementsSGS | 2021 Integrated Annual Report 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
Loans to subsidiaries
Long term assets
Investments in subsidiaries
Total non current assets
Total assets
Shareholder’s equity and liabilities
Short term liabilities
Bank overdraft
Amounts due to subsidiaries
Bank short term loans
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 – third party
Long term liabilities – subsidiaries
Corporate bonds
Total long term liabilities/non current liabilities
Shareholder’s equity
Share capital
Statutory capital reserve
Statutory retained earnings
Own shares for share buyback
Reserve for own shares held by a subsidiary
Total shareholder’s equity
Total shareholder’s equity and liabilities
161
Notes
2021
2020
324
7
691
4
1 026
1 279
3
1 981
3 263
4 289
9
209
–
250
44
1
513
2
772
2 075
2 849
7
34
878
–
8
927
4 289
540
7
534
2
1 083
1 475
2
1 980
3 457
4 540
9
232
542
275
52
1
1 111
1
290
2 325
2 616
8
34
878
(169)
62
813
4 540
2
3
4
4
5 to 6
5 to 6
5 to 6
5 to 6
5 to 6
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 162
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 less than 10 people for this company (2020: less than 10).
1. Significant accounting policies
The financial statements are prepared in accordance with the accounting principles required by the provisions of commercial accounting
as set out in the Swiss Code of Obligations.
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 into Swiss francs at year end exchange rates with the exception
of investments in subsidiaries which are valued at the historical exchange rate.
Foreign currency transactions are translated using the actual exchange rates prevailing during the year. Foreign exchange gains and losses
resulting from the settlement of such transaction and from the translation at year end exchange rates of assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Unrealized gains and losses arising on foreign exchange transactions are included in the determination of the net profit, except long-term
unrealized 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 recognized in income in the year in which they are received, on a cash basis. Dividends are recorded in the currency
defined for each affiliate and converted at spot rate in the income statement.
Bonds
Bonds are recorded at nominal value.
2. Subsidiaries
The list of principal Group subsidiaries appears in the annual report on pages 175 to 177.
In 2020, SGS SA acquired 80% of the capital of Ryobi Geotechnique Pte Ltd in Singapore. The share purchase agreement includes an option
to acquire the remaining 20% of Ryobi Geotechnique Pte Ltd in 2025.
3. Bank short term loans
In 2021, the loan with Credit Suisse First Boston has been reimbursed.
In 2020, a loan of EUR 500 Mio has been subscribed with Credit Suisse First Boston with a maturity 31.03.2021.
4. Corporate bonds
SGS SA made the following bond issuances:
Date of issue
27.02.2014
25.04.2014
Short term bonds
27.02.2014
08.05.2015
08.05.2015
03.03.2017
29.10.2018
29.10.2018
06.05.2020
06.05.2020
Face value in
CHF million
Coupon in %
Year of
Maturity
138
112
250
250
325
225
375
225
175
175
325
1.375
1.375
1.750
0.250
0.875
0.550
0.750
1.250
0.450
0.950
2022
2022
2024
2023
2030
2026
2025
2028
2023
2026
Issue
price in %
100.517
101.533
101.019
100.079
100.245
100.153
100.068
101.157
100.117
100.182
Redemption
price in %
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
Long term bonds
2 075
As at 31 December 2021, two bonds in the above table are classified as short-term liabilities as the due date is less than a year.
On 6 May 2020, SGS SA issued two bonds, one CHF 175 million with a 0.450% coupon and one CHF 325 million with a 0.950% coupon.
The Company has listed all bonds on the SIX Swiss Exchange.
Financial statementsSGS | 2021 Integrated Annual Report 163
Total
1 013
(598)
–
(169)
567
813
(599)
–
–
(1)
714
927
Reserve for
own shares
held by a
subsidiary
Own shares
for share
buyback
Statutory
Retained
earnings
–
–
–
(169)
–
(169)
–
–
169
–
–
–
940
(598)
(31)
(0)
567
878
(599)
54
(169)
–
714
878
5. Total equity
(CHF million)
Balance at 1 January 2020
Dividends paid
Transfer to the reserve for own shares
Share buyback program
Profit for the year
Balance at 31 December 2020
Dividends paid
Decrease in the reserve for own shares
Cancellation of treasury shares
Treasury shares cancelled
Profit for the year
Balance at 31 December 2021
6. Share capital
Balance at 1 January 2020
Own shares released into circulation
Own shares purchased for future equity
compensation plans
Treasury shares purchased for cancellation
Balance at 31 December 2020
Own shares released into circulation
Capital reduction by cancelation of own shares
Balance at 31 December 2021
Share
capital
8
–
–
–
–
8
–
–
–
(1)
–
7
Statutory
capital
reserve
34
–
–
–
–
34
–
–
–
–
–
34
Shares In
circulation
7 552 390
3 382
(15 834)
(70 700)
7 469 238
22 434
7 491 672
31
–
31
–
–
62
–
(54)
–
–
–
8
Own
shares
13 342
(3 382)
15 834
70 700
96 494
(22 434)
(70 700)
3 360
Total shares
issued
Total share capital
CHF (million)
7 565 732
8
–
–
–
7 565 732
–
(70 700)
7 495 032
8
(1)
7
Issued Share Capital
SGS SA has a share capital of CHF 7 495 032 (2020: CHF 7 565 732) fully paid-in and divided into 7 495 032 (2020: 7 565 732) registered
shares of a par value of CHF 1. In 2021, SGS SA proceeded to a capital reduction of 70 700 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 2021, SGS SA held 3 360 of its own shares through an affiliate company.
In 2021, no shares have been repurchased whilst 22 434 shares were released into circulation following vesting of equity compensation
plans. In 2021, SGS SA proceeded to the cancelation of 70 700 of its own shares directly held by SGS SA, while the shares to cover the
equity compensation plans are held by a subsidiary company.
On 31 December 2020, SGS SA held 96 494 of its own shares, thereof 70 700 directly and 25 794 through an affiliate company.
On 17 February 2020, SGS SA announced a CHF 200 million share buyback program for the purpose of capital reduction. The program
ended on 17 December 2020 and 70,700 shares were repurchased for a total amount of CHF 169 million at an average purchase price
of CHF 2 394 per share.
Further, in 2020 15 834 shares have been repurchased through an affiliate company for covering future equity compensation plans,
whilst 3 382 shares were released into circulation.
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 164
7. Financial income and financial expenses
(CHF million)
Financial income
Interest income Group
Exchange gain net
Financial income
Financial expenses
Interest expenses 3rd party
Interest expenses Group
Other financial expenses
Liquidation of subsidiaries
Financial expenses
8. Guarantees and comfort letters
(CHF million)
Guarantees
Performance bonds
Total
2021
2020
46
1
47
(24)
(8)
(9)
(1)
(42)
39
–
39
(28)
(6)
(14)
(1)
(49)
2021 issued
2021 utilised
2020 issued
2020 utilised
2 759
71
2 830
1 117
53
1 170
2 055
53
2 108
341
35
376
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.
9. Remuneration
9.1. Remuneration policy and principles
This section appears in the SGS Remuneration report paragraph 2 in the annual report on pages 91 to 93.
9.2. Remuneration model
This section appears in the SGS Remuneration report paragraph 3 in the annual report on pages 93 to 101.
9.3. Remuneration awarded to the Board of Directors
This section appears in the SGS Remuneration report paragraph 4 in the annual report on pages 101 to 103.
9.4. Remuneration awarded to the Operations Council members
This section appears in the SGS Remuneration report paragraph 5 in the annual report on pages 103 to 107.
Financial statementsSGS | 2021 Integrated Annual Report 10. Shares and options held by members of governing bodies
10.1. Shares and options held by Members of the Board of Directors
The following table shows the shares held by Members of the Board of Directors as at 31 December 2021:
Name
C.Grieder
S.R. du Pasquier
P. Desmarais
K. Sorenson
I. Galienne
S. Atiya
T. Hartmann
J. Vergis
The following table shows the shares held by Members of the Board of Directors as at 31 December 2020:
Name
C.Grieder
A. F. von Finck
C. Grupp
S.R. du Pasquier
P. Desmarais
K. Sorenson
I. Galienne
G. Lamarche
S. Atiya
T. Hartmann
10.2. Shares and options held by senior management
The following table shows the shares and restricted shares held by senior management as at 31 December 2021:
Name
F. NG
Corporate responsibility
Chief Executive Officer
D. de Daniel
Chief Financial Officer
O. Merkt
General Counsel and Chief Compliance Officer
Restricted shares
528
238
124
The following table shows the shares and restricted shares held by senior management as at 31 December 2020:
Name
F. NG
Corporate responsibility
Chief Executive Officer
D. de Daniel
Chief Financial Officer
O. Merkt
General Counsel and Chief Compliance Officer
Details of the various plans are explained in the SGS Remuneration report.
Restricted shares
599
163
136
165
Shares
90
28
37
36
1
92
–
–
Shares
90
1 000
1
10
37
36
1
25
92
–
Shares
3 385
1 165
250
Shares
2 125
1 165
200
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 166
11. Significant shareholders
To the knowledge of the Company the shareholders owning more than 5% of its share capital as at 31 December 2021, or as the date of their
last notification as per Article 20 of the Swiss Stock Exchange Act (SESTA) were Groupe Bruxelles Lambert (acting through Serena SARL and
URDAC) with 19.11% (December 2020: 18.91%) of the share capital and voting rights of the company.
As at 31 December 2021, the SGS Group held 0.04% of the share capital of the Company (2020: 1.28%).
Proposal of the Board of Directors for the appropriation of available retained earnings
(CHF)
Profit for the year
Balance brought forward from previous year
2021
2020
714 760 947
566 859 163
110 997 119
335 400 834
Dividend not paid on own shares bought in 2020 prior the Annual General Meeting in March 2020
–
6 202 320
Dividend paid on own shares released into circulation in 2021 prior the Annual General Meeting
in March 2021
Capital reduction by cancellation of shares
Share buyback program
(Transfer to)/Reversal from the reserve for own shares
Total retained earnings available for appropriation
Proposal of the Board of Directors:
Dividends¹
Balance carried forward
Ordinary gross dividend per registered share
1. No dividend is paid on own shares held directly or indirectly by SGS SA.
(1 688 800)
70 700
–
–
–
(169 299 740)
53 734 814
(30 626 419)
877 874 780
708 536 159
(599 333 760)
(597 539 040)
278 541 020
110 997 119
80.00
80.00
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 21 February 2022, and will be submitted for approval by the Annual General Meeting
to be held on 29 March 2022.
Financial statementsSGS | 2021 Integrated Annual Report 167
Report of the statutory auditor
to the General Meeting of SGS SA
Geneva
Report on the audit of the financial statements
Opinion
We have audited the financial statements of SGS SA (the Company), which comprise the income statement for the year
ended 31 December 2021, the statement of financial position as at 31 December 2021 and related notes for the year
then ended, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements as at 31 December 2021, presented on pages 160 to 166, 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.
Our audit approach
Overview
Overall materiality: CHF 42 million
Materiality
We tailored the scope of our audit in order to perform sufficient work to enable
us to provide an opinion on the financial statements as a whole, taking into ac-
count the structure of the entity, the accounting processes and controls, and
the industry in which the entity operates.
As key audit matter, the following area of focus has been identified:
Audit scope
Valuation of investments in and loans to subsidiaries
Key audit
matters
Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable
assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland
Téléphone : +41 58 792 91 00, Téléfax : +41 58 792 91 10, www.pwc.ch
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Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 168
error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
materiality for the financial statements as a whole as set out in the table below. These, together with qualitative consider-
ations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole.
Overall materiality
CHF 42 million
Benchmark applied
Total assets
Rationale for the materiality bench-
mark applied
We chose total assets as the benchmark, because, in our view, it is the
benchmark against which the performance of the Company, which has limited
operating activities and which mainly holds investments in subsidiaries and
intra-group loans, is most commonly measured, and it is a generally accepted
benchmark for holding companies.
We agreed with the Audit Committee that we would report to them misstatements above CHF 2 million identified during
our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
Audit scope
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial state-
ments. In particular we considered where subjective judgements were made; for example, in respect of significant ac-
counting estimates that involved making assumptions and considering future events that are inherently uncertain. As in
all of our audits, we also addressed the risk of management override of internal controls, including among other matters
consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
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 judgement, were of most significance in our audit of the fi-
nancial statements of the current period. These matters were addressed in the context of our audit of the financial state-
ments as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of investments in and loans to subsidiaries
Key audit matter
How our audit addressed the key audit matter
As at 31 December 2021, SGS SA's investments in and
loans to subsidiaries amount to CHF 1,981 million and
CHF 1,279 million, respectively. Given the significance of
these amounts in the financial statements and because of
the judgement used by management in determining their
value, we consider the valuation of investments in and
loans to subsidiaries a key audit matter.
The Company measures individually the investment in
each subsidiary and any related loans to that subsidiary.
The Company conducts an annual risk assessment based
on several impairment indicators to identify investments
and loans with an impairment risk.
For those investments in and loans to subsidiaries with a
higher identified risk of impairment, the recoverable amount
is determined based on a five-year discounted cashflow
forecast. The main judgements applied by management
relate to revenue and margin growth throughout the period
We obtained the Company’s work on the valuation of
investments in and loans to subsidiaries, and we performed
the following procedures in particular:
• We obtained an understanding of management's pro-
cess and controls relating to the valuation of invest-
ments in and loans to subsidiaries.
• We tested the mathematical accuracy of the calculations
and reconciled the balances to the financial statements.
• We challenged the appropriateness of management’s
process to identify impairment indicators by comparing
the triggers used to common indicators such as histori-
cal profitability and capacity to pay dividends.
• We also performed testing by calculating revenue and
operating profit multipliers based on the market capitali-
sation of the Group and comparing those to the respec-
tive multiples of the individual investments in subsidiaries.
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsSGS | 2021 Integrated Annual Report 169
of the five-year plan, the long-term growth rate beyond the
detailed forecast period and the discount rate.
An impairment is recognised if the recoverable amount of
an individual investment or loan receivable is lower than
the associated carrying value.
Refer to note 1 - Accounting policies
For those investments in and loans to subsidiaries with a
higher identified risk of impairment, we critically assessed
the reasonableness of the underlying key assumptions and
judgements applied by performing the following procedures
in particular:
• We assessed the quality of the five-year cashflow fore-
cast projections by comparing forecasted revenue and
margin growth to historical and market trends as well as
by holding discussions with local management to as-
sess their intention and ability to execute the strategic
initiatives.
• We evaluated, with the support of PwC's valuation spe-
cialists, the reasonableness of the discount rate and
long-term growth rate applied to those future cash flows.
We consider management's approach as an acceptable
and reasonable basis for the valuation of the investments
in and loans to subsidiaries.
Other matter
The financial statements of SGS SA for the year ended 31 December 2020 were audited by another firm of auditors
whose report, dated 23 February 2021, expressed an unmodified opinion on those statements.
Responsibilities 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.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control.
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsShareholder informationRemuneration reportCorporate governanceManagement reportSGS | 2021 Integrated Annual Report 170
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made.
• Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going
concern.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and 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.
PricewaterhouseCoopers SA
Guillaume Nayet
Audit expert
Auditor in charge
Geneva, 21 February 2022
Mario Berckmoes
Audit expert
SGS SA | Report of the statutory auditor to the General Meeting
Financial statementsSGS | 2021 Integrated Annual Report 171
3. Historical Data
3.1. SGS Group – Five-Year Statistical Data Consolidated Income Statements
For the years 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
Share of profit of associates and joint ventures
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
2021
6 405
(3 180)
(385)
(499)
–
2020
5 604
(2 797)
(352)
(517)
63
(1 364)
(1 206)
977
16
(69)
–
924
(269)
655
613
42
15.3
795
12
(66)
1
742
(237)
505
480
25
14.2
2019
6 600
(3 357)
(386)
(548)
268
(1 495)
1 082
18
(79)
(4)
1 017
(315)
702
660
42
16.4
2018
6 706
(3 422)
(387)
(317)
–
2017
6 349
(3 193)
(394)
(338)
–
(1 634)
(1 530)
946
20
(58)
–
908
(218)
690
643
47
14.1
894
14
(57)
–
851
(187)
664
621
43
14.1
93 297
89 098
94 494
96 492
93 556
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report
172
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
Trade and other payables
Contract liabilities
Current tax liabilities
Loans and other financial liabilities
Lease liabilities
Provisions
Other creditors and accruals
Total current liabilities
Total liabilities
Total equity and liabilities
2021
925
605
2020
872
590
2019
926
611
2018
969
–
1 778
1 651
1 281
1 224
382
26
164
173
333
34
161
154
187
35
174
149
202
36
203
133
4 053
3 795
3 363
2 767
59
175
928
204
108
–
1 480
2 954
7 007
7
1 118
(8)
1 117
85
1 202
2 889
481
92
84
90
57
160
856
188
77
9
1 766
3 113
6 908
8
1 282
(230)
1 060
74
1 134
2 390
470
53
136
88
45
195
953
219
77
9
1 466
2 964
6 327
8
1 536
(30)
1 514
81
1 595
2 199
490
23
151
91
46
226
969
214
94
9
1 743
3 301
6 068
8
1 851
(191)
1 668
75
1 743
2 110
2
30
119
89
2017
1 002
–
1 238
222
36
168
137
2 803
46
293
1 068
236
104
10
1 383
3 140
5 943
8
2 036
(125)
1 919
86
2 005
2 095
1
45
143
73
3 636
3 137
2 954
2 350
2 357
687
221
169
282
155
60
595
2 169
5 805
7 007
658
189
140
863
151
85
551
2 637
5 774
6 908
638
155
145
38
154
74
574
1 778
4 732
6 327
685
112
127
412
–
21
618
1 975
4 325
6 068
647
97
151
45
–
35
606
1 581
3 938
5 943
Financial statementsSGS | 2021 Integrated Annual Report 173
3.3. SGS Group – Five-Year Statistical Share Data
(CHF unless indicated Otherwise)
2021
2020
2019
2018
2017
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
7 495 032
7 491 672
7 565 732
7 469 238
7 565 732
7 552 390
7 633 732
7 550 707
7 633 732
7 551 408
3 059
2 595
3 047
1
2 843
1 974
2 670
1
2 689
2 213
2 651
1
2 683
2 170
2 210
1
2 541
2 051
2 541
1
149.20
141.91
200.37
220.86
254.16
81.91
80.00
80.00
64.05
80.00
80.00
87.45
80.00
80.00
84.54
78.00
78.00
82.41
75.00
75.00
599
599
598
598
604
604
589
589
566
566
1. Calculation of the basic earnings per share (weighted average for the year) is disclosed in note 11 of SGS Group Results.
2. As proposed by the Board of Directors.
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 2021 market capitalization was approximately CHF 22 837 million (2020:CHF 20 201 million). Shares are quoted on the
SIX Swiss Exchange.
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 174
3.5. Closing Prices for SGS & the SMI 2020-2021
SGS SA
3 200
3 100
3 000
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
J
F M A M J
J
A
S
O
N
D
J
2020
F M A M J
J
2021
A
S
O
N
D
High price
Closing
Low price
Swiss market index (monthly close)
SMI
14 000
13 500
13 000
12 500
12 000
11 500
11 000
10 500
10 000
9 500
9 000
8 500
8 000
7 500
7 000
6 500
6 000
Financial statementsSGS | 2021 Integrated Annual Report 175
4. Material Operating Companies and Ultimate Parent
The disclosure of legal entities is limited to entities whose contribution to the Group revenues in 2021 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
Albania
Algeria
Angola
Argentina
Australia
Austria
Azerbaijan
Bangladesh
Belarus
Belgium
Botswana
Brazil
Name and domicile
SGS Albania, Tirana
SGS Qualitest Algérie SpA, Alger
SGS Serviços Angola SA, Luanda
SGS Argentina SA, Buenos Aires
SGS Australia Pty. Ltd., Bentley
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
SGS Botswana (Proprietary) Limited, Gaborone
SGS Industrial – Instalaçaões, Testes e
Comissionamentos Ltda Sao Paulo
Bulgaria
SGS Bulgaria Ltd., Sofia
Burkina Faso
SGS Burkina SA, Ouagadougou
Cambodia
Cameroon
Canada
Central African
Republic
Chile
China
China
Colombia
Congo
Croatia
SGS (Cambodia) Ltd., Phnom Penh
SGS Cameroun SA, Douala
SGS Canada Inc., Mississauga
SGS CentrAfrique SA, Bangui
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 Analytics Denmark A/S, Nørresundby
Democratic Republic
of Congo
SGS Minerals RDC SARL, Lubumbashi
Ecuador
Egypt
Estonia
Ethiopia
Finland
France
Georgia
Germany
Germany
Ghana
Consorcio SGS – Revisiones Técnicas
SGS Egypt Ltd., Cairo
SGS Estonia Ltd., Tallinn
SGS Ethiopia Private Limited
SGS Fimko Oy, Helsingfors
SGS France SAS, Arcueil
SGS Georgia Ltd., Batumi
SGS Germany GmbH, Hamburg
SGS Institut Fresenius GmbH, Taunusstein
SGS Lab Ghana, 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 Guinée Conakry SA, Conakry
Issued
capital
currency
ALL
Issued capital
amount
15 100 000
% held by
Group
100
Direct/
indirect
D
DZD
USD
ARS
AUD
EUR
USD
BDT
USD
EUR
BWP
BRL
BGN
XOF
KHR
XAF
CAD
XAF
CLP
USD
CNY
COP
XAF
HRK
CZK
DKK
USD
USD
EGP
EUR
ETB
EUR
EUR
USD
EUR
EUR
GHS
GBP
EUR
USD
GTQ
GNF
50 000 000
30 000
230 603 536
200 000
185 000
100 000
10 000 000
20 000
35 995 380
1 000
91 266 840
5 010 000
601 080 000
4 000 000 000
10 000 000
20 900 000
10 000 000
29 725 583 703
3 966 667
180 000 000
135 546 166 036
1 510 000 000
1 300 000
7 707 000
1 000
50 000
25 000
1 500 000
42 174
15 000
260 000
3 172 613
80 000
1 210 000
7 490 000
12 500 000
8 000 000
301 731
25 000
4 250 000
50 000 000
100
49
100
100
100
100
100
100
100
100
100
100
100
100
98.9
100
100
100
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
D
I
D
I
D
D
D
D
D
D
D
D
D
D
D
D
D
I
I
I
D
D
I
I
I
D
I
D
I
D
I
I
D
I
I
D
I
D
D
D
D
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 176
Country
Equatorial Guinea
Name and domicile
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 Limited
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
Kazakhstan
SGS Kazakhstan Limited, Almaty
Kenya
SGS Kenya Limited, Mombasa
Korea (Republic of)
SGS Korea Co., Ltd., Seoul
Kuwait
Kyrgyzstan
SGS Kuwait W.L.L
SGS Bishkek LLC, Bishkek
Lao (People’s
Democratic Republic)
SGS (Lao) Sole Co., Ltd., Vientiane
Latvia
Lebanon
Liberia
Lithuania
Luxembourg
Madagascar
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
SGS Luxembourg, Windhof
Malagasy Community Network Services SA,
Antananarivo
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
Netherlands
New Zealand
Nigeria
Norway
Oman
Pakistan
Panama
SGS (Myanmar) Limited, Yangon
SGS Nederland B.V., Spijkenisse
SGS New Zealand Limited, Auckland-Onehunga
SGS Inspection Services Nigeria Limited, Lagos
SGS Analytics Norway AS, Hamar
SGS Minerals (FZC) LLC, Sohar
SGS Pakistan (Private) Limited, Karachi
Laboratorios Contecon Urbar Panama SA, Panama
Papua New Guinea
SGS PNG Pty. Limited, Port Moresby
Paraguay
Peru
Philippines
Poland
SGS Paraguay SA, Asunción
SGS del Perú S.A.C., Lima
SGS Philippines, Inc., Manila
SGS Polska Sp.z o.o., Warsaw
Issued
capital
currency
XAF
Issued capital
amount
10 000 000
% held by
Group
51
Direct/
indirect
D
HKD
HUF
INR
USD
IRR
EUR
EUR
XOF
JPY
JOD
KZT
KES
KRW
KWD
KGS
LAK
EUR
LBP
LRD
EUR
EUR
MGA
MYR
XOF
MUR
MXN
MDL
MNT
MAD
MZN
MMK
EUR
NZD
NGN
NOK
OMR
PKR
USD
PGK
PYG
PEN
PHP
PLN
200 000
518 000 000
960 000
350 000
100
100
100
100
50 000 000
99.99
5 000
2 500 000
200 000 000
100 000 000
100 000
228 146 527
2 000 000
15 617 540 000
50 000
3 463 000
2 444 700 000
100
100
95
100
50
100
100
100
49
100
100
118 382
30 000 000
100
99.97
100
711 576
38 000
10 000 000
750 000
300 000 000
100 000
281 068 828
488 050
1 787 846 388
17 982 000
343 716 458
300 000
250 000
10 022 190
200 000
50 000
500 000
2 300 000
760 000
2
1 962 000 000
43 081 182
24 620 000
27 167 800
100
100
100
70
100
100
100
100
100
55
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
D
I
D
D
D
I
D
D
D
D
D
D
D
D
D
D
I
D
D
I
I
D
D
D
D
D
D
I
D
I
D
I
D
D
I
D
D
I
I
D
D
D
D
Financial statementsSGS | 2021 Integrated Annual Report Country
Portugal
Qatar
Romania
Russia
Name and domicile
SGS Portugal – Sociedade Geral de Superintendência
SA, Lisboa
SGS Qatar WLL, Doha
SGS Romania SA, Bucharest
AO SGS Vostok Limited, Moscow
Saudi Arabia
SGS Inspection Services Saudi Arabia Ltd., Jeddah
Senegal
Serbia
Sierra Leone
Singapore
Slovakia
Slovenia
SGS Sénégal SA, Dakar
SGS Beograd d.o.o., Beograd
SGS (SL) Ltd., Freetown
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
South Africa
SGS South Africa (Proprietary) Limited, Johannesburg
Spain
Sri Lanka
Sweden
Switzerland
Switzerland
Taiwan
Tanzania
Thailand
Togo
SGS Tecnos, SA, Sociedad Unipersonal, Madrid
SGS Lanka (Private) Limited, Colombo
SGS Analytics Sweden AB, Linköping
SGS Société de Surveillance SA, Geneva
SGS SA, Geneva
SGS Taiwan Limited, Taipei
African Assay Laboratories (Tanzania) Ltd, Dar Es Salaam
SGS (Thailand) Limited, Bangkok
SGS Togo SA, Lomé
Trinidad and Tobago
SGS Trinidad Ltd, San Fernando
Tunisia
Turkey
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., Wilmington
Uruguay
Uzbekistan
Vietnam
Zambia
SGS Uruguay Limitada, Montevideo
SGS Tashkent Ltd., Tashkent
SGS Vietnam Ltd., Ho Chi Minh City
SGS Inspections Services Ltd., Lusaka
177
Issued
capital
currency
EUR
Issued capital
amount
500 000
% held by
Group
100
Direct/
indirect
I
QAR
RON
RUB
SAR
XAF
EUR
SLL
SGD
EUR
EUR
ZAR
EUR
LKR
SEK
CHF
CHF
TWD
TZS
THB
XOF
USD
TND
TRY
USD
UGX
USD
–
USD
UYU
USD
USD
ZMK
200 000
100 002
18 000 000
1 000 000
35 000 000
66 161
200 000 000
15 100 000
19 917
10 432
452 000 500
92 072 034
9 000 000
4 073 000
100 000
7 495 032
62 000 000
2 000
20 000 000
10 000 000
1 000
50 000
6 550 000
50 000
5 000 000
400 000
–
73 701 996
1 500
50 000
288 000
16 944 000
49
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
99.99
100
100
50
100
100
100
100
–
100
100
100
100
100
D
I
D
D
D
I
D
D
I
I
I
I
D
I
D
Ultimate
parent
company
I
I
D
D
D
D
I
D
D
D
–
I
D
D
D
I
SGS | 2021 Integrated Annual ReportFinancial statementsShareholder informationRemuneration reportCorporate governanceManagement report 178
Shareholder
information
Shareholder information
SGS SA Corporate office
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
Reuters: Registered Share: SGSN.VX
Telekurs: Registered Share: SGSN
ISIN: Registered Share: CH0002497458
Swiss security number: 249745
Investor relations, corporate
communications & sustainability
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
Tuesday, 29 March 2022
Geneva, Switzerland
2021 Half-Year results
Tuesday, 19 July 2022
Investor days
November 2022
Dividend payment date
Ex-date: Thursday 31 March 2022
Record date: Friday 1 April 2022
Payment date: Monday 4 April 2022
Media relations
Magali Dauwalder
SGS SA
1 place des Alpes
P.O. Box 2152
CH – 1211 Geneva 1
t +41 (0)22 739 95 51
m +41 (0)79 329 46 70
www.sgs.com
Project management
John Coolican
Global Head of Communications
Beatriz Cebrián López
Global Sustainability Manager
SGS | 2021 Integrated Annual Report SGS is a registered trademark of
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