Enabling a better,
safer and more
interconnected
world
SGS 2022 Integrated Report
Management report
1
30
8
10
12
14
16
18
22
24
26
28
Letter to stakeholders
CEO Q&A
Our company
Non-financial and financial results
Our TIC megatrends
Our business model
Our leadership team
Our corporate strategy
– a sustainability solutions framework
Our divisional strategy
– aligned to megatrends
Our investment strategy
– our platform for growth
Our investment strategy in action
Our investment strategy
– acquisitions and partnerships
36
Our focus on sustainability
40
Stakeholder engagement
42
Our material topics
43
Our risk intelligence
Our principal risks
46
Quantifying our value through six capitals 50
52
Financial capital
Financial capital by divisional
54
performance and outlook
Manufactured capital
Intellectual capital
Human capital
Social and relationship capital
Natural capital
Our contribution to the SDGs
58
62
66
72
76
80
32
34
Corporate governance
Investor relations at SGS
Remuneration report
Financial statements
84
101
102
124
Non-financial statements
190
Our approach to sustainability reporting
Databank
2022 GRI content index
Sustainable Accounting Standards
Board (SASB) framework alignment
191
192
204
212
Appendix
TCFD report
Human rights report
Shareholder information
215
215
228
236
Our integrated reporting approach
The Integrated Reporting framework aims to create
transparency. For the first time we have integrated our
financial, operational and sustainability information into a single
fully integrated report – measuring, as we have for the last five
years, our financial and non-financial performance across the
six capitals. This report has been prepared in accordance
with the comprehensive option of the GRI Standards, the
Sustainability Accounting Standard for the Professional and
Commercial Services Industry (SASB), and it follows the
guidelines for the AA1000 AccountAbility Principles Standard.
This report also complies with the reporting requirements
set in articles 964a to 964c of the Swiss Code of Obligations.
www.sgs.com/en/integrated-report
Cover image: Randall Maduro, Netherlands
SGS brings together global teams
of highly qualified experts providing
specialized solutions across our
industries. We enable a better, safer
and more interconnected world,
making business faster, simpler
and more efficient.
Our leading testing, inspection and
certification services add measurable
value to business and society.
They reduce risk, improve efficiency,
safety, quality, productivity and
sustainability, accelerate speed
to market and create trust.
1
We are passionate
about our purpose
César Denegri, Peru
“ We are leading the teams
that supervise shipments of
hydrobiological products to
verify the quality is in compliance
with national and international
standards. This is how I contribute
to enabling a safer world.”
We are
SGS
SGS | 2022 Integrated Report
Management reportFinancial statementsNon-financial statementsAppendixRemuneration reportCorporate governance 2
Management
report
Nicolas Kyndt,
Switzerland
“ We support energy efficiency
and optimization, integrating our
solutions with an organization’s
operational processes, and
identifying opportunities to
accelerate their energy transition
and society’s decarbonization.”
We are
providing our
customers with
better energy
solutions.
SGS | 2022 Integrated Report
3
The challenge
for our customers
There is a growing need to
accelerate the world’s energy
transition and to achieve net-
zero. This has become more
urgent for corporations and
governments, with high fuel
prices, inflationary pressures,
supply chain bottlenecks and
geopolitical tensions. They are
seeking urgent improvements
in every aspect of their energy
management: from producers
to end users.
Supporting reductions
in energy and emissions
Certifying to ISO 50001 standards can help
organizations, large or small, to save energy
and costs, while actively demonstrating
a commitment to sustainability. It can
also offer them a competitive advantage,
encouraging the use of processes that are
more energy efficient and environmentally
friendly. Our audits against ISO 50001
can help an organization to stand out
from the crowd, as well as supporting
them to develop and further improve
their performance.
We are shaping
our thriving future
With the world facing significant
challenges to limit the impacts of
climate change, we believe our
sustainability solutions will help
organizations manage their energy
transition, reduce emissions and
assist with practical matters like the
digitalization of their real estate.
• We develop data-enabled services
aiming at supporting building
portfolio owners, developers
and users by collecting accurate
and extensive energy and
carbon datasets
• We provide technical data to our
customers to help identify the most
relevant energy efficiency measures
they can implement to make their
buildings smarter and greener
• We are working with customers
to reduce energy costs and
greenhouse gas emissions to help
them become more independent
from energy market disruption
Watch our case study film at
www.sgs.com/en/integrated-report
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.
40%
Expected carbon reduction
per building portfolio
7 500
assets inspected to be transitioned
to our new digital platform
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 4
Management
report
Jorge Bazo,
Peru
“ We help our customers ensure
the safety, quality and sustainability
of their food products, and in
turn build consumer trust and
confidence. By expanding our
testing portfolio in the region,
we can fulfill local market needs
and serve the export market.”
We are
at the forefront
of testing for
food safety.
SGS | 2022 Integrated Report
The challenge
for our customers
Despite our strong food testing
footprint across the Group,
we were unable to offer a
comprehensive testing solution
throughout Central and South
America. Sending samples for
testing across borders was also
slow due to customs issues
and turnaround time challenges.
With the food market growing
across the continent, our
customers needed help to meet
local demand and food safety
requirements for exporting.
Safer means
We enable a safer world by ensuring
that the food you eat is safe and
that the environment you work
in is secure and clean.
9
food laboratories across
Central and South America
400+
attendees to our SGS Tour Agro
event in Peru and Colombia
5
Expanding our
food laboratory
network in Central
and South America
Our teams across South America have
worked hard to expand our capabilities
in Peru, Chile, Ecuador, Colombia and
Argentina, as well as establishing new
laboratories in Mexico and Brazil – from
microbiology, molecular biology, and
allergens, to the detection of contaminants
such as heavy metals, pesticides and
veterinary drugs. We can also support the
export of fruit, vegetables, seafood, meat
and poultry, while ensuring local food
safety and quality standards are met.
We are shaping
our thriving future
Our revitalized network provides
the answer to Central and South
America’s food safety requirements
and will allow us to offer quality and
safety testing services that meet
stringent European, American and
Asian requirements.
• We offer specialist testing services,
e.g. seafood in Chile and Ecuador,
and meat in Argentina
• Our laboratories in Chile, Peru and
Brazil cover pesticides, molecular
biology and more
This complements our existing
primary food production solutions that
support producers in the field, using
new technology for precision farming.
This farm to fork approach ensures
better, safer and more sustainable
food, locally and globally.
Watch our case study film at
www.sgs.com/en/integrated-report
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 6
Management
report
Kai-Fan Chang,
Netherlands
“ In a connected world, there
is no safety without security,
as devices have open interfaces
that you can connect to
from anywhere in the world.
We combine security testing
with safety testing to provide
a full-service package of
security solutions.”
We are
helping
manufacturers
of IoT devices to
ensure product
security.
SGS | 2022 Integrated Report
The challenge
for our customers
Many Internet of Things (loT)
device manufacturers have
products that are connected
to a network or interact with
other devices, but they may
not always be aware of all the
regulations, or the security they
need to build into their devices.
As a result, consumers may buy
IoT devices that are not secure,
risking their cyber safety and as
a result, potentially damaging
the manufacturer’s brand.
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 artificial intelligence (AI) and
IoT to help develop smart cities.
35+
years of experience in
security evaluations
55+
laboratory set ups
7
Comprehensive
cybersecurity
testing solutions
We provide our customers with
comprehensive cybersecurity solutions,
including training, risk assessments and
testing for their IoT devices. We also help
the industry to embed cybersecurity into
the design phase, so that security is a
consideration for all IoT devices from day
one. Our test solutions for IoT devices
cover a wide range of wireless networks,
devices, and technology, including Bluetooth,
Wi-Fi and near field communication
(NFC). The acquisition of Brightsight last
year expanded our solutions to cover
cybersecurity requirements for a range
of new devices.
We are shaping
our thriving future
Through our comprehensive testing
offering for existing IoT devices
and the earlier consideration for
cybersecurity in their designs,
consumers will have more trust
in the security of the IoT products
they purchase.
• IoT brands and manufacturers
are increasing the safety of
their products and building their
cybersecurity reputation, which
will lead to repeat purchases and
an increase in new customers
• Our cybersecurity product
certification mark, introduced
this year, gives consumers a
clear indication that their IoT
devices have been fully tested
and are cyber-safe
Watch our case study film at
www.sgs.com/en/integrated-report
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 8
Letter to
stakeholders
Calvin Grieder
Chair of the Board
of Directors
Enabling a better,
safer and more
interconnected
world
Together we are
building a thriving and
sustainable business.
Dear stakeholders,
Imagine a world without access to the
resources of today. How would this affect
the way you live and work? Ensuring a safe
flow of goods is at the core of us all at SGS,
every day.
These are challenging times. Pandemics,
global supply chain decoupling, inflation
and social disconnection have all become
part of the new normal but there is one
challenge that, if left unchecked, will be
catastrophic for everyone – our impact on
the environment and the climate crisis.
SGS is fully engaged in finding solutions to
these problems, answering the challenges
of the modern world while enhancing
sustainability and building prosperity. To be
truly successful, the changes we need to
make must impact every aspect of our daily
lives, both at home and work. All across
the network, we are making decisive
improvements by focusing on people,
planet and performance.
We have set very ambitious targets and
to meet them we must concentrate on
what is at the heart of our business – our
people. Better performance is not just about
technology, it is led by our expertise. Together,
we are building a network of highly trained,
passionate and committed employees,
who operate in a work environment that
emphasizes safety, efficiency and excellence.
Underpinning this is a philosophy of training
that prioritizes personal development to
deliver expertise across the network.
At the same time, we understand we do
not exist in isolation and so we are finding
new ways to help the most vulnerable
groups in our society. For example, SGS
Academy provided pro bono training to
over 400 people in Ghana, Pakistan, India,
Bangladesh and Turkey in 2022. This is
the kind of concrete support we provide to
the communities in which we operate and
which we aim to accelerate.
I am proud to say that SGS is the first
company in the TIC sector to have its
1.5º C and net-zero targets approved by
the Science-Based Target Initiative and
we are now committed to reach net-zero
greenhouse gas emissions across the value
chain by 2050. To meet this goal and protect
the planet every person must play their part.
I tried to work on understanding what
these targets mean to me and to put our
company-wide actions into this context. It is
difficult to work on an abstract CO2 emission
number and set it in proportion to what we
do every day. If we consider that a single
round trip flight from Geneva to New York
already accounts for 20% of the average CO2
emissions1 of a single person per year, we
have a good understanding of the magnitude
of steps a company of our size must do
to reduce its impact.
1. Source: IATA and World Bank.
Management reportSGS | 2022 Integrated Report 9
We are
Another example we can all relate to is
our daily meals. Think about how much
we could reduce by consuming local
products rather than produce produced
and transported from abroad. We all can
make a big difference.
We have started numerous projects with
this mission in mind and are determined
to take the necessary steps. To name a
couple of examples, our energy efficiency
in buildings program targets our most
energy intensive buildings and applies
energy efficiency measures to optimize
their consumption. In addition, this year
we have increased by 500% our solar
energy onsite production. Our new vehicle
emissions policy targets our second major
source of emissions and sets new and
ambitious goals to gradually reduce the
CO2 emissions of our fleet in the
coming years.
All these actions will enhance our
performance. This is not only driven by the
innovative solutions we offer, but also by
solid processes that enhance efficiencies
and robust guidelines that ensure safety.
Taking our lead from the automotive sector,
we continue to build our global network of
World Class Services (WCS) laboratories.
This strategic program stimulates a culture
of efficiency and excellence by developing
people and fostering a mindset that allows
change, engagement, empowerment and
the diffusion of knowledge.
In today’s connected world data has become
an important backbone for driving efficiency.
Our program to implement a new seamless
IT structure has fostered our efficiency on
a large scale. Data is also an important asset
to our customers’ business. In response,
SGS is evolving into a fully data-driven
company by implementing more efficient
systems and platforms. Operating in this
way allows us to offer a better customer
experience, with material improvements in
customization and the ability for customers
to connect and integrate directly with our
data platforms.
helping our customers
save energy and reduce
greenhouse gas
emissions through our
sustainability solutions
– and we do the same
across our own sites.
This focus on people, planet and
performance lets us build a solid culture
of sustainability. The innovative solutions
we are developing will not only benefit
our business but also our customers as
they continue on their journey towards
a sustainable world.
If we want to succeed in our ambitions,
and I am convinced we will, then we
must understand the decisions we make
today will not only have a profound impact
on our business but also on the future
of the planet. In 2022, we welcomed
a new board member expanding our
regional representation and the necessary
skills to prosper. With the creation of our
sustainability committee, we are also
accelerating the development of new
services and solutions that allow us
and our customers to reduce environment
impact while maximizing opportunities.
Finally, I started by saying we are living
through challenging times but, by working
together and with a common purpose,
we are making a difference. I would like to
take this opportunity to thank the Board and
every employee working for SGS for their
hard work and dedication. I would also like
to say a special thank you to our investors,
who continue to support us as we move
towards a better, safer and more
interconnected world.
As the world’s leading TIC company,
we are ready to answer whatever
challenges the future may present.
This is my passion, and it is at the
core of everything we do at SGS.
Calvin Grieder
Chair of the Board of Directors
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 10
CEO Q&A
Frankie Ng
CEO
Bringing our
purpose to life
Our strong spirit
of solidarity is
helping us support
our customers
and communities.
Markets saw some recovery
in 2022 but the current
trading environment remains
challenging. How has SGS
fared, and can you highlight
a few achievements?
I’d like to start by expressing my gratitude
to over 97 000 colleagues around the globe
who have contributed so much to the
success of SGS in 2022. This is a journey
we are on together and it is testament to
your capabilities and fortitude that we have
achieved so much during the last 12 months.
At the beginning of 2022 it looked like
we were nearing the end of the pandemic
and then, almost immediately, the war
in Ukraine began. There have also been
macro-economic factors that have impacted
all companies, like inflation and labor issues
and some more specific to the TIC industry.
I would say we’ve responded well, with
strong results in 2022 and we continue to
challenge ourselves to make sure we meet
and exceed the goals we have set for 2023.
In my opinion, our greatest achievement is
our spirit of solidarity. This has had a positive
impact throughout the network over the last
year, sometimes in extreme circumstances.
For example, when we asked how we
could help displaced colleagues at the
start of the war in Ukraine, we received an
overwhelming amount of support with our
people going to the border to transport our
colleagues and families to safe hotels to get
food and rest. This support and kindness
gave our colleagues a chance to recuperate
and consider the next stage of their journey.
We’ve seen similar things in Shanghai,
China, where what was predicted to be
a short Covid lockdown ended up lasting
two months. During this time we had
colleagues confined to their homes and
stuck at laboratories, but together we
found ways to keep them supplied with
food and other essentials.
In challenging times, this spirit of solidarity
brings us together and makes us stronger.
Management reportSGS | 2022 Integrated Report “ I started this Q&A by expressing my gratitude to
everyone in the SGS network for their hard work
and resilience. In my travels to meet with affiliates,
what I see again and again is our people working
with passion, looking for innovative solutions that
support our customers and communities, finding
better ways to bring SGS’s purpose to life.”
11
Turning to SGS’s three main
strategic objectives for 2023
– investment to consolidate
growth, becoming the largest
digital company in the TIC
sector, and increasing revenue
from sustainability solutions –
what progress have you seen?
Looking at the five divisions, a primary
strategic objective was consolidation
through investment to secure our leadership
position. I am proud to say that this has been
achieved in Natural Resources, Connectivity
& Products and Knowledge, and we will
continue to reinforce these areas through
the expansion of our technical consultancy
network. We are also on target to complete
more than CHF 1 billion of revenue (constant
currency) in the Health & Nutrition sector and
become the market leader in Environment
for our Industries & Environment division.
In terms of operational performance,
we have achieved mid- to high-single digit
organic growth over the last two years and
continue to acquire expertise in key sectors
such as cybersecurity, cosmetics, biopharma
and analytical services to expand our reach
and capabilities.
Looking at becoming the most digital
company in the TIC sector, we are making
solid progress building our ‘platform for
growth’ through our Level Up initiatives
being driven by our Chief Financial Officer
and Chief Information Officer. We have
successfully implemented our digital
labs strategy in our Natural Resources
laboratories by harmonizing our Laboratory
Information Management Systems (LIMS)
which standardizes workflows, improves
efficiencies and reduces turnaround times
for our customers. As part of our digital
evolution, this progress will continue to be
made across the rest of the network over
the next two years.
Other new ways to optimize our network
include the implementation of World
Class Services, with 26 laboratories now
employing World Class Management, and
we continue to gain efficiencies through
improved back-office systems such
as enterprise resource planning (ERP),
customer relationship management (CRM),
shared service centers and IT outsourcing.
Finally, sustainability. With a clear vision,
new targets and a framework for looking
at sustainability in external services, we
are confident of reaching our goal of 50%
of revenue from sustainability solutions.
We are also finding new ways to support
our customers on their sustainability
journeys, regardless of their industry
sector or maturity. Together, we are even
introducing new solutions which reduce
the impact of industries which traditionally
have a bigger environmental impact.
Working in this innovative, forward-thinking
way, we are discovering solutions that
benefit our customers, our business
and our planet.
SGS has announced ambitious
targets with its Sustainability
Ambitions 2030. Where do we
stand today with these targets?
That is a long list but, based on what
we’ve seen so far, I would say we are on
target to meet both our 2023 and 2030
targets, whether they are for safety, carbon
emissions or diversity and inclusion.
However, it’s not all about hitting targets
and what is more interesting to me is
the evolution I see in SGS’s culture of
sustainability. Through investment in new
schemes and concepts and effective
communication with colleagues, we are
changing this culture both at home and in
the office. Improvements can be difficult
to quantify, but it is vital if we are to meet
our 2023-2030 Sustainability Ambitions
and I am pleased to say we are making
good progress.
The business climate is likely
to remain challenging in the
foreseeable future. How is
SGS positioned to respond?
We are seeing multiple macro-economic
challenges at the moment, such as high
inflation and geopolitical disruption.
These cycles seem to be becoming more
frequent and stronger, however, we remain
confident that we can continue to adapt
and be agile in our responses.
SGS is a resilient company, with highly
diversified end-markets both industrially and
geographically. Our focus is on maintaining
organic development in the areas where
we are already strong. We are continuing to
make acquisitions to exploit potential growth
areas, such as expansions in our footprint,
skill set and technical capacities, adding
competences and accreditations. Finally,
we are investing in innovative processes
and solutions to optimize our systems
and customer offering.
Operating in this way, we have built a
resilient and sustainable structure that can
weather all macro-economic challenges
in the long term.
How else do you
see SGS guaranteeing
a thriving future?
I started this Q&A by expressing my
gratitude to everyone in the SGS network
for their hard work and resilience. In my
travels to meet with affiliates, what I see
again and again is our people working with
passion, looking for innovative solutions that
support our customers and communities,
finding better ways to bring SGS’s purpose
to life. This is what is important to me and
again it takes me back to SGS’s strong spirit
of solidarity.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 12
Management
report
Our company
We operate in 116 countries. This makes
us truly global and focused on the impact
we have on the planet.
Americas
20.5%
of total SGS revenue
North America
Latin America
Our five divisions
1
2
3
Connectivity & Products
We are the experts who support brands,
manufacturers, retailers and governments
across the supply chain with the performance,
safety, security and quality of their products
and services. We help make products better
and safer for an increasingly connected world.
Health & Nutrition
We assure quality, safety, sustainability and
security in the health, wellness and nutrition
industries, helping our customers to meet
stringent standards throughout their supply
chain and, ultimately, improving the quality
of life in society.
Industries & Environment
We enable safer, greener and smarter
infrastructure, transportation and industries
through our innovative solutions, which is
important as organizations transition towards
cleaner and sustainable energy solutions to
meet their environmental responsibilities.
Adjusted operating income
Adjusted operating income
Adjusted operating income
CHF 313 MIO
CHF 119 MIO
CHF 224 MIO
Adjusted operating income margin
Adjusted operating income margin
Adjusted operating income margin
23.9%
13.3%
10.4%
Read more on page 54
Read more on page 54
Read more on page 55
SGS | 2022 Integrated Report
13
Revenue by division
Total
CHF 6 642 MIO
Connectivity
& Products
1 311 MIO
Health
& Nutrition
892 MIO
Industries &
Environment
2 157 MIO
Natural
Resources
1 583 MIO
Knowledge
699 MIO
Asia Pacific
35.2%
of total SGS revenue
North East Asia
South East Asia & Pacific
Europe, Africa,
Middle East
44.3%
of total SGS revenue
Africa & Western Europe
North & Central Europe
Eastern Europe & Middle East
4
5
Natural Resources
We are a global network of trusted,
independent and committed experts who
deliver pivotal solutions to the agricultural,
mining, oil, gas and chemical industries,
supporting quality, safety, efficiency and
sustainability goals across the supply chain.
Knowledge
We have the expertise and knowledge,
and the people, processes and tools to help
organizations improve their results, manage
risk, comply with regulatory changes, adopt
best practice and meet increasingly stringent
sustainability requirements.
Adjusted operating income
Adjusted operating income
CHF 225 MIO
CHF 142 MIO
Adjusted operating income margin
Adjusted operating income margin
14.2%
20.3%
Read more on page 55
Read more on page 55
SGS | 2022 Integrated Report
Management reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 14
Non-financial and
financial results
We made good progress in 2022 investing
in our platform for growth and evolving SGS’s
culture of sustainability to help us meet our
2030 Ambitions.
SO Strategic Objective
Our corporate
sustainability leadership
People
Planet
Women in leadership positions
Reduction in CO2 emissions
Member of DJSI World and Europe,
and leader of the professional services
industry in S&P Corporate Sustainability
Assessment (CSA) and well over double
the sector average
31.1%
+7%
-10.5%
against 2019 baseline
2022
2021
31.1
2022
29.0
2019
116 505
130 201
SO 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.
SO Reducing our CO2 emissions
Support the transition to a low-carbon world
by meeting our science-based target.
Proportion of revenues generated
by sustainability solutions
SO World Class Services (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.
Lost Time Incident frequency Rate (LTIR)
Number of lost time incidents per
200 000 hours worked.
47.3%
+1.2%
2022
2021
47.3
46.7
Prime distinction rating as recognition
for excellence in management of ESG
aspects among over 200 companies
in the same sector
Low risk rating driven by our strong
management of material ESG issues
AAA rating, the highest ESG
rating awarded by MSCI, for
the third consecutive year
Platinum medal, the highest
recognition awarded by EcoVadis,
for the third consecutive year
0.19
-25% against 2018
2022
2021
Inclusion in the FTSE4Good index for
the fifth consecutive year for our strong
commitment to sustainable practices
Leadership position achieved through
score of A- in CDP’s highly technical
climate change management assessment
SO Guaranteeing a safe workplace
Reduce our Total Recordable Incident
Rate (TRIR) by 20% and LTIR by 10%
against a 2018 baseline.
SO Positive impact on communities
Increase by 10% our positive impact
on our communities through employee
volunteering, focusing on vulnerable
groups including those affected by
pandemics against a 2019 baseline.
SO Sustainability solutions
Support our customers on their journey
to sustainability by increasing the proportion
of revenue generated by our sustainability
solutions to above 50%.
SO Integrity principles
Reduce the impact that our supply chain
has on society by committing our strategic
suppliers to support our integrity principles.
0.19
0.22
SO Energy efficiency
Increase annually the number of energy
efficiency measures in our 100 most
energy intensive owned buildings.
1. Constant currency (CCY)*.
2022Management reportSGS | 2022 Integrated Report
15
15.4
16.4
80
80
7
9
Performance
Revenue
Adjusted operating income*
Adjusted operating income margin*
CHF 6.6 BN
+6.8%1 +5.8% organic*
1 023 MIO
+0.1%1
15.4%
(1.0)pp1,2
2022
20211
6.6
2022
6.2
20211
1 023
2022
1 022
20211
Profit for the period
Basic earnings per share
Proposed dividend
CHF 630 MIO
(3.8)%
CHF 78.86
(3.7)%
CHF 80
2022
2021
630
2022
655
2021
78.86
2022
81.91
2021
Free cash flow*
Return on invested capital*
Acquisitions completed in 2022
CHF 507 MIO
(20.2)%
18.6%
(1.0)pp2
2022
2021
507
2022
635
2021
7
18.6
2022
19.6
2021
1. Constant currency (CCY)*.
2. Percentage points.
* Alternative Performance Measures (APM) – refer to the ‘2022 Full Year APM’ document.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
16
Our TIC megatrends
The five interconnected megatrends are driving
regulation and outsourcing. We have positioned
SGS to meet these primary drivers of demand.
By addressing some of the planet and society’s
largest challenges, we are generating value from
structurally growing markets.
The five megatrends impacting society
Connectivity
Nutrition, Health
& Wellness
Sustainability & Climate
With access to the internet rising
rapidly and technologies such as 5G,
the IoT and AI, we are entering a new
era where networks of machines
are digitally connected often without
human involvement. A more connected
world brings both opportunities and
challenges for brands, manufacturers,
retailers and governments. We can
help them to deliver safe, accessible,
high-quality products and services
in stores and online, ensure secure
connectivity and reduce risks.
The nutrition, health and wellness
industries are converging, responding
to consumer demands for healthier
lifestyles and well-being. A rise in both
consumer interest and purchasing
power presents tremendous
opportunities for companies, but
consumers need to know that the
food they eat and the products they
use are safe. We can help companies
demonstrate the safety, security,
quality, sustainability, authenticity
and efficacy of food, healthcare
and wellness products.
Today, many are 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, and of all the
minerals, fossil fuels, metals and
biomass used each year, just 8.6%3 are
cycled back into the circular economy.
Organizations face growing scrutiny
in this area, but we can help them put
sustainability at the center of their value
proposition and business models.
USD 6 tn
is the estimated global annual
cost of cybercrime in 20211
Our industries
Our services cover 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.
USD 1.5 tn
is the estimated value of the global
wellness market, with annual growth
of 5-10%2
3.3 bn
people’s daily lives are ‘highly vulnerable’
to impacts of climate change4
Life
sciences
We safeguard
the quality
and efficacy
of medicines.
Agriculture
and food
We develop
innovative safety,
quality and
sustainability
solutions for
supply chains.
Mining
Our expert
services improve
speed to market,
manage risks and
maximize returns.
Oil
and gas
Our innovative,
sustainable
solutions add
up along the
value chain.
Energy
Chemical
Construction
Industrial
Transportation
Public sector
We power
processes in
renewables and
conventional
energy.
We drive
innovation,
optimization,
efficiency and
safety, from
feedstocks to
finished products.
manufacturing
We make
manufacturing
more productive
and profitable.
We drive a safer,
cleaner and more
efficient industry.
We ensure
safety and
performance
during the
construction
of buildings or
infrastructure.
We facilitate trade
We enable
and sustainable
development,
while protecting
society against
fraud and
economic crime.
Consumer
and retail
manufacturers,
exporters,
importers and
retailers to
generate trust
throughout the
supply chain.
Management reportSGS | 2022 Integrated Report 1.
2.
www.techxplore.com/news/2022-
05-global-cybercrime-topped-trillion-
defence.html
www.mckinsey.com/industries/
consumer-packaged-goods/our-insights/
feeling-good-the-future-of-the-1-5-
trillion-wellness-market
3. www.circularity-gap.world/2022
4. www.ipcc.ch/report/ar6/wg2/about/
factsheets/
5. www.worldbank.org/en/topic/
urbandevelopment/overview
6. www.ey.com/en_qa/consumer-
products-retail/redesign-consumer-
ecosystems-to-scale-sustainability
Infrastructure
Consumer
Empowerment
While the growing trend towards
urbanization enables increased
productivity, the additional need for
resources and space affects the
economy, environment and quality
of life. Innovations in areas such
as smart cities and smart mobility
contribute to economic growth,
but we can also help organizations
adopt more sustainable approaches
to infrastructure, transportation
and community services, while
protecting workers, reducing
environmental footprints, managing
risk, and enhancing efficiency
and brand reputation.
More and more, consumers are
flexing their purchasing power to
encourage companies to take a
stand on issues like sustainability,
transparency and fair employment
practices. This has increased
the demand for traceability and
transparency across the supply chain,
as people are looking to eat less
meat, source more organic food, fly
less and buy electric cars. We can
help organizations keep up to date
with complex regulatory obligations
to reduce their legal, financial and
reputational risks.
>80%
of global GDP is generated in cities5
72%
of consumers say companies should be
driving positive sustainability outcomes6
Mining
Energy
Chemical
Oil
and gas
Life
sciences
We safeguard
the quality
and efficacy
of medicines.
Agriculture
and food
We develop
quality and
sustainability
solutions for
supply chains.
innovative safety,
services improve
sustainable
Our expert
Our innovative,
speed to market,
solutions add
manage risks and
up along the
maximize returns.
value chain.
We power
processes in
renewables and
conventional
energy.
We drive
innovation,
optimization,
efficiency and
safety, from
feedstocks to
finished products.
Industrial
manufacturing
We make
manufacturing
more productive
and profitable.
Construction
We ensure
safety and
performance
during the
construction
of buildings or
infrastructure.
Transportation
Public sector
We drive a safer,
cleaner and more
efficient industry.
We facilitate trade
and sustainable
development,
while protecting
society against
fraud and
economic crime.
Consumer
and retail
We enable
manufacturers,
exporters,
importers and
retailers to
generate trust
throughout the
supply chain.
17
Divisional addressable
market
(CHF BN)
Connectivity
& Products
CHF 40 BN
Health
& Nutrition
CHF 65 BN
Industries
& Environment
CHF 70 BN
Natural
Resources
CHF 60 BN
Knowledge
CHF 20 BN
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 18
Our business model
We are the leader in the TIC industry and
create value by enabling a better, safer and
more interconnected world. We measure
total value creation using the six capitals.
Our inputs
Our business model
Total equity
CHF 763 MIO
Total assets
CHF 7 122 MIO
Capital expenditure
CHF 329 MIO
Profit (prior year)
Our purpose
CHF 655 MIO
We are enabling
a better, safer and
more interconnected
world
Goodwill and other
intangible assets
CHF 2 105 MIO
R&D
expenditure
CHF 83 MIO
Employees
97 000
SGS Rules for Life
15
Suppliers
+50 000
1 voice
of the customer program
SGS community program
About our business model
Our businesses all operate under our globally
recognized name. We have a vast number of
operating licenses, accreditations and government
authorizations – a compelling offer which is difficult
to replicate. Our global footprint comprises
2 650 laboratories and offices and 97 000 experts.
We leverage these capabilities and our expertise to
bid for large multiyear contracts and, as our network
expands, our customer offer also increases, creating
a virtuous circle.
We have a broad range of customers, and a strong
record in retaining them. In certification areas, such
as health and safety and supply-chain management,
changing providers may involve retiring an existing
system and incurring significant costs, so we aim to
build longer-term relationships. In other areas, such as
consumer product testing, the average contract length
is short, typically a year. However, switching carries a
risk of reputational damage and the financial benefits
can be small, as manufacturers typically spend less
than 1% of the value of goods in control and testing.
Financial
capital
The funds
available to us
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
Electricity consumed
Water consumed
Natural
capital
The natural
resources we
need to operate
487 GWh
Fuel consumed
460 GWh
2 MIO m3
Our global drivers
What we do
Testing
Inspection
Certification
Management reportSGS | 2022 Integrated Report 19
Our value
CHF 3 331 million paid in wages
to our employees
CHF 219 million taxes paid to governments
CHF 590 million 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 consumers
Revenue
CHF 6.6 BN
Free cash flow*
CHF 507 MIO
Adjusted operating income margin*
15.4%
Offices
and labs
2 650
Training
ratio1
3%
31.1%
Employees trained
to Code of Integrity
99.9%
Community
investment
CHF 2 MIO
Number of labs using
World Class Services
Enhancing career opportunities
through training
26
Improving knowledge through innovation
Simplifying the customer journey
through innovation
Women in leadership positions
Lost time incident rate
0.19
(occurrences per 200 000)
Protecting the health of employees
through operational integrity excellence
and well-being programs
Reducing social risks by reinforcing
human rights compliance
Providing flexible working conditions
to our employees
Satisfaction score in our Voice
of the Customer surveys
Supporting the communities in which
we operate
84.5%
Improving how we work with
our customers and suppliers
Percentage of suppliers locally sourced
98%
Metric tons
of CO2e2
116 505
EEB program: number of
buildings under the program
701
Committed to net-zero by 2050
Helping mitigate climate change
by reducing air pollution
Minimizing resource depletion
and protecting the environment
Our outputs
Financial
capital
Long-term shareholder
value creation
Manufactured
capital
Efficient and sustainable
services
Intellectual
capital
Expertise and
innovative solutions
Human
capital
Diverse leaders in a safe
working environment
Social and relationship
capital
Meaningful stakeholder
engagement and strong
brand and reputation
Natural capital
Net-zero pathway, limited
waste and wastewater
1. % of total employment cost spent on training.
2. Scope 1 and 2 market-based.
* Alternative Performance Measures (APM) – refer to the ‘2022 Full Year APM’ document.
Our value to society
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 20
Our business model
continued
Our process: Testing
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 and regulations. 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 content
has been monitored across supply
chains and is the same as 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
2 Process planning
3 Sampling
Job scope agreed with
customer encompassing
compliance or meeting a
quality specification and, in
some cases, establishing value
Define the correct
methodology including safety
and ESG considerations
Collected by SGS (including
digitally) or submitted
by customers
6 Analysis
5 Sample preparation
4 Sample registration
Digital registration of samples
in Laboratory Information
Management Systems
(LIMS) – this step can be
combined with sampling
7 Data generation
approval and
reporting
8 Customer outcome
Assessment of sample is
compliant/meets customer
requirements. Post-analysis
review with customer and
satisfaction assessment
Management reportSGS | 2022 Integrated Report Our process: Inspection
Customer
21
1 Customer need
Job scope agreed with customer.
Inspection of quantity, or
compliance to measurement,
or a build specification
4 Customer outcome
Assessment of inspection findings
is compliant/meets customer
requirements. Post-analysis
review with customer and
satisfaction assessment
2 Process planning
Define the correct methodology
including safety and ESG
considerations
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
Our process: Certification
1 Customer need
2 Process planning
3 Stage 1:
Agree with customer on
the standard to be applied
Audit/assessment dates,
sites and processes to be
sampled and agreed with
the customer
preparedness review
Evaluation of client’s
preparedness for a
stage 2 audit
7 Maintaining
certification
Ongoing surveillance
and cyclical
recertification
audit program
6 Customer
Certification documents
provided to the customer
4 Stage 2: audit
Evaluation of compliance
with certification
standard requirements
5 Technical review &
certificate decision
Independent evaluation of the
efficacy of the audit process to
determine if certification shall
be granted
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 22
Our leadership
team
Headed by our CEO, the Operations Council
governs SGS’s future and comprises a total
of 17 members across five key business
areas, seven regions and four functions.
Regions
Functions
Frankie Ng
CEO
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 | 2022 Integrated Report Our Operations Council
Our Operations Council is made up of five executive
vice presidents, seven Chief Operating Officers and
two functional Senior Vice Presidents, as well as
our CEO, Chief Financial Officer and General Counsel.
The council meets regularly to decide on strategies
and priorities, and to review the Group’s performance.
Divisions
Charles Ly Wa Hoi
Connectivity & Products
Olivier Coppey
Health & Nutrition
Alim Saidov
Industries & Environment
Derick Govender
Natural Resources
Jeffrey McDonald
Knowledge
23
We follow six key
business principles:
Integrity
Integrity is at the heart of SGS. The trust that we
inspire in our customers and stakeholders is the key
to our success. As leaders in our industry we hold
ourselves to the highest standards of professional
behavior as embedded in our Code of Integrity.
Health, Safety & Environment
Our long-term success and sustainable business
depend on our ability to remain a recognized
leader and a reference for all Health, Safety
and Environmental (HSE) matters.
Quality & 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.
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.
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.
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
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 24
Our corporate
strategy
Our strategy
1
We are driving our business forward with
clear objectives for market leadership, digital
innovation and sustainability solutions.
2
3
Invest to consolidate
leadership position
Become the most
digital company
in the TIC industry
Increase proportion
of revenue from
sustainability solutions
n
o
i
t
i
s
o
p
p
h
s
r
e
d
a
e
i
l
e
t
a
d
i
l
o
s
n
o
c
o
t
t
s
e
v
n
I
Our objectives by division
Connectivity
& Products
Goal: market leader
Status: achieved
Health
& Nutrition
Goal: CHF 1bn
Status: target 2023
Industries
& Environment
Goal: market leader
in Environment
Status: target 2025
Natural Resources
Goal: market leader
Status: achieved
Knowledge
Goal: market leader
Status: achieved
Higher
21%
2%
2%
Mid-
single digit
25%
7%
13%
Lower
8%
4%
18%
h
t
w
o
r
G
<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 255 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.
Management reportSGS | 2022 Integrated Report
l
i
a
t
i
g
d
t
s
o
m
e
h
t
e
m
o
c
e
B
25
y
r
t
s
u
d
n
i
C
I
T
e
h
t
n
i
y
n
a
p
m
o
c
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
Digitalizing
operations
ongoing
>50%
applicable
inspections &
audits remote
>50%
FAIR* data-
leveraging
structured data
A data-
driven
company
2022
2023
2025
Our vision is to become the most digital company
in the TIC industry through a customer-centric
approach. We have made further progress towards
our aim of linking at least 20% of our revenues
to digital services by 2023, with more than
50% of applicable inspections and audits
being done remotely.
We are enhancing existing services to deliver them
faster and better. Technologies, such as AI, are
helping us create new services and we continually
assess emerging technology trends to explore
the potential for entirely new markets. In 2022,
we implemented a Digital Builders Organization
that aims to design and develop technology-based
products to support our services with a short time to
market and a real impact on business operations. We
already have three products in testing phases with
more coming in 2023. We are digitally transforming
our labs to simplify the way we work and the service
that we provide. As of 2022, 13% of our labs have
been transformed to labs of the future, delivering
efficiencies and a better customer experience.
Beyond 2025, we will 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.
* Fair, accessible, inoperable, reusable.
Digital lab targets
Progress key
labs transformation % (2022)
0%
1-24%
25-49%
50-74
75-100%
Digital lab
30% sales by end of 2023
70% sales by end of 2025
80% process standard
CORE code vs 20%
local customizations
Digital lab 3
No barriers,
AI enabled
Digital lab 2
Modelling, lab
replication,
analytics
Integrated lab
Instruments to
insights. full
automation
Data-driven
Aggregated data,
analytics
Digital lab 1
Smart instruments
mobility enabled
Connected lab
Instruments &
data capture
Paperless lab
Faster science
fewer errors
1. Lay the foundation
– today
Simplify, comply & secure.
capture & automate
2. Lab transformation
– 2023/24
Optimize, harmonize processes
end-to-end. leverage analytics
3. Lab automation
– 2024 >
Automate & use AI to
continue transformation
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
26
Our corporate strategy
– a sustainability
solutions framework
Our target: reaching 50% of sustainable revenue by 2023
l
s
n
o
i
t
u
o
s
y
t
i
l
i
i
b
a
n
a
t
s
u
s
m
o
r
f
e
u
n
e
v
e
r
f
o
n
o
i
t
r
o
p
o
r
p
e
s
a
e
r
c
n
I
60%
50%
40%
30%
20%
10%
0%
Our goals
Launch
Sustainability
Solutions
Framework
Achieved
New sustainability
solutions in all
divisions
Achieved
>50% revenue under
our Sustainability
Solutions
Framework
Target 2023
2020
2021
2022
2023
Connectivity & Products
Industry & Environment
Knowledge
Health & Nutrition
Natural Resources
We are helping companies to implement
better and more efficient processes, address
stakeholder concerns and reduce risks.
The table on page 27 shows the revenue
breakdown by division and confirms that we
now offer sustainability solutions across all
our divisions. In 2022, Health and Nutrition
accounted for the largest proportion, driven
by our sustainable living pillar. We are on
track to achieve our 2023 target of generating
than 50% of revenue from our Sustainability
Solutions Framework.
On our previous annual report, we set out an
innovation curve showing that a large majority
of companies were followers with a less
mature approach to sustainability. They take a
compliance and risk approach to address regulatory
environmental, social and governance risks through
ISO and standards. We expect these companies to
move towards a holistic approach to sustainability
that encompasses their entire supply chain.
Our Sustainability Solutions Framework supports
our customers as they move along this curve.
No matter what their level of maturity is, we
can offer multiple integrated options to improve
environmental, social and governance performance
and reduce risk at every point of the supply
chain, from sourcing raw materials to using
the final product.
Our six sustainability solutions pillars
Sustainable
use of natural
resources
Sustainable
energy
Sustainable
production
Sustainable
infrastructures
Sustainable
living
Sustainable
business
practices
Management reportSGS | 2022 Integrated Report
27
Overall framework for our value to society
Sustainable
use of natural
resources
• Agriculture & Fishing
• Forestry
• Mining
• Fossil Fuels
• Water and
Soil Preservation
Sustainable
energy
Sustainable
production
Sustainable
infrastructures
Sustainable
living
• Energy Efficiency
• Renewable Energy
• Climate
Change Mitigation
• Circular Economy
• Responsible Supply
Chain & Traceability
• Environment,
Health & Safety
• Quality Management
• Buildings
• Transportation
• Health & Wellbeing
• Food & Nutrition
• Product Safety
Sustainable
business practices
• Sustainable Finance
• ESG Data advisory &
Assurance Services
• Digital Services
• Risk Management
• Ethics & Social
Practices
• Education
• Productivity
Progress in 2022
In 2022 we achieved our goal of launching
new sustainability solutions in all divisions.
Having analyzed the market trends and
customer demands, we identified several
focus areas:
– Connectivity & Products: chemical
– Industries & Environment: climate
risks and circular economy
– Health & Nutrition: responsible
sourcing and traceability; soil fertility
and water management
change and greenhouse gases
emissions; waste management
– Natural Resources: energy and
water optimization
– Knowledge: reporting, assurance,
and impact valuation
Revenues by pillar and division
Sustainable living
Sustainable use of natural resources
Sustainable energy
Sustainable infrastructures
Sustainable production
Sustainable business practices
C&P
9.5%
0.2%
0.2%
H&N
12.7%
0.3%
I&E
2.8%
2.6%
1.2%
0.1%
4.9%
NR
0.8%
0.1%
1.8%
Kn
3.5%
0.5%
0.1%
0.2%
3.2%
2.6%
28.5%
4.2%
1.4%
0.5%
10.1%
2.6%
9.9%
13.0%
11.6%
2.7%
10.1%
47.3%
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 28
Our divisional
strategy – aligned
to megatrends
Our five divisions are closely aligned to the key
TIC megatrends, to better service our customers
and to anticipate future demand.
Connectivity
& Products
Health
& Nutrition
Industries
& Environment
Natural
Resources
Knowledge
Connectivity
& Products
We are focusing investment in Connectivity to increase our
competitive advantage.
1
Strategic objectives 2023 and beyond
• Consolidate our leading market position
• Leverage market growth supported by the
Progress during the year
• Consolidated our leading market position in Softlines and
progressing ahead of target for Top 3 in Connectivity
proliferation of 5G technology and loT devices
• Significant capex has been approved for East Asia
• 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
and the USA
• New cybersecurity laboratories have been opened
in East Asia
• Supply chain challenges temporarily slowed progress
but expect the eMobility development and semiconductor
global demand to boost this end of the year
• New data services to generate first
• Invested in a program called ‘China Import’ providing
revenue by 2023
support to exporters from North America and
Western Europe who want to sell goods on China’s
domestic markets
• First European retailers have committed to use our
new digital solution Truum™
Our growing portfolio of sustainability solutions
During 2022, we launched various SGS
product marks (sustainability, certification and
performance) addressing customer demand
across all product categories.
Capex intensity Higher
Net working capital intensity Lower
Last 12 months return profile +++
M&A appetite High in Connectivity
Health
& Nutrition
We are expanding our global footprint through the organic development
of our network and acquisitions.
2
Our growing portfolio of sustainability solutions
Services in our portfolio help to address our pillars
of Sustainable Living as well as Sustainable Use
of Resources. New initiatives are underway to
broaden our offerings around verification of product
and supply chain sustainability including product
marks and automated emerging risks monitoring
on our AI-assisted platform.
Strategic objectives 2023 and beyond
• Achieve CHF 1 billion of divisional revenue
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
Progress during the year
• H&N delivered solid organic growth of 4.1% in 2022,
and, complemented by the acquisition of proderm,
total growth of 7.6%
• Continued investments in Biopharma including lab
expansions in Belgium and Switzerland have Health
Science well on track to become the largest H&N
division in 2023
• Acquisition of proderm cements our leadership position
• On track with geographical and portfolio
expansions including:
– Capacity and scope expansions in Thailand,
solutions in key Health & Nutrition sectors
Vietnam and China
– New lab capacity in Latin America, particularly Brazil,
Mexico, Peru and a new laboratory in Puntas Arenas,
Chile, supporting the local seafood market
– Acquisition of Industry Lab in Romania expanding
our footprint in Eastern Europe
– Ramp up of our laboratory hub and spoke
model in Europe to gain economies of scale
and improve efficiency
• Launch of SGS Digicomply Nutriwise, an AI-powered
solution to perform composition assessment of food
supplements and guide companies on compliance
questions when entering new markets
• Expansion of SGS Digicomply Regulatory Watch
to the cosmetics business segment
Capex intensity Higher
Net working capital intensity Average
Last 12 months return profile =
M&A appetite High
Management reportSGS | 2022 Integrated Report Industries
& Environment
Using our expertise to provide integrated solutions, while accelerating our transition
to a high-volume hub and spoke testing model in our Environmental testing business.
29
3
Strategic objectives 2023 and beyond
• Reach a market leadership position in
Environment Health & Safety in 2025
• Reassess portfolio focusing on TIC megatrends
Progress during the year
• I&E Health and Safety strengthened its footprint providing
H&S Management Services in customer data centers with
several bluechip customers (Amazon, Microsoft etc.)
and complement our expertise related to
energy transition through M&A in renewables
and specialty fields
• We continued to work with customers and build expertise
in the development of energy transition markets despite
delays due to geopolitical factors
• 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
• I&E Auditing and Compliance has achieved double-digit
organic growth in 2022 focused on mandatory and
voluntary carbon verifications and other industry specific
schemes, and waste management related products
• Development of a common Target Operation Model
• Leverage digital and data to enhance our
(TOM) for environmental lab activities
existing and create new ones
• New I&E Zengine product has been piloted in the USA
for B2C and B2B markets and we continue to work
on improvements
Our growing portfolio of sustainability solutions
SGS is expanding its capacity globally in response
to increased demand for emissions verification
and accounting under multiple schemes.
Capex intensity Average
Net working capital intensity Average
Last 12 months return profile =
M&A appetite Selective
Natural
Resources
We are building on our wide-ranging expertise across the mining industry and optimizing
our processes to help customers use fewer resources.
4
Strategic objectives 2023 and beyond
• Consolidate our leading market position
• Trade activities to remain core, with a
supportive outlook for mining and agriculture,
and oil and 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
Progress during the year
• Further enhanced our biofuels testing capability.
This includes providing services to the agri market
as well for used cooking oil analyses
• Smart warehouse scaling underway: 18 warehouses
in four countries
• Identified ESG diagnostic solution to scale across all NR
customers in collaboration with the Kn and I&E divisions
who will execute these services for our customers
• Economic and production-related sustainability services
to the mining industry have been developed within the
metallurgical consulting group and focusing on three
key areas: increased optimization in operating plants,
improved energy and water utilization and waste reduction
• SGS and VAKT (blockchain developer) have launched a
digital products database for the oil, gas and chemicals
market. This will allow all users of the VAKT block chain
platform to have a single database to conduct transactions
Our growing portfolio of sustainability solutions
Our acquisition of Sulphur Experts in late 2021 has
expanded our sustainability services in supporting
refineries and gas plants with reduced air pollution.
Capex intensity Lower
Net working capital intensity Average
Last 12 months return profile +++
M&A appetite Low
Knowledge
We provide business assurance and operational efficiency solutions across supply chains that
deliver sustainable value for the organization, the environment, society and shareholders.
5
Strategic objectives 2023 and beyond
• Consolidate our leading market position
• Certification remains core with new schemes
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
• With organic growth at 8.7%, we are exceeding industry
performance across all business segments highlighted
by Certification, Responsible Business Services from
social and environmental audits, and our consulting
business, Maine Pointe in the USA
• Despite a challenging environment from a post transition
year, investment in the information security segment and
medical device industry has allowed us to deliver above
industry organic growth in Certification
• Replication of consulting activities in Europe and in Asia,
combined with a very strong performance of Maine
Pointe, has further increased the proportion of revenue
generated outside our traditional certification activity
• The addition of new ESG and sustainability solutions
has enabled us to enter new markets, including the
financial services sector. We have also seen significant
growth in existing solutions, particularly Sustainability
Report Assurance
Our growing portfolio of sustainability solutions
Our new ESG and Sustainability Assurance
solutions have enabled us to enter new markets,
including the financial sector where we have seen
significant growth, particularly in Sustainability
Report Assurance.
Capex intensity Lower
Net working capital intensity Lower
Last 12 months return profile +++
M&A appetite Selective
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 30
Our investment
strategy – our
platform for growth
We have accelerated the investment in our
platform to improve and harmonize our processes
and accelerate our digital transformation.
Initiatives
Financial Shared Service
Centers (FSSCs)
Billing
centralization
Customer Relationship
Management (CRM)
IT transformation
Digital Labs Concept (DLC)/
World Class Services (WCS)
global platforms
Objective
Benefits
Target 2023
Centralization, harmonization and
standardization of key financial
processes (B2C, P2P, R2R) in
regional FSSCs to drive productivity
and lower service cost
Centralized billing via standardized/
harmonized processes and
systems by country to drive
productivity increase
Deployment of Salesforce
as the global CRM solution
IT modernization: adopting modern
Evolution of current Laboratory Information
Higher customer satisfaction/safer place
technologies and processes, improving
Management Systems (LIMS) to create
to work with enhanced productivity
time to market and quality as well as
efficiency in the delivery and operations
digital labs, with AI, machine learning and
full predictive analysis based in consolidated
data with fully standardized and harmonized
LIMS processes
+5%
Productivity increase of 5%
per annum for the scope
under consideration
75%
Operate five regional FSSCs
covering 75% of revenues
via fully standardized/
harmonized processes
• Increase productivity by 20%
for processes in scope
Increased customer intimacy
and stronger sales focus
to new technologies
Standardized target operation model/access
Productivity increase of 10%+ per lab
Increased customer satisfaction
• Reduce days sales outstanding
(DSO)
33%
Accelerated rollout of centralized
billing covering 33% of
group revenue
Add remaining countries and
remaining businesses to the
CRM platform
Target 2025
Full global coverage
80%
Centralized billing to cover 80%
of group revenues
n/a
Achievements
2022
60%
13%
Deployment of Salesforce as the
global CRM solution in 70 countries
during 2022
of group revenues are covered
by FSSCs via fully standardized/
harmonized processes
of group revenues are covered
by billing centralization
Complete outsourcing of application
management, application development
and infrastructure to a third party
New target operating model for Global
IT systems established
Nearly 20%
of lab revenues are executed via DLC +
of WCS labs (2020 perimeter) have
full migration of the certification business
been audited with best score of 42
to the global CertIQ platform
Better quality, cost optimization, innovation
Safer place to work with
of new services, enhancement of customer
enhanced productivity
experience and launching new services
to generate streams of revenues based
+15%
5%
on data
30%
+70%
productivity besides initial step-up savings
of lab revenues are executed via DLC
WCS labs (2020 perimeter) to reach
WCM Bronze Award level, expansion
to at least 10 new sites in WCS program
incremental productivity increase
of lab revenues are executed via DLC
of current WCS perimeter to achieve WCM
awarded levels (bronze and above), reach at
least first WCM Gold awarded site by end
20%
90%
of 2030
65%
Management reportSGS | 2022 Integrated Report 31
Initiatives
Financial Shared Service
Billing
Centers (FSSCs)
centralization
Customer Relationship
Management (CRM)
IT transformation
Digital Labs Concept (DLC)/
global platforms
World Class Services (WCS)
Objective
Centralization, harmonization and
Centralized billing via standardized/
Deployment of Salesforce
as the global CRM solution
standardization of key financial
processes (B2C, P2P, R2R) in
harmonized processes and
systems by country to drive
regional FSSCs to drive productivity
productivity increase
and lower service cost
IT modernization: adopting modern
technologies and processes, improving
time to market and quality as well as
efficiency in the delivery and operations
Evolution of current Laboratory Information
Management Systems (LIMS) to create
digital labs, with AI, machine learning and
full predictive analysis based in consolidated
data with fully standardized and harmonized
LIMS processes
Higher customer satisfaction/safer place
to work with enhanced productivity
• Increase productivity by 20%
Increased customer intimacy
for processes in scope
and stronger sales focus
Standardized target operation model/access
to new technologies
Productivity increase of 10%+ per lab
Increased customer satisfaction
Better quality, cost optimization, innovation
of new services, enhancement of customer
experience and launching new services
to generate streams of revenues based
on data
Safer place to work with
enhanced productivity
Add remaining countries and
remaining businesses to the
CRM platform
+15%
30%
productivity besides initial step-up savings
of lab revenues are executed via DLC
20%
WCS labs (2020 perimeter) to reach
WCM Bronze Award level, expansion
to at least 10 new sites in WCS program
Achievements
2022
60%
13%
Deployment of Salesforce as the
global CRM solution in 70 countries
during 2022
of group revenues are covered
by FSSCs via fully standardized/
harmonized processes
of group revenues are covered
by billing centralization
Complete outsourcing of application
management, application development
and infrastructure to a third party
New target operating model for Global
IT systems established
Nearly 20%
65%
of lab revenues are executed via DLC +
full migration of the certification business
to the global CertIQ platform
of WCS labs (2020 perimeter) have
been audited with best score of 42
5%
+70%
90%
incremental productivity increase
of lab revenues are executed via DLC
of current WCS perimeter to achieve WCM
awarded levels (bronze and above), reach at
least first WCM Gold awarded site by end
of 2030
Benefits
Target 2023
+5%
Productivity increase of 5%
per annum for the scope
under consideration
75%
Operate five regional FSSCs
covering 75% of revenues
via fully standardized/
harmonized processes
• Reduce days sales outstanding
(DSO)
33%
Accelerated rollout of centralized
billing covering 33% of
group revenue
80%
Centralized billing to cover 80%
of group revenues
Target 2025
Full global coverage
n/a
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 32
Our investment
strategy in action
We are
Our digital labs
transformation program,
launched in 2022, will
see us move to fully
digital laboratories with
new generation LIMS
by the end of 2025,
supporting our drive
for more sustainable
practices across
the business.
transforming
our laboratories
for a digital future.
Management reportSGS | 2022 Integrated Report We have
started our journey
towards maximizing
automation in our
laboratories.
33
Our digital transformation
We provide our services to customers from
more than 1 000 laboratories across the
world. It’s a geographically spread network
that presents us with several operational
challenges. We recognized that without
a standardized Laboratory Information
Management System (LIMS), we lacked
a uniform way of managing the workflows,
administration, finances and operations
at our laboratories. This made it harder
for us to leverage the complex data we
hold, and affected our ability to scale up
new technologies, boost productivity and
improve efficiency.
Aligning, optimizing and digitizing our
laboratory processes through our new digital
labs transformation program is enabling us
to increase efficiency, improve quality and
standardize our test methods. In turn, this
will allow us to introduce new data analytics
solutions, move towards integrated digital
laboratories with smart instrumentation,
mobility and analytics, then deliver secure,
supported and cost-effective LIMS
solutions (G6, STARLIMS and LabVantage)
and automated labs with AI-enabled insights
and modelling, and excellent scalability.
We will
meet customers’
expectations by
using advanced
technology.
“ STARLIMS is one of our
new generation LIMS.
It has a flexible Application
Programming Interface
(API), which makes it easy
to integrate with other
systems, ours or our
customers’, accelerates the
job registration process,
and means it can generate
complex reports quickly
and conveniently.”
Adams Yu
CN CCL Deputy Director and Owner
of CN CCL STARLIMS Project
Stronger governance
and greater visibility
The implementation of new generation
LIMS solutions within our digital labs
program is already delivering outstanding
benefits, offering best in the market lab
specific capabilities, including customizable
reporting. Smooth integration with other
systems across our network means we
can provide direct operational support to
our laboratories, reducing the need for
manual tasks, and minimizing human error.
The new LIMS solutions also provide
stronger governance and greater visibility,
making it possible to standardize naming
conventions, parameters and method
references for key international customers’
reporting, BI tools and data extractions.
We have set clear objectives for our digital
lab transformation: 30% of total group
laboratories sales will be generated by
digital laboratories with new generation
LIMS by the end of 2023, rising to more than
70% by the end of 2025. We will meet our
customers’ expectations by using technology
that provides advanced reports, client and
regulatory specification management, a
customer portal, and enhanced due diligence
solutions. The transformation will also help
our IT organization by reducing the risk of
system obsolescence.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 34
Our investment
strategy –
acquisitions and
partnerships
Acquisitions and partnerships help us grow
geographically, fill service gaps or expand our
skill set and technological capacities. In 2022,
we announced or completed seven acquisitions
and purchased the remaining 49% stake of
SGS Digicomply.
Gas Analysis Services (GAS)
Ecotecnos
Location
Division
AIEX
GAS provides gas instrumentation
measurement & calibration, on-site
testing, technical services, instrumentation
solutions and industrial hygiene testing to a
range of sectors including pharmaceuticals,
semi-conductors, food and beverages.
The acquisition enhances our competence
to further support our customers along
their supply chains.
Ecotecnos serves multiple sectors in Chile,
including aquaculture, energy, mining and
petrochemical, helping to ensure that
any impact these industries have on the
aquatic or marine ecosystem complies with
national laws. The acquisition strengthens
our sea monitoring and oceanography
services and enables us to support the
governance of marine ecosystems in
the region.
United Kingdom
Location
Industries
& Environment
Division
Chile
Industries
& Environment
Advanced Metrology Solutions
(Acquisition of the remaining 32% minority stake)
AMS specializes in 3D metrology precision
services and high precision measurements
in the aerospace industry.
AIEX provides mainly technical and welding
inspection services to the nuclear and
marine industries in France. The acquisition
adds complementary inspection capabilities
to our existing testing expertise, supporting
sustainable nuclear energy production
in the country and helping to reduce
dependence on fossil fuels.
Location
Division
France
Location
Division
Industries
& Environment
Spain
Industries
& Environment
Acquisition timeline 2022
January
February
May
July
August
November
Advanced
Metrology
Solutions
Gas Analysis
Services
Ecotecnos
AIEX
SGS Digicomply
Penumbra
Security, Inc.
Industry Lab
Silver State
Analytical
Laboratories, Inc.
and Excelchem
Laboratories, Inc.
proderm GmbH
Management reportSGS | 2022 Integrated Report 35
SGS Digicomply
(Acquisition of remaining stake)
Silver State Analytical Laboratories, Inc.
and Excelchem Laboratories, Inc.
SGS Digicomply was created and developed
by our joint venture C-Labs, and offers
a fully automated intelligence-gathering
solution that scans regulatory, media,
trading and environment information in
real-time to support our food and cosmetics
industry customers. Following the
acquisition of the remaining 49% stake from
the other shareholders of C-Labs, we now
own 100% of SGS Digicomply.
Sister companies Silver State Analytical
Laboratories and Excelchem Laboratories
are regionally recognized environmental
testing laboratories serving companies
and government agencies across the
western USA for their water and soil
needs. The acquisitions not only expand
our capabilities in the region, but they
also become an important part of our
Sustainability Solutions Framework.
Location
Division
Switzerland
Location
Health
& Nutrition
Division
United States
Industries
& Environment
proderm GmbH
Penumbra Security, Inc
Headquartered in Hamburg, proderm is
the leading provider of advanced clinical
testing solutions for cosmetics, personal
care and medical products in Germany.
The acquisition supports the strategic
alignment of our global network to the
key TIC megatrends, adding innovative
capabilities and strong scientific expertise
to further enhance our strong reputation.
Penumbra Security is a recognized leader
providing various types of information
security conformance testing to
government standards and regulatory
compliance. The acquisition expands our
cybersecurity capabilities and footprint into
the USA. It further aligns SGS with the
TIC connectivity megatrend and supports
our purpose of enabling a better, safer and
more interconnected world.
Location
Division
Germany
Location
Health
& Nutrition
Division
United States
Connectivity
& Products
Industry Lab
Drilling business in USA
(Disposal)
Industry Lab offers a comprehensive
range of microbiological analysis services,
from enumeration of indicator organisms
to detection of foodborne pathogens.
The acquisition is in line with our strategic
focus of expanding our food services and
laboratory network in Europe. It fills a gap
in our service portfolio and will allow us to
generate efficiencies and better serve our
clients in this market.
Location
Division
Romania
Location
Health
& Nutrition
Division
United States
Industries
& Environment
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 36
Our focus on
sustainability
Strong sustainability governance
From the Board of Directors to our affiliates,
a strong governance structure ensures
that sustainability remains at the heart
of our activities. Our senior management
is actively involved in overseeing the
delivery which is developed by the
corporate sustainability team.
The Sustainability Committee assists the
Board in evaluating and approving the group
policies and strategies regarding the impact
of the group’s activities on the environment
and society. Then the SGS Operations
Council takes the overall strategy forward,
approving and implementing more detailed
programs, policies and targets for all our
operations across the group.
Our regions and affiliates are responsible
for implementing various initiatives
that support the group’s sustainability
targets. We have appointed sustainability
ambassadors in most of our regions who
are responsible for implementing the
programs in their affiliates, cascading our
corporate programs and guidelines down
to every single SGS site.
Our Sustainability Ambitions 2030 cover our
whole value chain and set targets to 2023 and
2030. Each year, we track our progress against
our targets and define specific action plans
to meet our goals in the three pillars: better
governance, better society and better planet.
Sustainability awareness and training
Every employee has the opportunity to
contribute to the Sustainability Ambitions
2030 (SA2030) no matter their position or
location. To make them an active part of our
commitment, we have worked on several
initiatives in 2022:
• We have developed and launched a new
sustainability training that is mandatory for
all new employees. The course explains
our sustainability commitment and strategy,
and provides tips about how everyone
can contribute to the group’s SA2030
• The current energy crisis being a major
concern for all of us, we have launched
an energy savings campaign, to help our
employees save energy both at home
and at work, teaching them responsible
behaviors and minimizing our environmental
impact. We also share good practices
between affiliates, for example ways to
improve energy efficiency and renewable
energy projects at different sites across
our network
• For the third consecutive year we organized
the SGS People – 15 Day Challenge,
with more than 60 countries participating
in activities that reinforce our sense of
community. We organized other activities
for our colleagues’ families, including a
drawing contest for children that attracted
almost 2 000 entries
• The challenge also included activities
to promote recognition. More than 30
affiliates organized activities to choose
their best employees and/or best teams
• We also organized fundraising and
volunteering activities in more than 25
affiliates to support local communities
• Our human rights policy was updated in
2022 to better reflect our commitment and
align with the best practices of the market
Supporting the network
The importance of purpose and sustainability
in B2B environments is increasing. In particular,
our customers are placing greater importance
on the environmental, social and governance
practices of their suppliers and business
partners. Also, the demand for specific
sustainability-related information is increasing.
To ensure we continue making sustainability
an essential part of SGS’s value proposition,
we have provided training and materials to
our sales teams. This will help them better
understand and convey our sustainability
commitment to our customers.
In addition, we are encouraging closer
collaboration between the sustainability
professionals in our network to help us share
knowledge, good practices and success
stories, and ultimately to provide a better
service to our customers.
Management reportSGS | 2022 Integrated Report 37
2022 progress
On track
In progress
Focus for improvement
Better governance
Enabling long-term value through secure, fair,
transparent and responsible business practices.
Excellence
Integrity
2023 targets
2022 performance
2023 targets
2022 performance
Promote a culture of
efficiency and excellence
through our WCS program,
with 20% of WCS labs
reaching WCM Bronze
During the 2022 our labs reached important
milestones with 3 Labs already at their 4th
WCS external audit (with the best score of
42 against the 50 required for the Bronze
Award level)
Ensure 100% of
employees are trained on
our Integrity Principles on
an annual basis
99.9% employees trained on
our Integrity Principles
Expand the program
to at least 10 new
sites (considering
2020 perimeter)
Four new sites adopted WCS in 2022
WCS implementation has progressed
according to each lab WCS routemap.
In total, we have expanded the program
to six new sites
Brand
2023 targets
2022 performance
Achieve a customer
satisfaction score of 85%
84.5% of customer satisfaction score
In 2022, we expanded the program to cover
27 affiliates across six regions, representing
a massive improvement in geographical
coverage compared to prior years
Digitalization, information
protection and privacy
2023 targets
2022 performance
Enhance the SGS
Information Governance
Framework, data
privacy framework
and standardized
information security
management systems
Security governance maturity has been
improved by establishing the various
security committees (tactical and strategic)
as well as satellite committees with DPO,
Architecture and Security and RISOs
The security structure has been expanded
by creating LISOs for security management
in the countries
Harmonize processes
for third-party vendors/
processors for risk
evaluation purposes
The process of “Third party security
assessments” (TPSA) has been formalized.
Projects and suppliers are subjected to a
security assessment to ensure that their
processes and information security measures
are adequate to minimize possible risks
The assessments are analyzed by the
security technical office as part of the
GRC tasks and validated by the RISO
Sustainable procurement and supply chain
2023 targets
2022 performance
55% of our goods and services
spend was achieved in 2022
Actively promote SGS
sustainability principles
and values in our
supply chain:
• At least 50% of our
goods and services
spend will be supplied
by suppliers who have
signed our code of
conduct or commit to
comparable standards
to SGSs’ within their
own policy
• 100% of the selected
SGS strategic suppliers
will have completed
our sustainability
self-assessment
questionnaire (SAQ)
SAQ updated and launched to a pilot
group of suppliers covering all global
strategic suppliers and local strategic
suppliers on four pilot countries, achieving
65% completion rate. Planning to expand
scope and to work with a partner to
increase completion rate to 100%
• 75% of requests for
proposals to be online
and include the relevant
SGS sustainability
criteria, enabling
comparison and
selection of suppliers
• Actively contribute to
the reduction of our
SGS CO2 footprint
by sourcing energy
efficient solutions
from our suppliers
• Leverage SGS buying
power to request
strategic suppliers
to report their own
CO2 footprint and
subsequently target
carbon reduction in
their own operations
We are currently improving our monitoring
system to ensure that this target is met
by 2023
Continued to source energy efficiency
technology to feed our Energy Efficiency
in Buildings program, as well as
renewables certificates
Started supplier relationship management
program with strategic suppliers,
to develop initiatives to reduce our
CO2 footprint
The SAQ now includes questions
related to CO2 that will serve as a basis
for understanding better our scope 3
and defining reduction actions with
our suppliers
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
38
Our focus on
sustainability
continued
2022 progress
On track
In progress
Focus for improvement
Better society Empowering equality,
well-being and prosperity.
Diversity and equal opportunity
Human rights
2023 targets
2022 performance
2023 targets
2022 performance
Continue performing
annual risk assessments
on human right across the
Group, keep developing
our human rights due
diligence program to
avoid violations across
our operations and train
100% of our employees
on our human rights
principles annually
Annual risk assessment completed
for 2022
Due diligence program continued
to develop
Human rights eLearning completed by
78% employees. Plans are in place to
account for employees that completed the
training off line (currently excluded) and to
further increase the completion ratio
Community investment
2023 targets
2022 performance
Increase by 10% our
positive impact on our
communities through
employee volunteering,
with special focus
on vulnerable groups
affected by pandemics2
CHF 2 million of community investment
and 18 691 hours of volunteering,
representing a 54% and 9% variation
compared to 2019
31.1% women at CEO-3 level,
a 7% increase compared to 2021
Achieve 30% women
in senior leadership
positions (3 levels
below CEO)
Health and safety
2023 targets
2022 performance
Reduce our Total
Recordable Incident
Rate (TRIR) by 20%
and Lost Time Incident
Rate (LTIR) by 10%1
HSE certify the
main operational
sites (integrated
ISO 45001 and ISO
14001 certification)
LTIR of 0.19 and TRIR of 0.35, a -25%
and -16% variation respectively compared
to 2018
229 sites, covering approximately
33 000 employees, have now achieved
certification in ISO 45001 (previously,
OSHAS 18001) and ISO 14001
Knowledge and engagement
2023 targets
2022 performance
Increase by 10% the
completion rate of job-
related training (except
compliance training and
against a 2020 baseline
Improve year on
year our employee
engagement and
manager effectiveness
scores
4.2 million hours of training and 43.3
hours of training per FTE, representing
a 11.9 % and 3.1% variation compared
to 2020
69/100 employee engagement score
(-1% variation compared to 2020)
72/100 manager effectiveness
(no variation compared to 2020)
1. Except compliance-related training.
2. Against a 2019 baseline.
Management reportSGS | 2022 Integrated Report
39
Better planet
Supporting the transition to a low-carbon and climate resilient world
through responsible resource use and effective waste management.
Climate change mitigation
2023 targets
2022 performance
Meet our science-based
target by:
10.5% reduction since 2019 in scope
1 and 2 absolute GHG emissions
8.2% increase since 2019 in scope 3
absolute GHG emissions
• Increasing annually
the number of energy
efficiency measures
in our 100 most
energy intensive
owned buildings
The coverage of our energy efficiency
measures in these buildings has now
reached 77% of our consumption,
representing a 7% increase compared to
2021. The number of energy efficiency
measures has increased by 12%
• Reducing total car
fleet GHG average
emissions by 10%
9% reduction in car fleet GHG emissions
since 2019
New vehicle emissions policy implemented
across the Group
• Ensuring 10% of
our cars have low-
carbon technologies
All residual GHG
emissions will
be compensated
11% of cars have low-carbon technologies
Our residual GHG emissions have
been compensated
Further adopt Task
Force on Climate-related
Financial Disclosures
(TCFD) recommendations
In 2021, we became official supporters
of the TCFD and our second TCFD Report
is available in the appendix of this report,
including our first impact quantification
for key selected risks and opportunities
In 2022 we became the first TIC company to receive
approval for our 1.5ºC and net-zero targets from the
Science Based Targets initiative (SBTi).
Science-based targets provide a clearly defined pathway
for companies to reduce greenhouse gas (GHG) emissions,
helping prevent the worst impacts of climate change and
future-proof business growth.
Aligned with the 1.5ºC objective from the Paris Agreement,
we have committed to reach net-zero greenhouse gas
emissions across the value chain by 2050. To achieve this
objective, we have approved near- and long-term science-
based emissions reduction targets with the SBTi:
Near-term targets:
• We commit to reduce absolute scope 1 and scope 2
GHG emissions 46.2% by 2030 from a 2019 base year
• We also commit to reduce absolute scope 3 GHG
emissions 28% by 2030 from a 2019 base year
s
t
e
g
r
a
t
d
e
s
a
b
-
e
c
n
e
c
s
d
e
t
a
d
p
u
r
u
O
i
Long-term targets:
• We commit to reduce absolute scope 1, 2 and 3
GHG emissions 90% by 2050 from a 2019 base year
Our direct emissions reductions will be prioritized, and
all residual emissions will be neutralized in line with SBTi
criteria before reaching net-zero emissions by 2050.
This means another great milestone for SGS and
further proof of our commitment to make a positive and
long-lasting impact in society, and limit global temperature
rise to 1.5ºC. Our Sustainability Ambitions 2030 set the
roadmap to reducing our emissions, including initiatives
such as the reduction of energy consumption in our top
energy intensive owned buildings, our vehicle policy and
the use of renewable energy, among others.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
40
Stakeholder
engagement
Maintaining continuous dialog with our stakeholders
is critical to our long-term success. These valuable
insights inform our materiality assessment and
enable us to align our sustainability initiatives to
stakeholder requirements and ensure we deliver
value to society.
Why we engage
Our customers are at the heart of
everything we do. It is important for us
to understand whether we achieve our
goals to make their businesses more
efficient, profitable and sustainable.
How we engage
• One-to-one meetings
• SGS hosted conferences, seminars
and webinars
• Customer surveys, e.g.
Voice of the Customer
• White papers
• Customer portal
Why we engage
Our services ensure that consumers trust
the products they buy. Understanding our
end-consumers tells us if our services
support SGS’s reputation for delivering
confidence and assurance.
How we engage
• Certification and product labeling
• Direct marketing and communication
with certain B2C products
Key topics discussed
• Quality of services
• SGS employees’ attitude,
expertise and responsiveness
• Quick turnaround times
• Sustainability solutions
• Data privacy and protection
• Cybersecurity
• Ethical behavior
Key topics discussed
• Ethical behavior
• Adaptation and mitigation
of climate change
• Respecting human rights
and ethical labor practices
Why we engage
Our people are essential to our business.
Discussing performance and providing
training and opportunities helps to keep
our people motivated and engaged.
How we engage
• Our global employee engagement program
• SGS intranet portal and internal
social network
• SGS Inside newsletter
• Training programs, videos and
eLearning modules
• SHINE onboarding
• Line manager direct engagement
Key topics discussed
• Career development plan
• Diversity and inclusion
• Well-being and work-life balance
• Respecting human rights and
ethical labor practices
• Health and safety of employees
and contractors
• Talent attraction and retention
• Sustainability awareness, good
practices in labs and offices
• Recognition
Customers
Consumers
Employees
Management reportSGS | 2022 Integrated Report 41
Why we engage
Engaging with our suppliers is key to
ensure a smooth supply chain, boost
innovation and strengthen sustainability
in our business.
Key topics discussed
• Human rights and ethics
• Cybersecurity and data privacy
• Innovation
• Carbon footprint
How we engage
• Supplier relationship
management (SRM)
• Supplier self-assessment questionnaire
(SAQ)
• Supplier code of conduct
Why we engage
Our communities and the planet both
affect our business and could be affected
by our operations. We evaluate whether
our sustainability endeavors are recognized
as being among the very best – both
regionally and in the TIC industry.
Key topics discussed
• Respecting human rights and
ethical labor practices
• Adaptation and mitigation
of climate change
• Local community investment support
How we engage
• Multiple community investment
projects across the network – the
impact of which we measure through
our annual community survey
• White papers
• One-to-one meetings with NGOs
and responses to questionnaires
Why we engage
Governments and industries are often
moving in the same direction that we
are. We need a clear picture of how
we contribute to driving innovation,
promoting sustainable development
and shaping markets.
How we engage
• SGS hosted conferences, seminars
and webinars
• Membership meetings and events
• White papers
Key topics discussed
• Ethical behavior
• Risk management and
business continuity
• Cybersecurity
• Data privacy and protection
Why we engage
Our investors are vital to our ongoing
success and growth. We constantly
review market analysis, and aim to be
assessed as both a sound investment
and a sustainable business.
How we engage
• Annual General Meeting
• SGS Investor Days
• Meetings with investors and analysts
• Responses to analyst questionnaires
Key topics discussed
• Climate-related risks and opportunities
• Sustainability solutions, impact valuation
of our activities
• Ethical behavior
• Risk management and
business continuity
• Good practices in corporate governance
• Cybersecurity
• ESG performance and reporting
• Services that support our customers’
sustainability ambitions
Suppliers
Communities
and the planet
Governments
and industries
Investors
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 42
Our material topics
Materiality assessment
We conduct a formal materiality assessment
every two years. In 2022, we integrated the
results of our risk assessment and 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.
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 nine topics that are most important to the organization
1 Cybersecurity
6 Talent attraction and retention
2 Data privacy and protection
7 Customer relationship management
3 Ethical behavior
4 Health and safety
5 Risk management
8 Corporate governance
9 Sustainable supply chain
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
10 Adaption and mitigation of climate change
18 Local community investment support
11 Biodiversity
19 Preventing air pollution
12 Diversity in the executive team
20 Reducing and managing waste
13 Diversity and inclusion
14 Employee engagement
21 Responsible use of materials
22 Tax strategy
15 Executive compensation linked to sustainability
23 Training and development
16 Freedom of association
24 Water footprint
17 Innovation in services and operations
25 Well-being and work-life balance
5
2
1
3
4
6
8
9
7
10
12
15
24
18
20
23
13
14
25
17
21
22
16
19
11
Management reportSGS | 2022 Integrated Report Our risk intelligence
During 2022 we have continued to focus
on and address the main prevailing risks
facing the organization, to ensure we can
fulfill our purpose of making the world
better, safer and more interconnected.
43
Risk governance
Our Board of Directors reviews risks to
ensure that the company has a solid strategic
approach to mitigating them (see page
94). 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 CEO. 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 framework
During the year, SGS has worked to further
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
enhanced by providing additional guidelines
to local affiliates on how to properly recognize
and measure their local risks, and by sharing
best practice examples of mitigation actions.
The scope and global coverage of the risk
management assessment now continues
to cover a full and limited scope affiliates,
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 heat map,
presented on page 45.
Risk oversight
To support our risk management framework,
the Group conducts risk assessment, using
a bottom-up approach, with identification
of potential risks, coupled with design and
implementation of mitigation actions in
place at a local level, where appropriate.
Additionally, at group level, SGS applies 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, especially due to political instability and
military conflicts, global energy crisis driving
the inflationary pressures, further aggravated
by trade sanctions, adversely impacting local
and regional economies, especially sourcing
and supply chain operations, coupled with
continued climate changes, to name a few.
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.
Risk management process
Enterprise Risk Management Framework
Places responsibility and accountability for managing risk
close to our operations
Board of Directors and CEO
Review risks and ensure 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
Audit Committee
Supporting the Board in risk assessment
and monitoring
Operations Council
Ultimately responsible for identifying company
risks and integrating the management of these
risks into key business planning processes
Group Risk Steering Committee
Chaired by the CEO, the Committee gathers executive
members, including the CFO and CCO, together with
operational function representatives
Macro
risk assessment
Global Risk
& Compliance
(GRC) platform
Risk champions
– Affiliates
– Local Divisions
– Operations
Own risks in local jurisdictions
applying a bottom-up approach
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 44
Our 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
2022 risk assessment results
In 2022, we carried out risk assessments
in 56 of our main markets, applying full
and limited scope approach. We assessed
147 specific risks within 44 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 three
to five 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
the 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. Other significant
risks, mentioned already above, are political
and military conflicts, global energy crisis,
which adversely impact the supply chain
and sourcing activities, result in growing
operational costs of our business.
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
proactive resilience, planning and incident
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 training sessions
and webinars, and enhanced our knowledge
hub launched in 2021 for all the business
continuity officers to have access to best
practice documentation.
Management reportSGS | 2022 Integrated Report 45
External risks
Communication & Investor Relations
Environment & climate change
Pandemic
Customer needs
Cyberattack
Economy & sovereign
Industry
Legal & regulatory
Political risk, war, crime, terrorism
Technological innovation
Internal risks
Operational
risks
Process
Environment
(operations)
Health & safety
Pricing
Real estate
Service delivery
Sourcing
Supply chain
Non-operational
risks
Management
information
Human capital
Compliance
Technology
Treasury
Strategic
Accounting
Compliance
Budget & forecast
Reward
Contract commitment
& claim
Access
Availability
Credit
Business model
Foreign exchange
Business portfolio
External reporting
Talent acquisition
Internal reporting
Talent management
Tax
Data privacy
Fraud & illicit or
unauthorized activities
Information governance
Unethical behavior,
bribery & corruption
Data integrity
Infrastructure
Reliability
Technological
capacity
Liquidity
Mergers &
acquisitions
Social responsibility
Heat map of highest scored residual risks
1 Political risk, war & terrorism
2 Cyberattack
3 Legal & regulatory
4 Supply chain
5 Access to IT applications
6 Pricing
7 Sourcing
8 Fraud & illicit or unauthorized activities
9 Talent management
10 Technological innovation
11 Economy & sovereign
12 Pandemic
13 Data privacy
0
.
5
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H
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0
.
4
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I
0
.
3
0
.
2
0
.
1
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L
12
10
11
5
9
13
6
8
1
7
4 2
3
Low 1.0
2.0
3.0
Likelihood
4.0
High 5.0
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
46
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
l Political risk, war
a
n
and terrorism
r
e
t
x
E
• Health and safety
of employees
• Sustainable
supply chain
• Business disruption, asset loss or
harm to employees due to civil or
interstate war, political violence and
terrorism and external criminality
• Crisis management in place to monitor
the situation and take necessary
actions with respect to the Russia/
Ukraine conflict
• Reputational risks, risk of penalties
• No major concentration of
and loss of business due to
international trade sanctions
and embargoes
investments in single countries
to ensure adequate level
of diversification
• Incorporate relevant mandatory
requirements for all levels of
management into the group security
risk management policy
• Introduction of an enhanced sanction
policy, identification of red-flags and
know your client (KYC) procedures for
clients, suppliers and other business
partners, review of existing activities
at risk areas
Cyberattack
• Cybersecurity
• Financial losses resulting from
• Execution and monitoring of
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, Intelligence and digital
forensic and incident response
(DFIR), services through the
Security Operations Center (SOC)
• Implementation of security
measures and solutions at different
organizational layers
• Execution and monitoring of advanced
endpoint detection and response
(EDR) anti-malware systems
• Further enhancement of security
awareness among employees,
through training campaigns
• Implementation of security
updates and patches in systems
and applications
• Vulnerability management plan
in place to detect and remediate
potential weaknesses
Management reportSGS | 2022 Integrated Report 47
Risk description
Material topic
Summary of impact
Mitigation measures
sovereign
l Economy &
a
n
r
e
t
x
E
• Risk
management
and business
continuity
• Loss of revenue (decrease in
service demand/economy)
• Risk of price pressure
• Ongoing performance monitoring
of SGS operations by region and
country in comparison to local
economic environment
• Proactive and more frequent pricing
measures to address cost increases
and to protect SGS growth
• Take measures to adapt SGS
capacity (and cost base) based
on market demand
• Balanced resources allocation
to ensure adequate business
and geographical diversification
Pandemic
• Health and safety
of employees
• Sustainable
supply chain
• Spread of infections (including
• Ongoing use of business continuity
outbreak, epidemics, pandemics,
etc.), disrupting business operations,
interactions with suppliers and
customers, resource availability
taxonomy and related implementation
of action plan (2 000 actions defined
on a worldwide basis within the
SGS operations)
l
y Access to IT
g
applications
o
o
n
h
c
e
T
• Cybersecurity
• Risk of unauthorized access to
• Reinforcement of user access
• Ethical behavior
• Good practices
and corporate
governance
sensitive information and resources,
existence of orphan accounts and
use of exfiltrated credentials
procedures and control
• Implementation of digital surveillance
services to reinforce the process of
user activity monitoring
innovation
l Technological
a
n
r
e
t
x
E
Customer
needs
• Innovation
in services
and operations
• Customer
relationship
management
• Risk of investing in technological
innovation with limited value and
impact on customers
• Risk of losing opportunities due to
lack of innovation agility in serving
current and new markets
• Deployment of a customer-centric
and rapid validation approach
• Execution of innovation initiatives,
based on a thorough understanding
of the customer needs, problems
and context
• Continuous assessment and validation
of innovation initiatives and projects
to ensure their organizational viability
• Ongoing business digitalization
through strategic partnership on
technology development to identify
solutions to mitigate operational
risks, and to improve efficiency
and competitiveness
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 48
Our principal risks
continued
Risk description
Material topic
Summary of impact
Mitigation measures
e Fraud & illicit or
c
n
a
i
l
unauthorized
activities
p
m
o
C
• Ethical behavior
• Good practices
and corporate
governance
• Business disruption, asset loss
or harm to employees due to
fraud, theft and abuse of integrity
of services
• 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)
• Strong code of conduct policy and
philosophy with regular and recurrent
training for SGS employees
• Confidential and anonymous whistle-
blower reporting system in place
• Reinforcement of business ethics
compliance function at corporate
and affiliates levels
• Security integrity vulnerability
assessment incorporated into
business processes
• Ongoing rollout 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/P&L
reviews and internal audits at
country level
Data privacy
• Data privacy
and protection
• Failure to comply with data
• Appointment of a full-time group
protection laws and/or changes
in privacy regulatory environment
and enforcement
data privacy officer (DPO) and local
DPOs in major affiliates to drive and
monitor compliance with policies
and legislation relating to protection
of personal data
• Global privacy policy and set of
working guidelines covering all
aspects of handling of personal
data, applicable to all affiliates
• Induction training to all new
employees ensuring a level of
awareness to personal data in line
with the group exposure in this field
• Third-party vendor due diligence and
supervision in matters concerning the
security and safe handling of personal
data, aimed at assessing their privacy
and data security policies, processes
and controls
• Systematic assessment/due
diligence conducted for projects
involving the purchase of global IT
solutions and global IT consultancy/
development services
Management reportSGS | 2022 Integrated Report 49
Risk description
Material topic
Summary of impact
Mitigation measures
s Supply chain
s
e
c
o
r
P
& sourcing
• Sustainable
supply chain
• Business slow-down and/or
• Inflation, increased transportation
increased operational costs due
to supply chain issues, inflation,
increased transportation costs
and energy price spike
costs and energy price risks
integrated into the strategic risk
action plan roadmap and a dedicated
procurement workforce, with
numerous initiatives undertaken,
especially in the areas of contract
management, tendering and
renegotiations, introduction of
standard specifications, consolidation
of services and implementation of
new technologies
• Regular monitoring of potential
supply chain risks, especially for
laboratory providers
• Leveraging market intelligence
to monitor market trends and
continuously address inflation
and energy-related risks
Pricing
• Customer
relationship
management
• Risk of incorrect pricing due
to inadequate pricing model
• Risk of margin pressure and
• Completion of pricing self-assessment
leading to implementation of key
pricing actions and corrective measures
processing inaccurate discounts
• Implementation of our Pricing Golden
• Risk of underutilized capacity
due to too high pricing
versus competition
management
l Talent
a
t
i
p
a
c
n
a
m
u
H
• Talent attraction
and retention
• Training
• Ineffective or inadequate training
and development programs
for employees
and development
• Lack of leadership alignment and
effectiveness, lack of qualified and
competent employees, lack of
succession planning of key personnel
• Risk of inefficient
performance management
• Employee
engagement
and consultation
• Diversity
and inclusion
• Well-being and
work-life balance
Rules and value-based pricing
• Execution of additional pricing actions
leveraging on available data (upgraded
internal dashboards, external market
intelligence, segmentation, in-
depth analysis)
• Introduction of employee value
proposition (EVP) and employer
branding program which support
our talent attraction and retention
• Talent review and succession planning
process across the organization
to enhance talent management
and development
• Talent assessment and movement
will significantly improve
talent development
• Structured leadership development
program will enhance leaders’
competencies
• Development of well-being program
to improve employee engagement
and retention
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
50
Quantifying our
value through
six capitals
2021 SGS value to society (CHF MIO)1
Like all organizations we depend on various
capitals to be successful. We are one of a small
number of companies that measure value creation
by capital using our Impact Valuation Framework.
We continued to develop this in 2022 and it now
covers a wider range of services than last year.
The framework is based on six forms
of capital, as defined by the International
Integrated Reporting Council. We use it
to help us to make better decisions, by
considering non-financial as well as financial
aspects of our business. We measure
our progress using 32 indicators that
support how we track our measurable
positive impact.
Applying our Impact Valuation Framework
methodology, we have calculated that our
total value to society calculated in 2022
for 2021 was +CHF 6 397 million, and
that the value of our positive benefit to
society was +CHF 7 220 million.
We created the majority of this value through
profit generation, the paying of taxes and
wages, and our investments in training
programs and information security.
The framework also shows that we
generated CHF 822 million of negative
societal impacts, arising from the
environmental footprint of our supply chain.
www.sgs.com/en/our-company/
corporate-sustainability/value-to-
society
1.
Value to society is calculated using 2021 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.
Our manufacturedcapital valuemeasures theimprovementof capital assets(directly controlledand those of oursupply chain)Our financialcapital resultsare impactedby profit,revenue,employmentcosts andtaxes paid togovernmentsOur human capitalvalue is directlyinfluenced, amongothers, by ourrisk of havinghuman rightsnon-compliancesin our value chainand by oursuboptimal dataon gender equalityThe most negativeimpact is related to the footprint in the value chain, especially in our supply chainOur intellectualcapital value ismostly driven byour training anddevelopmentprogramsThis capital ispositively impactedby the way weimprove ourrelationships withlocal communities,creating trust tocustomers and alsonegatively impacteddue to the riskof suppliers’financial stressThe total valueto society ofSGS directoperations andsupply chainactivities6 0236 397556(181)(359)27484NaturalcapitalIntellectualcapitalFinancialcapitalManufacturedcapitalHumancapitalSocial andrelationshipcapitalValue tosocietySupply chain 463Supply chain 0Direct operations 145Supply chain 1 919Positive impactsDirect operations 4 104Supply chain 0Direct operations 7Supply chain 0Direct operations 298Supply chain 0Direct operations 209Value to societyTotalDirect operations 71Supply chain 0Direct operations (53)Supply chain 0Negative impactsDirect operations 0Supply chain (352)Supply chain 0Direct operations (24)Direct operations (14)Supply chain 0Direct operations (125)Supply chain (118)Direct operations (134)Management reportSGS | 2022 Integrated Report 51
Our value in action
Our value in action
Through our SGS Impact Valuation
Framework we can measure the impact
of what happens in our operations and
across our supply chain. We are committed
to measuring the impact of the sustainability
solutions we offer.
To create a valuation methodology based
on verifiable data and research we worked
across all five of our divisions by identifying
services and their impacts. Then, based on
a mix of research and input data, we are able
to calculate the impact and monetize it.
An example of the methodology applied
to energy and green building services
is shown below.
This exercise helps us better understand
the impact of our services in terms of how
much value they add to the different capitals.
We have covered almost all the revenue
coming from our sustainability solutions so
far, and our initial impact calculation shows a
significant positive impact in many different
areas. Among the main impact indicators,
we have looked at so far are consumption
of energy and CO2 emissions avoided; water
consumption avoided; injuries avoided; and
lost disability-adjusted life years avoided.
Main impact indicators1:
Avoided energy
consumption
(billion KWh)
Avoided injuries
(Mio)
Avoided water
consumption
(billion liters)
Avoided CO2
emissions (million
metric tons)
Avoided DALYs
lost (thousands)2
+28
+12
68
+14
+116
Example of how our valuation
methodology was applied to
forest services
1 Service or group
of services selected
2 Input
indicators
• Energy & Green Buildings
• Number of buildings audited
6 Impact monetization
• Social cost of avoided
CO2 emissions
• Increase in natural capital
3 Identification
of impacts
• Reduced energy
consumption
• Avoided
CO2 emissions
5 Impact calculation
4 Valuation methodology
• CO2 avoided
• U.S Energy Information Agency research regarding
the energy consumption of commercial buildings
• World Green Building Council research about average
energy savings associated with green buildings
• Social cost of carbon
1.
2.
Impact indicators resulting from applying the SGS Impact Valuation Framework and covering 90% of the revenue coming from our sustainability solutions.
Disability-adjusted life years (DALY). One DALY represents the loss of the equivalent of one year of full health.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 52
Financial capital
Our financial capital includes the value we add
to society through paying taxes to governments,
dividends to investors and wages to employees.
Beyond this, the profits we generate allow us
to reinvest in growth, innovation and improving
our services to our customers.
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(a)
– 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
2022
630
763
7 122
2021
655
1 202
7 007
2020
505
1 134
6 908
3 Progress during the year
Financial discipline
and focused
capital allocation
– The structural optimization plan, at a one-off cost of CHF 35 million, will deliver over CHF 50 million
recurring savings from 2023
– Continued strong investment into our network expansion with net capex as a percentage of
group revenue of 4.8% and seven acquisitions. In particular, our acquisition of proderm GmbH
adds competence in cosmetics and personal care testing, significantly reinforcing our leading
global position
– We issued two bonds with a total value of CHF 500 million. All our long-term debt is fixed
at an average interest rate of 0.8%
– CHF 250 million share buyback for cancellation as part of our flexible capital allocation strategy
A resilient financial performance
– Total revenue reached CHF 6.6 billion, up 3.7% (6.8% at constant currency*), with mid to high-
single digit growth achieved across all divisions. Organic revenue* increased by 5.8%, supported
by pricing initiatives and volume increase throughout the SGS network
– Adjusted operating income*, on a constant currency basis, is broadly stable at CHF 1 023 million
in 2022 compared to CHF 1 022 million in prior year. Operational leverage was temporarily offset
by the impact of Covid in China, supply chain disruption and acceleration of inflationary pressure
– Adjusted operating income margin* of 15.4% compares to 16.5% in prior year (16.4% at
constant currency*)
– Operating income of CHF 898 million compares to CHF 977 million in prior year. It was also
impacted by restructuring measures, the decision to cease two key upstream projects in Libya
following absence of cash collection, and strengthening of the Swiss Franc
– Net financial expenses slightly decreased from CHF 53 million in prior year to CHF 51 million in 2022
– Effective tax rate (ETR) improved from 29% in prior year to 26% in 2022, reflecting a normalization
of non-deductible expenses
– Profit attributable to equity holders of CHF 588 million compares to CHF 613 million in prior year,
a reduction of (4.1)% over prior year
(a) While we expect an improved adjusted operating income* and margin* in 2023, this target is more challenging given progress in
2022 and our disciplined approach to M&A.
* Alternative Performance Measures (APM), refer to the ‘2022 Full Year APM’ document.
Management reportSGS | 2022 Integrated Report 53
3 Progress during the year continued
Financial discipline
and focused
capital allocation
– Basic earnings per share of CHF 78.86 compares to CHF 81.91 in prior year. On an adjusted*
basis, earnings per share increased by 3.4% to CHF 92.46
– Free cash flow (FCF)* of CHF 507 million compares to CHF 635 million in prior year. Cash flow
was impacted by higher net working capital* to support the strong revenue growth. Consequently,
operating net working capital balance was close to 0% as a percentage of revenue compared
to (2.4)% in prior year. In addition, Cash flow from operating activities decreased from
CHF 1 169 million in prior year to CHF 1 030 million in 2022 for the same reason
– Investment activities: Net capital expenditure was CHF 321 million, compared to CHF 331 million
in prior year. The group completed seven acquisitions for a total consideration of CHF 64 million
– Financing activities: In 2022, the group paid a dividend of CHF 599 million and issued two new
bonds in August for an amount of CHF 500 million. A new share buyback program was completed
for a total of CHF 250 million
– Return on invested capital (ROIC)* of 18.6% compares to 19.6% in prior year, mainly due to the
higher net working capital requirement
– As at 31 December 2022, the group net debt* increased from CHF 1 691 million in December 2021
to CHF 2 219 million
4 Outcomes
Revenue CHF BN
Free cash flow CHF MIO
Adjusted operating income margin* %
2022
6.6
507
15.4
2021
6.4
635
16.5
2020
5.6
758
16.1
5 Outlook 2023
– Mid-single digit organic growth
– Improved adjusted operating income* and margin*
– 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 ‘2022 Full Year APM’ document.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 54
Financial capital
by divisional
performance
and outlook
We strengthened our market position in
Connectivity & Products, and in certain
Knowledge markets through focused
resource and capital allocation.
Connectivity
& Products
A very strong performance given the impact from Covid in China 1
Overview
Outlook
• Organic growth of 3.9%, a solid
performance given the lockdowns
in China and supply chain disruption
• Connectivity growth was strong,
supported by our continuous investment
in new technologies
• Softlines grew in high-single digits
benefiting from market share gains
• Hardlines declined organically due to
the impact of supply chain disruption
• Strong growth in Trade Facilitation Services
driven by Antifraud services in Africa
and eCustoms
• Solid growth expected across all activities
against a potentially challenging backdrop
• Connectivity to remain major growth
driver benefiting from investment and
cybersecurity market development
• Softlines to develop in new sourcing
countries despite some short-term
market headwinds
• Hardlines to improve despite being
potentially most impacted by
economic conditions
Revenue (CHF million)
CHF 1 311 MIO
Constant currency growth in 2022
4.5%
Health
& Nutrition
Health Science to reaccelerate in 2023
2
Overview
Outlook
• Organic growth of 4.1%
• Structural growth drivers to remain strong
• Food organic growth well above
divisional average
• Vaccine volumes largely replaced,
however organic growth slightly
declined in Health Science
in 2023
• Americas Food network expansion
to support portfolio growth
• Investment in Biopharma will support
reacceleration of growth in Health Science
• Cosmetics & Hygiene grew in line
with the divisional organic average
driven by clinical and panel activity
• The integration of our recent acquisitions
combined with efficiency initiatives will
support profitability
• Margin impacted by reduction of Covid
vaccine-related work and significant
investment in the network
Revenue (CHF million)
CHF 892 MIO
Constant currency growth in 2022
7.6%
Management reportSGS | 2022 Integrated Report Industries
& Environment
Growth led by industrial businesses
55
3
Overview
Outlook
• Organic growth of 4.8% from both
• Growth momentum in Field Services
volume and price
• Double-digit growth in Technical
Assessment & Advisory driven by an
improving market and new contract wins
• Field Services and Inspection grew above
divisional average driven by environmental
field and marine services
and Inspection with expansion into new
services and geographies
• Strong growth expected in safety,
and the new areas of energy transition
and sustainability solutions
• Continue to develop new innovative
solutions to enhance the service portfolio
• Higher demand in safety services drove
above divisional average growth in
Industrial and Public Health & Safety
• Bolt-on acquisitions and proactive portfolio
management as a key part of our divisional
growth strategy
Revenue (CHF million)
CHF 2 157 MIO
Constant currency growth in 2022
5.4%
Natural
Resources
Strong momentum in minerals
4
Overview
Outlook
• Organic growth at 8.7% reflects an overall
strong commodity market, mainly in mining
• Strong growth in Trade and Inspection
as a result of favorable market conditions
in all commodities
• Double-digit growth in Laboratory Testing
due to strong momentum in geochemistry
and new outsourcing contracts in oil and gas
• Major project wins and service
diversification drove double-digit
growth in Metallurgy and Consulting
• Continued momentum in the mining
industry, while oil and gas and agriculture
markets continue to be dependent on
macro factors
• Laboratory Testing momentum continues
to be driven by ongoing exploration demand
and outsourcing opportunities
• Investing in our biofuels testing capacity
to meet strong market demand
• Rolling out sustainability solutions to support
energy and mining customers’ ESG goals
Revenue (CHF million)
CHF 1 583 MIO
Constant currency growth in 2022
9.3%
Knowledge
Certification growth ahead of market and very strong growth
in consulting
5
Overview
Outlook
• Organic growth of 8.7% with good
• Overall demand for Knowledge services
performance from all SBUs in
all geographies
• Certification organic growth was
strong, ahead of the market
• Consulting grew well above the
divisional average primarily driven
by SGS Maine Pointe
• Customized Audits grew below divisional
average despite double-digit growth
in Responsible Business Services and
ESG services
to remain strong
• Solid growth in Certification led by medical
devices and information security, while our
new and innovative CertIQ online portal
will also support growth
• Momentum in Consulting supported by
network expansion
• Social and environmental audits as well
as sustainability report assurance are
expected to deliver double-digit growth
Revenue (CHF million)
CHF 699 MIO
Constant currency growth in 2022
8.7%
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 56
Financial capital
in action
Financial
capital
We are
The acquisition of
proderm, now SGS
proderm GmbH,
has brought us
complementary
capabilities and scientific
expertise in dermatology,
ophthalmology, oral care,
women’s health and
intimate hygiene, as well
as ‘cosmeceutical’ and
medical-related products.
growing
organically and
through strategic
acquisitions.
Management reportSGS | 2022 Integrated Report We have
expanded and
strengthened our
clinical testing
capabilities.
We will
drive revenue
synergies across
the organization.
+59 000
products tested since foundation
+250 000
subjects enrolled since foundation
“ We want to use the proderm
team’s globally recognized
expertise to expand
our offer to customers.
The team exceeded our
expectations, both culturally
and strategically, adding
great value to SGS and
our customers.”
Dr. Sheida Hönlinger
Director Health Science and Cosmetics
& Hygiene Germany/Austria
57
Providing our customers
with optimal support
The global cosmetics and hygiene market
continues to grow rapidly, fueled by an
increased consumer focus on well-being.
To differentiate their products from the
competition, brands and manufacturers
constantly need to develop new innovative
formulations that will fulfill consumer
expectations. They need to stay on the
leading edge of trends and developments
by offering sustainable, green products
and move away from fossil fuel-based
ingredients to bio-based ones.
These organizations operating within
the health, beauty and consumer goods
industries are also held to incredibly high
standards. Their products must be safe
and effective, meeting both consumer
expectations and regulatory requirements.
The acquisition of proderm, with a team of
nearly 140 study experts and more than 20
specialist doctors, allows us to better assist
our global customers as a one-stop testing
solutions shop. In particular, expanding and
strengthening our capabilities in clinical
testing for cosmetics and pharmaceuticals
means we can provide our customers with
optimal support during the clinical studies
required if they are to make successful
product launches into the market.
Unique offering in cosmetics & hygiene
The acquisition of proderm GmbH completes
our global footprint. Now we are able to
provide solutions across a network of 45
laboratories and clinical testing sites across
North America, Europe and Asia. It gives us
a unique cosmetics and hygiene footprint,
offering analytical, microbiological, stability
and in-vitro testing, as well as clinical studies
for safety and efficacy.
In 2023 we will look to drive revenue
synergies through our sales and marketing
activities, setting up joint cross-site working
groups and projects, enabling us to share
SGS’s and proderm’s capabilities and
expertise in clinical trials and testing of
cosmetics, dermatological products and
medical devices. We have already started
these collaborative efforts at some of our
sites, including SGS Analytics’ clinical
testing and molecular biological laboratory
in Germany. Further cross-site projects are
planned to create efficiency gains – making
more use of digitalization, and replicating
SGS proderm’s unique techniques in
areas such as panel management and
the recruitment of study subjects.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 58
Manufactured capital Our property, plant, equipment and other
manufactured goods comprise our manufactured
capital, and it is the investments we make in all
of these, from our laboratories to the items our
people use every day, that enable us to provide
even better services to our customers.
1 How we develop our manufactured capital
We invest in
and maintain
our testing
laboratories
– Our laboratory network is at the center of our business activities, making the equipment and
services we require to operate them one of our largest procurement categories. We not only
have to negotiate the right commercial terms for the business need, we must also ensure they
are fit for purpose, high quality and delivered on time anywhere in the world
We create great
places to work
that support our
business growth
– We manage our large corporate real estate (CRE) portfolio proactively with the aim of 100%
accuracy of our database, with no expired contracts. This enables us to operate in full compliance
with group policy and deliver workspaces that are fully sustainable, energy efficient and correctly
priced. With 85% of our portfolio leased, it is important that we start (re)negotiating early, usually
18-24 months ahead of a lease expiry or the initiation of a new project, to guarantee the best
leverage for SGS
2 Our inputs
Capital expenditure CHF MIO
Operating expenditure CHF MIO
2022
329
2021
336
2020
259
1 493
1 364
1 206
3 Progress during the year
We invest in
and maintain
our testing
laboratories
– We expanded our food laboratory network in our South and Central American region, including
adding capabilities at our labs in Peru, Chile and Argentina, and establishing brand new labs in
Mexico and Brazil
– In February, we acquired Gas Analysis Services, an Irish gas analysis testing and instrumentation
specialist group. This acquisition built further on our competence in high purity gas testing and
critical skills and knowledge
– May brought two new acquisitions: AIEX, which adds complementary inspection capabilities
to our existing testing expertise, supporting sustainable nuclear energy production in France;
and Ecotecnos, which provides sea monitoring and oceanography services to multiple sectors
in Chile including aquaculture, energy, mining and petrochemical. We also acquired the remaining
49% stake from the other shareholders of C-Labs, which means we now own 100% of SGS
Digicomply, its market-leading regulatory compliance solution
– We continued to expand our water and soil testing capabilities in North America with the acquisition
of Silver State Analytical Laboratories, Inc. and Excelchem Laboratories, Inc. in July. We also added
advanced clinical testing solutions for cosmetics, personal care and medical products with our
acquisition of proderm GmbH in Germany
– In August, we expanded our cybersecurity capabilities and footprint into the USA with the
acquisition of Penumbra Security, Inc. – supporting our global strategy to become the global
TIC leader in cybersecurity
– During the year, we also acquired Ecotecnos, which provides sea monitoring and oceanography
services to multiple sectors in Chile, and Industry Lab in Romania, which has expanded our food
services and laboratory network in Europe
– We invested further in our Advanced Metrology Solutions laboratories to help us increase our
presence in the fast growing 3D metrology and dimensional measurement inspection services
sector in Spain and across Europe
– We have rolled out a standard set of guidelines, called the CRE Golden Rules, to guide our people
through the negotiation process. We have also consolidated our office space by implementing new
work from home policies, which have improved our people’s work-life balance, as well as delivering
cost reductions
We create great
places to work
that support our
business growth
Management reportSGS | 2022 Integrated Report 59
4 Outcomes
– Since 2020, we have achieved a CHF 66 million cost
reduction over the length of lease agreements against
our target of CHF 40 million
5 Outlook 2023
– Work with innovative suppliers like Microsoft to support
our digital agenda and develop new innovative and
sustainable business opportunities
– Develop a plug and play model to integrate new
companies efficiently and leverage acquisitions
to further deliver synergies across the group
– Retain cost reductions over CRE portfolio at
CHF 40 million over life cycle of leases
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 60
Manufactured capital
in action
Manufactured
capital
We are
Today’s office buildings
are more than just a
workspace. They need
to empower people
by boosting their
productivity with access
to the right technology,
while addressing their
work-life balance, with
an emphasis on health
and well-being.
reducing our
footprint and
working more
flexibly and
efficiently.
Management reportSGS | 2022 Integrated Report We are
creating modern,
flexible and attractive
workspaces to inspire
our people.
We will
improve the way we
work together and
attract new talent.
CHF 2.25 MIO
total cost reduction in five years
3 095 sqm
reduction in office space (51%)
“ Our new co-work app
means we can manage
our workspaces more
effectively, from monitoring
employee traffic in the office,
to managing car parking
spaces and our canteens.”
Paula Fuentebella
Communications Supervisor
61
Making more efficient use of our space
In the Philippines, our teams were based
at three large buildings that, due to new
working patterns that became more
common during the pandemic, had become
under-utilized. That’s why SGS Philippines
consolidated two of its shared service
centers into a single more efficient space.
We were able to achieve an overall reduction
of 3 095 sqm of office space, halving the
space we occupy, while bringing a range
of benefits for both SGS and our people.
We started the consolidation project by
running an analysis that not only determined
the cost savings we could make, but also
how it would be possible to reduce the
overall size of our office space without
creating a problem for colleagues. In fact,
it quickly became apparent that by making
more efficient use of a smaller space, we
could offer significant benefits to our people,
introducing new IT platforms and innovations
that would make our offices an even better
place to work.
Working better together –
wherever we are
Our new ways of working at these offices
in the Philippines have helped our teams
improve their productivity, while colleague
engagement has benefited from reliable
communication platforms, and the exciting
new collaboration and creative spaces we
have provided. This is not just good for our
existing employees, but is also important
when trying to attract talented new people to
the organization. Alongside our new working
from home policy, most colleagues attending
our offices feel they now have a better
work-life balance. We have also seen cost
savings and other benefits in a range of areas
– including less rent payable for the two
buildings, and lower energy consumption.
One very useful innovation we have
introduced is the SGS Co-Work app, which
employees can download to their mobile
device and use to book hot desks, shared
rooms and training rooms. This is a great
benefit to colleagues and visitors alike, and is
another example of how we are supporting
our people to thrive in whatever working
environment they choose.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 62
Intellectual capital
Our intangible and knowledge-based assets make
up our intellectual capital. That is everything from
our people’s knowledge of protocols, procedures,
our divisions and our customers, to the innovations
we develop to meet customer needs, and improve
our processes and services to add value to society.
1 How we develop our intellectual capital
We build
capabilities that
will enable us
to deliver on
our strategy
– Our strategic program includes a wide range of initiatives and programs that promote a
culture of efficiency and excellence not just through the development of our people, but
by fostering a mindset change, driving engagement and empowerment that helps us
create and spread knowledge
– We want to provide our customers with the most efficient and cost-effective solutions for
testing by implementing a World Class Services (WCS) program along with a hub and spoke
model where applicable
– We are implementing a zero trust security model that assumes that untrusted actors already
exist inside and outside the organization’s network. Our approach relies on identity management
and governance that supports the principle of least privilege, meaning that someone only has
those privileges needed to complete their task
– We are pivoting towards a more digital business to capture market growth with the objective
of providing our operations with technology-based products to improve business results
We innovate for
our customers
– We promote innovative ideas among our employees through initiatives such as our moonshot
campaigns, and provide tools and coaching that will help us develop ideas and prioritize projects
with the potential to scale up to significant new revenue streams for SGS
We inspire and
encourage our
people to innovate
and generate new
intellectual capital
We secure our
information and
know-how
– Within our own operations we are applying digital technologies such as machine learning and IoT
in our labs to reduce manual touch points during testing. Applying remote applications and drone
technologies to existing services is keeping our inspectors out of harm’s way while giving us new
ways to monitor and manage objects in the physical world and providing new streams of data
– The ability of our people to innovate is integral to our success. To support them, we promote
self-directed learning, and invest in digital tools for training and development. We also tailor our
talent development programs to fit local markets, business needs and employee expectations
– Our information security policy describes the principles we use to prevent information from
being lost, from becoming public knowledge, and from being unavailable
– We maintain a state of constant vigilance – through our risk analyses, our constant analysis
of tools and market solutions, and by monitoring the cyber threat landscape. That ensures we
can provide preventive, detective and corrective solutions to reduce or mitigate possible future
security incidents, with the aim of transforming security from a risk to an enabler for the business
– Our information governance framework (IGF) establishes fundamental principles designed to
create a system of behavioral guidelines, physical and technical controls that protect information
in any format, whether digital, hard copy or spoken
2 Our inputs
Goodwill and other intangible assets CHF MIO
2022
2021
2020
2 105
2 160
1 984
3 Progress during the year
We build
capabilities that
will enable us
to deliver on
our strategy
– We have launched a permanent digital builders organization that will empower joint business and
IT teams to design and develop technology-based products to improve business results in the short
to medium term through increased revenues or efficiency
– In 2022, four additional laboratories have embarked on their WCS journey – in India, Turkey, Peru
and the USA. That’s one more than our initial target for the year and brings us up to a total of 26
sites in scope for the program
– We have enhanced our detection capabilities both internally and externally by extending the
capabilities and services of the security operations center. These include digital surveillance
services that provide us with early warnings of exfiltrated credentials, and cybercriminal
movements in corners of the dark web that could affect our assets
Management reportSGS | 2022 Integrated Report 63
3 Progress during the year continued
We innovate for
our customers
We inspire and
encourage our
people to innovate
and generate new
intellectual capital
We secure our
information and
know-how
– We completed our first two moonshot (innovation) campaigns in collaboration with our Natural
Resources and Industries & Environment divisions in 2022
– Microsoft has signed an agreement to invest in SGS digital innovations over the next three years.
Taking a customer-centric approach, we will jointly explore emerging technology trends in
collaboration with Microsoft, such as AI, IoT or the metaverse, to identify new business models
for SGS and joint go-to-market opportunities
– We partnered with two of the world’s leading business schools to create a development program
for managers to support our business growth strategy and digital awareness, and equip our
managers with new skills and behaviors to help them and their teams deliver solutions around
transformation and digital awareness
– The program provides strategic tools, concepts and perspectives that will allow us to develop a
strategic response to the new digital possibilities that will support us in becoming more proactive
in the digital domain, help us turn digital threats into opportunities, create a competitive advantage
and enhance our performance. It will support our ambition to build a culture of innovation and
create a language of digital innovation
– In parallel, we have developed a comprehensive digital and innovation database containing both
learning and marketing material to help us apply digital technologies and methodologies to create
new products and services. It will also improve the way we work and the services we provide
by augmenting our physical operations with AI and machine learning
– We also conducted digital and innovation workshops, led by innovation coaches, to encourage
innovation in our teams and to boost cross-functional communication and collaboration
– We have created a holistic information security management system by adapting our processes
and methodologies to the ISO/IEC 27001 standard
– Our cybersecurity plan has helped us improve our incident detection and response capabilities
– Throughout the year, our security technical office has continued to work on the framework of
policies and procedures as part of the cycle of continuous improvement, with the aim of creating
a robust risk and compliance management framework
– The adoption of information classification has also helped us understand our data and its value
better, increasing its usage within the company
– Our new IGF effectively requires sensitivity and awareness of fitness for purpose.
Corporate Security has conducted 13 pilot projects involving more than 1 000 employees across
all levels of the company and received very positive feedback
– We have appointed a full-time group data privacy officer (DPO) and local DPOs in our major
affiliates to drive and monitor compliance with policies and legislation relating to the protection
of personal data
– We are also providing induction training to all new employees to ensure a level of awareness
in managing personal data in line with the group’s exposure in this vital area
4 Outcomes
Training ratio % of total employment cost spent on training
(includes safety training hours)
Number of WCS laboratories
2022
2021
2020
3.0
26
2.6
22
2.5
20
5 Outlook 2023
– Continue the WCS journey by adding four further
laboratories, expanding the full number to 30 in
scope of the program and leveraging more of our
internal resources
– Continue the external WCS audits to measure our
progress in driving growth
– Continue to develop the learning strategy to meet
the upskilling needs of our workforce
– Introduce an integrated talent management model
to the organization, which will include how to identify,
assess, develop and retain our talented people
– Continue to engage innovators across our divisions,
regions and countries through our moonshot campaigns
– Maintain the cycle of continual improvement,
conducting internal audits to verify the implementation
of security controls
– Continue to enhance current technologies by adopting a zero trust
model in combination with a powerful training and awareness program
and the advanced monitoring support of the security operations center
– The new classification system will be launched in Q1 2023. It will
be accompanied by an intense training and education program to
explain the concepts of information security and classification, and
to empower managers and other leaders to interpret and apply the
system to their own areas of responsibility
– Continue the focus on personal data protection – we will launch a new
global data privacy eLearning module in 2023, while developing a new
education, awareness and communication program on data privacy.
This will feature specific activities targeted at work involving sensitive
data and marketing data
– Improve our organizational setup for data protection with more
formalized roles and responsibilities across the accountable
business areas
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 64
Intellectual capital
in action
Intellectual
capital
We are
Combining deep
product knowledge with
proprietary algorithms
and AI models, Truum™
autonomously scans
product pages, offering
retailers effortless
analysis of their catalog
health, saving them
time, and enabling
them to focus on
what matters most:
their customers.
leading the
way in managing
data at scale.
Management reportSGS | 2022 Integrated Report We have
learned how to
speak our customers’
language.
We will
help retailers develop
their relationship with
digital customers.
+20 MIO
product pages scanned/analyzed
>55%
of product pages have issues
“ Combining our core product
expertise and the latest
AI technologies, Truum
helps us pave the way for
trust in eCommerce and
invent solutions that not
only make our customers’
lives better: it empowers
their own customers.”
Vincent Jeanne
Vice President of Global Innovation
65
Identifying the real issues retailers
face with their online catalogs
The rise of eCommerce has seen consumers
move from physical stores to online
shopping, and this shift has come with its
own set of challenges. Online shoppers no
longer interact with products – they interact
with product data and the sheer volume
of that data is staggering. There are now
millions of product data points for every
single eCommerce website.
Managing data at such a scale is close to
impossible and most retailers are unaware
of how much bad product data is polluting
their online catalogs. Not only does this
impact their eCommerce performance,
by lowering conversion rates, or increasing
returns and their regulatory exposure, but
it also significantly harms their brand image
and consumer trust.
Approaching this problem, we conducted
more than 150 interviews with online
retailers. This helped us identify the real
issues that existing systems are not solving
with their online catalog. We also learned
how to speak their language to ensure
we built a solution that truly resonates
with users and will have a positive impact
on a daily basis.
Delivering data quality assurance
and a thriving future
Truum is not a regular innovation, it reflects
the obsession upon which it was built
– we start with the customer and keep
them at the center of everything we do.
Our first product, Digital Shelf Monitoring,
autonomously scans online catalogs
and inspects the product pages seen by
consumers. Our proprietary technology
automatically identifies missing, incoherent
or erroneous data points on every product
page. In a few clicks, our customers can
prioritize and share corrective actions
with all their data actors to get rid of bad
product data, quickly and efficiently.
Bad product data hurts online retailers’ top
and bottom-lines, resulting in endless catalog
reworks, high product returns, unexpectedly
low conversions, dissatisfied customers and
regulatory exposure. Truum delivers data
quality assurance for products sold online,
allowing retailers to thrive and confidently
progress in the eCommerce world. As more
retailers take advantage of all that Truum has
to offer, we believe they will regain trust in
their operations and renew their relationships
with their digital customers, taking their
businesses from strength to strength.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 66
Human capital
We promote a workplace that provides equal
opportunities to all employees and allows them
to reach their greatest potential. Working with
integrity and protecting the health and safety of our
employees are top priorities. We are committed
to respecting human rights and also addressing
human rights risks in our supply chain. Through
the services we provide, we help our customers
to address these same risks.
1 How we develop our human capital
We work
with integrity
– Being trusted is a prerequisite of everything we do as a business. Our 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
We respect
human rights
– Our code of integrity is reinforced through mandatory annual integrity training, and we require
all new employees to complete the same training within three months of joining us
– Our absolute commitment to human rights is grounded in our SGS code of integrity and our SGS
business principles. It is also reflected in our human rights policy, supplier code of conduct and
other relevant policies. We follow the principles of the United Nations Global Compact and United
Nations Guiding Principles on Business and Human Rights. These incorporate by reference the
rights and principles expressed in the International Bill of Human Rights and in the International
Labour Organization Declaration on Fundamental Principles and Rights at Work with its eight
core conventions
– As part of our continuous effort to respect human rights, we have put in place numerous policies,
programs and plans to prevent and mitigate the risk of our business causing or contributing to
adverse impacts to human rights
We attract,
develop and retain
the best talent
– Our global Employer Value Proposition (EVP) of #Bethechange and #BeSGS guides us and helps
us to attract, engage and retain the best people in a very challenging labor market. The four pillars
of our EVP define the essence of our employer brand and are complemented by our integrated
talent management and total reward strategy
We commit to
diversity and equal
opportunities
– Our culture of diversity and inclusion makes us more competitive and creates value for our
customers, investors and employees. Our commitment to diversity and equal opportunities
is expressed in our business principles, our code of integrity, our human rights policy and
our anti-discrimination and dignity at work policy
We engage
with and care
for our people’s
well-being
We provide a
safe and healthy
environment
– We do not tolerate any form of discrimination and are proud to be known as a diverse employer
– We value the skills, knowledge and cultural diversity that people bring to our organization and
actively seek to engage them within our teams
– We are committed to paying our employees equally for work of equal value and conduct regular
analyses to ensure this remains the case
– We invest in benefits, programs and services to support each dimension of our employees’
well-being – physical, mental, social, professional and financial. We also value feedback
and encourage employees to voice their opinions via our voluntary annual employee
engagement survey
– 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
– We run a bi-annual Health & Safety (H&S) survey to check that safe operations and practices are
in place in workplaces and facilities. It is an opportunity to assess how employees and contractors
perceive the value of H&S initiatives and for us to identify improvements opportunities
2 Our inputs
– 97 000 (average number of employees)
– 15 SGS Rules for Life
Management reportSGS | 2022 Integrated Report 3 Progress during the year
We work
with integrity
– We built a network of regional compliance managers across our regions. We also implemented
policies in relation to risk management of third parties and sanctions
67
We respect
human rights
We attract,
develop and retain
the best talent
We commit to
diversity and equal
opportunities
– In 2022, our human rights task force progressed in the development of our human rights due
diligence program. We also updated our group policy on human rights in line with the United
Nations Guiding Principles on Business and Human Rights, clarifying our focus areas. We provided
a mandatory online training program for all our employees
– We also published our first SGS human rights report this year and an update report regarding our
2022 operations can be found in the appendix, page 228. The report consolidates the principles,
policies and initiatives that demonstrate our human rights commitment. Our aim is to improve
transparency to our stakeholders, and to report openly on our progress
– We continued to roll out our talent acquisition tool Smart Recruiters during the year. The tool is
now used in 55 countries and covers about 90% of open positions globally. It helps our teams
streamline their recruitment processes, improves service levels and increases the speed of hiring.
We have also engaged with a reputable, global pre-employment screening provider to reinforce
our commitment to employing honest, trustworthy people
– We conducted a full talent review and succession planning exercise that included the review
of our top 100 critical jobs across the business, by geography and function. We also partnered
with a well-known global consulting firm to conduct a leadership assessment, to provide feedback
to our leaders, and help to determine our leadership development needs. An action plan is in
place and we are tracking its progress
– More than 100 leaders participated in different leadership programs, with 50% of our leaders
completing programs across a range of subjects
– 82 000 of our employees are registered in SGS Campus, our global e-Learning platform.
Each affiliate and division use this tool to provide targeted learning and training programs
to local employees and global teams
– Our UK affiliate opened the resource and learning center ’becoming a manager’, in SGS Campus.
It aims to help their employees to seamlessly transition to managerial roles
– Our global divisions use SGS Campus to upskill their global teams in a range of technical areas,
such as inspection procedures and sampling. Our affiliates also provide on-the-job training and
some of them kicked off mentoring and coaching programs like the UK, who opened a virtual
learning center to help their employees transition to managerial roles
– The diversity of our Board members continues to progress with 33% of positions being held
by women and eight out of nine board members are ethnically diverse
– Our workforce represents nationalities from 118 countries, territories and regions across
five generations demonstrating our competitive advantage. The unique backgrounds and
perspectives that each nationality and generation brings helps us thrive
– To address generational issues, SGS Germany created a ‘shadow board’, a group of 14
non-executive employees between the age of 25-35 years that work with senior executives
on strategic initiatives. The shadow board helps SGS Germany address young employees’
lack of sense of belonging within the company, and the company’s ability to adapt to rapidly
changing market needs. It also promotes dialog between generations, supporting new
perspectives and fresh ideas, as well as providing a platform for the younger generation
to increase their visibility and add the benefits of their insights
– We continue to impose a diversity target for gender representation of interviewed candidates
for all management/leadership positions. About 36.8% of our new hires are women worldwide
– More than 300 managers participated in an unconscious bias webcast training during the year.
The training explains that how a person thinks can be based on life experiences which may
lead to unfair beliefs and views of others
– SGS Switzerland progressed on its diversity goals obtaining equal salary certification,
a symbol of excellence in terms of equal pay for all its employees
– SGS France held events to coincide with the 26th annual European Week for the Employment
of People with Disabilities including inviting Paralympics medal winning table tennis player,
Thu Kamkasophou, to share her story and advice. They also conducted a webinar for people
managers on how to integrate disability into their day-to-day work, and conducted a DuoDay,
where they welcomed people with a disability to pair up with SGS employees to share experiences
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 68
Human capital
continued
3 Progress during the year continued
We engage
and care for
our people’s
well-being
– We formed a cross-functional well-being working group to further develop our global employee
well-being program and launched a campaign to raise awareness and increase employee
participation in our well-being initiatives
– We launched the first group-wide well-being portal providing a single place to share global
well-being initiatives and ideas. It promotes successes of local initiatives and offers numerous
online courses designed to increase happiness, build more productive habits, and develop
skills that help to increase resilience
– We continue to offer flexible working where the nature of the work allows. A hybrid workplace
model not only enables us to attract and retain talent but supports employee well-being
– We encourage each affiliate to develop an employee recognition program based on their local
needs and culture. This improves motivation, and helps individuals feel valued in their roles
– In South and Central America we have implemented numerous programs to recognize our
employees’ and teams’ accomplishments. An example is Colombia’s ‘Extra Mile’ program,
which seeks to promote a culture of recognition based on our employees demonstrating
SGS values in their achievements and behaviors. The program began in 2021, and this year,
SGS Colombia has recognized 360 employees who went the ‘Extra Mile’. They are proud
and happy to be part of this initiative, receiving recognition from colleagues, and sharing
prizes in their personal network
– Our annual employee engagement survey helps us understand how colleagues feel about
working for SGS. In May 2022, more than 28 000 colleagues from 37 affiliates were invited
to complete the catalyst survey. More than 79% provided feedback, our overall employee
engagement index was rated at 69/100 and our manager effectiveness index was rated
at 72/100
– These results demonstrate that our employees recognize our strengths in: role clarity
(employees clearly understand what is expected from them in their role), highlighting the
efforts our managers have made to clearly express team expectations, even when many
work remotely; and safety and ethics (employees feeling safe at their workplace and
employees being encouraged to behave ethically), both key areas for SGS
– Country action based on the survey plans have been developed and are being executed
by our affiliates
– Our global H&S survey delivered many positive outcomes, such as the confidence to stop any
work if unsafe, the willingness to report all H&S issues, and the overall satisfaction with H&S
training. Some clear opportunities for improvement were identified, including clarifying the
purpose of our H&S actions, increasing the quality of dialog between managers and employees,
and improving the H&S onboarding which have been beneficial to safety at SGS
– Globally, a number of pioneer countries, such as Spain, Bangladesh, Turkey, France, Algeria,
Morocco, South Africa and Peru, have been selected to work jointly with global and regional
H&S teams. Their aim is to develop and put in place solutions that involve managers,
employees and specific experts, that we hope will result in improvements
– At a global level we launched three main initiatives to address some of the challenges highlighted
by the global H&S survey. First, our new global H&S vision considers all of our stakeholders’
expectations, and is known as ‘Because We Care.’ Based on care, inclusion, listening and
increasing ownership, it is part of a more human centric approach to addressing H&S; the
second initiative was the launch of the Safety LeaderSHIFT program, equipping our leaders
with practical tools and insights to demonstrate care to their teams, while encouraging a culture
of accountability on H&S; and third was Safety Month 2022, dedicated to the shared vigilance
concept, promoting both self-care and care for others. Under our motto, ‘See Something,
Say Something’, employees were introduced to the ‘Intervention’ process with practical
workshops and live events, covering safety and neurosciences, and how we can work
together safely
– We have been developing complete fire safety assessments on 20 sites in different
countries to upgrade their fire protection systems in line with our insurance company’s
standards. These assessments are in addition to their visits to our key sites (where the
insured values are above CHF 10 million), and have led to more than 200 actions to
improve safety, including fire safety training and better control of inventory. We have
also implemented new fire protection equipment in business critical sites, where a fire
could have severe consequences for our people and our strategic assets
We provide a
safe and healthy
environment
Management reportSGS | 2022 Integrated Report 69
4 Outcomes
Lost time incident rate (LTIR)
SGS code of integrity: % employees trained to SGS Code of Integrity
Human rights training: % employees trained on human rights
Women in Leadership: %
2022
0.19
99.9
78
31.1
2021
0.22
99.9
29
29.0
2020
0.23
98.8
28
28.0
5 Outlook 2023
– Expand our network of regional compliance managers
– Perform integrity audits throughout the SGS network
– Strengthen our human rights due diligence, with special
focus on further identifying and mitigating risks
– Continue to embed and promote our employee value
proposition and employer brand and develop a better,
more efficient talent acquisition delivery model globally
– Continue to provide training and include digital
elements within our talent acquisition and talent
development strategy
– Maintain our focus on gender equality and
generational diversity
– Further develop our well-being strategy in collaboration with an
external expert
– Continue to provide well-being training programs to our managers
and employees – by further building our well-being culture we will
improve employee engagement and retain our talent
– Continue analyzing the global H&S survey results to assess the
impact of the global efforts made by the countries to address their
challenges, especially the pioneer ones
– Explore further opportunities to improve onboarding and the
well-being of employees and evaluate our well-being baseline
and set improvement targets
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 70
Human capital
in action
Human
capital
We are
At SGS we share
responsibility for our
health and safety.
We are all empowered
and trusted to act
to improve our own
and others’ health
and safety, while
acting to preserve
the environment
through conscious and
responsible decisions.
promoting a
culture of caring
throughout SGS.
Management reportSGS | 2022 Integrated Report We have
made solid progress,
but we need to
go further.
We will
work to become
a company where
everyone goes
home safely.
230+
operations managers have been trained
as safety leaders in five countries
19
sessions organized in 2022
“ We truly believe that if we
demonstrate care to our
workers, they will not only
take care of themselves,
but also of others.”
Nassim Beneddine
Global OI Head – Learning,
Resources and Cultural Change
71
Engagement, leadership
and commitment
Over the last decade, we have acted
and implemented systems, programs and
actions across our sites and reached a level
of health and safety that is close to our
goal. Disappointingly though, our Health,
Safety and Environment (HSE) results are
now ‘plateauing.’ We continue to work hard
to understand the reasons for this plateau.
First of all, we think it is important to set
the right priorities and look beyond the
immediate benefits, as this will help us
mitigate any risks. In order to achieve these
objectives on our health and safety journey
we need engagement, leadership and
commitment from everyone.
We all have a role to play in our
health and safety, whether we are at
management level or out in the field.
That means engaging in constant dialog
and learning of all HSE matters. We must
adopt the correct behaviors and aim
to be a role model for others.
Our new HSE vision – Because We Care
We are taking further actions that will improve
our HSE performance. We made a lot of
progress setting up reactive and proactive
systems and now we are moving towards
cultural aspects. 90% of accidents are
caused by unsafe behavior. Behavior is not
the problem but a symptom that needs to be
adjusted. To better understand the symptoms
that lead to an incident we are examining the
human psychological aspects to improve our
prevention programs. In 2021, we conducted
a global employee perception survey.
This survey helped us identify employees’
main concerns and delivered candid feedback
on their experiences with our HSE initiatives.
We are fully convinced that if we demonstrate
care to our workers, they will not only take
care of themselves, but also of others. This is
why we believe that promoting a culture of
caring will help us make SGS a safer and
healthier company.
One of the key programs to support our
new HSE vision is the Safety LeaderSHIFT.
It’s a program designed for SGS leaders
and provides an insight into what they can
do to improve their people´s health and safety
thinking and behaviors.
The Safety LeaderSHIFT program was first
launched in Lima, Peru, in May, at an event
attended by 70 operational leaders and local OI
employees. Since then, further LeaderSHIFT
sessions have been held as the program
visited Spain, Benelux, France and Germany.
We aim to continue the deployment in these
existing countries and extend the program
globally, with the support of local champions,
until all managers are in scope.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 72
Social and
relationship capital
The way we collaborate with our customers,
suppliers, communities and other stakeholders can
be described as our social and relationship capital.
This is not just important to our success, it ensures
we add value for all of them and that, together,
we add value to society.
1 How we develop our social and relationship capital
We engage with
our customers
– Our brand is a vital tool, both for our business and for all of the stakeholders that interact with us.
It helps consumers to recognize quality and safety; it helps employees and prospective employees
to connect to our identity and values; and it helps prospects and customers to find us and do
business with us
– Our divisions each have a customer care department, connecting customers to the relevant parts
of SGS. Each of these departments works hard to adapt our communication channels to meet our
customers’ needs
– We tailor our web presence to local needs in more than 80 countries and over 20 languages.
These websites fulfill many functions, including business and corporate information, knowledge
sharing, online engagement (including chat services), certification and document verification
We collaborate
with suppliers
– We collaborate with more than 50 000 global, regional and local suppliers worldwide, enabling us
to prioritize our sustainability and innovation goals. While maintaining solid partnerships with our
key strategic suppliers to generate long-term growth, we also work closely with local suppliers.
This allows us to seek new opportunities for development and collaboration, which will support
and benefit the communities where we operate
We use
procurement to
drive sustainability
– Procurement plays a key role in supporting our sustainability ambitions through effective
collaboration with our suppliers, which drives growth, innovation and productivity. Our supply
chain is an important part of our value chain and we are serious about our responsibility to embed
sustainability in our suppliers’ operations
– We include sustainability criteria in the selection of our suppliers, monitor their risk through our
Self-Assessment Questionnaire (SAQ), and work closely with them on the development of global
and local sustainability initiatives
We support our
communities
– We are committed to investing in the communities where we operate, and we do so across
three pillars: empowerment, education and environmental sustainability. Through our community
investment program, we help to tackle global challenges such as poverty, equal opportunities,
health, education, climate change and environmental degradation
– SGS Community Program
2 Our inputs
3 Progress during the year
We engage with
our customers
– More than 50 000 suppliers
– Voice of the Customer program
– We launched a new SGS online store strategy in 2022, providing a new digital sales channel for local
affiliates to administer, helping them prioritize online sales and facilitate a faster go-to-market. We have a
new agile platform which was piloted in Germany, the Netherlands and New Zealand. This allows teams
to add new services to the platform quickly with reduced implementation costs. Launch of the platform
was achieved in just one week and it has already provided an improved customer journey
– We track customer sentiment annually through our global Voice of the Customer (VoC) program.
In 2022, we expanded the program to cover 27 affiliates across six regions, gathering the voice of
19 000 customers. This represents a massive improvement in geographical coverage compared to
prior years, as well as a robust improvement in customer diversity per affiliate, with surveys sent
to key accounts and a proportionately relevant sample from all divisions of other customers
– The global VoC program is now the source for our customer satisfaction (CSAT) results, replacing
the Laboratory Excellence program. Our CSAT results are shared with all relevant stakeholders
across the organization and corrective actions are developed to increase customer satisfaction.
CSAT results were 84.5% in 2022, very close to our 2023 target of 85%, although slightly lower
than prior years due to the expansion of location and type of customers surveyed
– In 2022, we migrated our corporate website to a new platform, and began consolidating all local
corporate websites on the new platform under a single domain. This is a secure and futureproof
environment, offering smarter and faster internal operations with reduced manual work, and
new, industry-leading ways to interact with our audiences and service their needs. It gives us a
competitive advantage by further strengthening our leadership position as the number one online
authority for the TIC industry. All remaining local corporate sites will be migrated and consolidated
during 2023
Management reportSGS | 2022 Integrated Report 73
3 Progress during the year continued
We collaborate
with suppliers
– Business continuity remained a challenge in 2022 due to the pandemic, bottlenecks in supply
chains and geopolitical conflicts. That’s why we have put such an emphasis on supplier
collaboration to ensure the supply chain in all the countries we operate, with constant reviews
of the market conditions, global backorders with high dependency products such as lab
consumables, chemical products and IT equipment. We have avoided long delays by working
with our suppliers on portfolio substitution and rationalization, which has mitigated the effects
of global supply chain issues
– Reducing the risk of price increases has been another business continuity challenge in 2022.
Many of the actions we have taken with our suppliers have been to anticipate risks, standardize
payment terms and compliance, set up mitigation plans or promote more effective tendering
– Managing CHF 2 billion third-party spend, we have reinforced the value of procurement by
strengthening the collaboration among global, regional and local procurement teams to find
synergies, optimize our savings and support our operations
– Procurement is a key enabler for capturing innovation from our partner ecosystem to the SGS
group, carrying out more than 200 sourcing events related to business innovation and digital
transformation in 2022. New agreements and partnerships will also bring efficiency and growth
in the SGS Digital Transformation Journey, improving the way we work in areas such as
information security, production and delivery services
– Our Supplier Relationship Management (SRM) program is a systematic approach to evaluating
and engaging with our suppliers. Through the SRM program we aim to develop and leverage the
way we work with suppliers based on their risk to the business and the potential of added value
solutions to our stakeholders. SRM is focused on developing long-term relationships with our most
strategic suppliers to create business, innovation and sustainability opportunities. The program
is also there to increase collaboration among our global, regional and local teams, enabling us
to manage suppliers and key categories in a more efficient manner
– We have started rolling out our new self-assessment questionnaire (SAQ) for strategic suppliers.
This includes the definition of a new process that considers supply chain risk management and
mitigation plans for high-risk vendors. The first phase, in Q4 2022, covered our strategic global
suppliers and strategic local suppliers from four countries. By the end of 2023, we plan to extend
the use of the SAQ to all countries in scope
– We deployed the new SGS Supplier Segmentation in more than 25 countries and with over 6 000
top suppliers. This segmentation will not only leverage our category management but will also
allow us to put in place more efficient sustainability-driven projects by supplier segment
– We continued to promote our commitment to best practices in sustainability and ESG by making
adherence to our code of conduct part of our tendering and contracting processes
– The development of our new community strategy has been a priority in 2022, and this will be
launched in the early months of 2023
– During the year, we have also worked with our regional and local sustainability network to promote
community investment with a special focus on volunteering. We have now made it mandatory for
all affiliates to organize volunteering activities. This commitment to volunteering, in kind and cash
donations, helps us to contribute towards our global priority sustainable development goals. We
are also committed to finding and supporting more online community volunteering opportunities.
Our affiliates continue to participate in global initiatives that support local communities, like the
SGS People 15 Day Challenge and the SGS Academy for the Community
We use
procurement to
drive sustainability
We support our
communities
4 Outcomes
Customer satisfaction score (CSAT)*
Investment in community CHF MIO on a constant currency basis
Percentage of suppliers locally sourced %
2022
84.5
1.99
98
2021
88.0
1.45
98
2020
88.0
1.25
97
*
This is a satisfaction score on a 0-100% scale. The data sources used are the global VoC program in 2022 and the Laboratory Excellence Program for previous years.
Following a change in the methodology, data of the actual year is now reported.
5 Outlook 2023
– Continue and strengthen the VoC program to reach
85% CSAT, while increasing the sample size to gather
statistically relevant results by affiliate and by division
– Full rollout of SGS online stores for those countries
which want to start the online selling journey
– Continue to focus on brand awareness – helping
consumers to recognize the SGS brand as an
authority on quality and safety, in turn benefiting
our market leadership
– Start our procurement transformation project (‘Horizon’)
to support our business in a more impactful way, by further
developing our agility, collaborative mindset and impact on
SGS financial performance
– Extend supplier SAQ to all affiliates in scope
– Launch and deploy our new community strategy
– Continue promoting volunteering activities throughout
the network
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 74
Social and
relationship capital
in action
Social and
relationship capital
We are
Through our SGS
Academy for the
Community program,
we bring training to
disadvantaged people
who do not have access
to the opportunities
some of us take
for granted.
committed
to supporting
people in our
communities.
Management reportSGS | 2022 Integrated Report We have
helped people to
be more employable
and productive.
We will
continue to support
economic development
worldwide.
“ We are passionate,
considerate and fully
understand that there are
people in the world who need
a helping hand to get them
on the road to personal and
professional enrichment
and success.”
Laurent Corbaz
Global Head of Strategic Planning
& Business Support, Knowledge
+600
people trained by the SGS
Academy for the Community
9
countries SGS supported
75
Providing a helping hand
across the world
In many of our communities, we see a
vicious cycle whereby people cannot afford
an education, so they remain unqualified and
therefore cannot find well-paid employment.
Through the SGS Academy for the Community,
we continue to provide high-quality technical
training free of charge, to people earning
less than the average living wage in the
communities in which we operate.
During the year, SGS Academy for the
Community provided support and training
for people in Pakistan, Ghana, India,
Bangladesh, Turkey and the UK.
For example, in Pakistan we trained people
with disabilities who had completed their
graduation but had not been able to become
economically independent. By training these
people in ISO management systems, we gave
them an opportunity to enter the workplace.
We also provided support to professionals with
low skills, upskilling them and making them
more employable and productive.
In Turkey we trained 225 female unemployed
environmental engineers and students on
integrated management systems, which will
enhance their employability.
And in Ghana we trained women from four
shea butter cooperatives in low-income
neighborhoods. They learned about good
manufacturing practices and hazard control.
This enabled them to increase the quality of
the shea butter they make, a product that is
used in beauty products in western countries,
and most importantly it has helped them
guarantee their jobs in the longer term.
Generating opportunities
for individuals to thrive
The ongoing aim of the program is to
support economic development by
enhancing individuals’ employability and
improving their qualifications, so they can
seek better paid positions. In deciding what
courses to offer, we consider the local
employment market in each country.
The program shares our philosophy of
continual improvement by reaching out
and educating individuals and communities,
which in turn supports an improvement
in the quality of life for many others.
It generates opportunities for individuals to
grow personally, enhances their skills and
enables them to be more independently
productive and even to support others.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 76
Natural capital
Our climate change strategy sets a clear path
to reduce energy consumption at source, use
renewable energy whenever possible, and offset
residual emissions. 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 three main pillars:
1. Reducing energy consumption at source: our main sources of CO2 emissions come from
buildings and vehicles – we have specific programs such as the Energy Efficiency in Buildings
(EEB) program to address these sources of emissions
2. Using renewable energy whenever possible
3. Offsetting all residual emissions
– Our employees are an essential part of the journey we are on, and the environmental awareness
initiatives we develop are an important part of this. We encourage employee participation to
strengthen their and our commitment and we are keen to take their initiatives and suggestions
into account
We promote the
circular economy
– While we produce relatively little waste, we do need to carefully consider the way we handle chemicals,
test samples, paper, plastic and organic waste at our offices and laboratories in order to preserve
natural resources
2 Our inputs
Electricity consumed GWh
Fuel consumed GWh
2022
487
460
2021
480
448
2020
441
422
3 Progress during the year
Leading
decarbonization
path following
SBTi
In 2022 we became the first TIC company to receive approval for our 1.5ºC and net-zero targets
from the Science Based Target initiative (SBTi).
Aligned with the 1.5ºC objective from the Paris Agreement, we have committed to reach net-zero
greenhouse gas (GHG) emissions across the value chain by 2050. To achieve this objective, we
have approved near and long-term science-based emissions reduction targets with the SBTi:
Near-term targets:
– We commit to reduce absolute scope 1 and scope 2 GHG emissions 46.2% by 2030 from
a 2019 base year
– We also commit to reduce absolute scope 3 GHG emissions 28% by 2030 from a 2019 base year
Long-term target:
– We commit to reduce absolute scope 1, 2 and 3 GHG emissions 90% by 2050 from a 2019
base year
Our direct emissions reductions will be prioritized, and all residual emissions will be neutralized
in line with SBTi criteria before reaching net-zero emissions by 2050.
In addition, we have been carbon neutral since 2014, meaning that so far, while reducing our absolute
emissions year-on-year, we have compensated our residual emissions using avoidance off-sets.
In our sustainability journey, while prioritizing the reduction of absolute emissions, we aim to gradually
transition from using avoidance off-sets to exclusively removal off-sets.
Evaluating and managing the risks associated with climate change remains a priority for us, and
we are supporters of the Task Force on Climate-related Financial Disclosures (TCFD). We are
well ahead of the mandatory implementation of the TCFD recommendations, recently approved
in Switzerland, and we have adopted their recommendations around governance, strategy, risk
management, and metrics and targets. In 2022, we have worked to quantify the financial impact
of some of our key risks and opportunities. The result of this analysis is available in our TCFD
appendix to this report.
Management reportSGS | 2022 Integrated Report 77
3 Progress during the year continued
We reduce energy
consumption
– Our Energy Efficiency in Buildings (EBB) program is our flagship program to target our major source
of energy consumption. In 2022, we enhanced our IT tool to help us manage and visualize data,
as well as analyze and compare buildings from an energy-intensity prospective.
– 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. The 701 buildings
we currently have in our EEB program account for 80% of our electricity and non-transport
fuel consumption. We have now approved a global capex fund to support EEB measures and
incentivize local investments. In specific, we’ve improved our electricity intensity per revenue
by 5% compared to last year. We’ve intensified our investment in on-site photovoltaic systems,
which led us to multiply by six the amount of renewable electricity directly generated in SGS
buildings compared to the previous year
– For new buildings, the SGS green building guidelines are applied, enabling us to rate facilities
based on KPIs spanning energy, water and pollution; to transport, building materials and
employee well-being
– In 2022, we approved our vehicle emissions policy. Our goal now is to continue innovating with
our 10 000 strong car fleet, so that by 2025 it emits 40% less carbon, and that by 2023 10% of
our cars make use of low-carbon technologies (increasing to 50% by 2030). These technologies
include, for example, full electric, plug-in hybrid, hybrid and ethanol
– After buildings and vehicles, energy use across our IT infrastructure and data centers is an important
priority for us. Our new sustainable IT activation plan promotes optimization in cloud migration,
hardware and e-waste management, and we now manage more than 80% of our workloads via
the cloud. We have downsized the data center at our Swiss headquarters, while migrating our
enterprise resource planning platform to a cloud data center in Europe
– We are also replacing devices with new ones that are more aligned with our sustainability
standards. This has meant updating our purchase catalog to include a range of new devices or
models from manufacturers like HP and Lenovo that adhere to stronger sustainable standards
– Our power reduction policy is helping us to move devices into a special mode that saves energy.
This policy is being implemented globally, and is based on the principle that a device should start
to consume less energy after four minutes of inactivity, and provide maximum energy saving after
just 15 minutes, compared to a three-hour period under our previous policy
– We are investing in both renewable energy certificates and onsite self-generation facilities (solar
panels). So far, 97% of the electricity consumed by SGS comes from renewable sources, and
we are working towards closing that gap as far as possible
We reduce waste
and conserve
water
– 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
4 Outcomes
CO2e thousand metric tons*
EEB program energy conservation measures identified (cumulative)
2022
2021
2020
116 505
115 303
110 137
786
708
471
* Market-based figures. Excludes district heating and refrigerant gases emissions due to unavailability of data. 2021 and 2020 data are recalculated and no longer include
business travel category of scope 3 in line with our new SBTi targets.
5 Outlook 2023
– Develop a policy to include circular economy principles
into our waste and water management
– Track compliance of our new vehicle emissions policy
– Continue deploying our Energy Efficiency in
Buildings program
– Reinforce our IT Activation Plan with communications
across the network
– Re-evaluate the scope and criteria of our Green Building
Guidelines as continuous improvement process
– Refine our green IT initiatives and promote them via regional
and local IT
– Continue replacing local network equipment in all countries,
consolidating in the cloud
– Increase our environmental awareness initiatives to guide
our employees on how to contribute to decrease our impact
as a company
– Continue adopting the TCFD recommendations
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
78
Natural capital
in action
Natural
capital
We are
We have supported
our customer in their
transition toward a
circular economy for the
mining sector to reuse
damaged leaching layflat
hose – transporting
the layflat hose to our
workshop to repair and
make them reusable in
a sustainable way.
developing
innovative
solutions for a
circular economy.
Management reportSGS | 2022 Integrated Report We have
reduced industrial
waste and delivered
cost savings.
We support
our customers to
make mining more
sustainable for
future generations.
79
Enabling our customers to reuse
vital equipment
Our customer BHP Escondida is the world’s
largest producer of copper concentrates
and cathodes. They use layflat hoses as an
essential input for the assembly of leaching
ponds in their metal extraction process.
When leaching layflat hoses are damaged,
they are normally disposed of as standard
waste in garbage dumps and replaced,
as they cannot be recovered in any form.
This poses a challenge to BHP Escondida
in their supply chain – specifically, with
the availability of these replacement
layflat hoses.
As part of the solution we provided to
our customer, our team now inspects the
hoses for damage, and where needed we
take them to our workshop to be cleaned,
disassembled, reconditioned and tested,
before returning them to the site for reuse.
This not only lowers our customer’s impact
on the environment, it reduces the new
materials they need as well as their costs, as
well as increasing their operational efficiency.
Protecting the environment
This solution is in line with our commitment
to promote sustainable mining and to
support our customers in meeting their
commitments to the environment.
Now, BHP Escondida receives a product that
was previously a waste at their operation, yet
it offers the same performance and quality
standard as the original hose. This reduces
their industrial waste by 50% and achieves
savings of more than 20% compared to
sourcing brand new hoses.
For the wider mining sector we have
demonstrated that certain materials that are
currently disposed of could potentially be
recovered. It shows that we can all move
towards a more sustainable mining industry,
while ensuring efficiency of operations.
We will seek opportunities to replicate this
project in other industries, wherever we
can put our principles into action to achieve
a positive outcome. Working closely with
our customers, we believe we can leave a
prosperous legacy for future generations.
50%
material recovered and reused
+20%
costs saved
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 80
Our contribution
to the SDGs
Zero
hunger
We offer a range of sustainability
solutions that support food production
systems around the world.
Good health
and well-being
We offer sustainability solutions
that help our customers achieve
positive health and well-being
outcomes for their organization
and for wider society.
Through our client services and our own operations,
we make a measurable contribution to the Sustainable
Development Goals (SDGs). We are committed to
increasing this contribution year-on-year. To help track
and report our wider contribution to society and the
planet, SA30 is mapped to the 11 SDGs, out of 17,
that are most relevant to our business activities.
Examples of our contribution
Feed, farm and agriculture
We have developed a
comprehensive range of
support services that address
food and feed safety, animal
welfare and sustainability –
from farm to food processing.
We work with farmers as
they strive to develop more
sustainable methods for
production, increasing yields,
promoting greater efficiencies
and improving access to
new markets.
Read more online
Gafta sustainability pledge
Over 100 of our labs,
fumigation and inspection
operations are now included
in the Grain and Feed
Trade Association (Gafta)
sustainability pledge directory.
This demonstrates our
company-wide commitment
to following – and promoting –
sustainable industry practices.
Read more online
WELL performance testing
In 2022, we partnered with
IWBI (International WELL
Building Institute) joining the
WELL Enterprise Provider (EP)
network. WELL certification
is an eco-friendly initiative
that focuses on human health
and welfare enterprises by
reinforcing design layout and
architectural infrastructure
tailored around current green
building standards inside the
workplace. We are supporting
the WELL community with
our laboratory network
across the world ensuring
standard compliance of indoor
environmental parameters.
Examples of our contribution
Biopharmaceutical testing
We offer innovative
biopharmaceutical testing,
biosafety, bioanalytics
and product quality control
solutions for every life cycle
stage – from early phase cell
bank safety assessment and
product characterization to later
phase method development,
bioanalysis and final phase
product release.
Read more online
Air quality monitoring
Air pollution from
transportation, power
generation, industry and
domestic sources can
cause a variety of health
problems, including
cancer and respiratory
and cardiac diseases.
Chemicals and particles
released by these activities
change the composition
of the ambient air, which
can also affect animal and
plant life. Our sampling and
monitoring services ensure
the environment and human
health is protected.
Management reportSGS | 2022 Integrated Report Quality
education
We enable access to
education through our
training programs.
Gender
equality
Our commitment to
inclusion and diversity
includes working towards
gender equality throughout
our business.
Clean water
and sanitation
We ensure that our
own operations –
and the services we
offer customers –
support responsible
water stewardship.
Affordable and
clean energy
We help customers
save energy and reduce
carbon through our
sustainability solutions
– and we do the same
across our own sites.
81
Examples of our contribution
SGS Academy
Our SGS training programs
cover a wide range of topics
related to areas such as quality,
sustainability, performance and
health and safety. We offer
bespoke training from industry
experts, and our courses are
designed for different levels
of ability to address the needs
of any industry.
Moreover, SGS Academy
for the Community provides
high-quality technical training
to people earning less than
the average living wage in
the communities where we
operate. The aim of this pro
bono initiative is to support
local economic development
by enhancing access to and
quality of employment.
Read more online
Examples of our contribution
Women in leadership
We are progressing against our
2023 goal of 30% women in
senior leadership positions by
taking proactive steps, from
recruitment (our recruitment
academy helps avoid conscious
or unconscious biases), to
policies (for example on anti-
discrimination and dignity
at work) and reward (taking
action on our gender pay gap).
Equal salary certification
SGS has obtained EQUAL-
SALARY certification in
Switzerland, a symbol of
excellence in terms of equal
pay. After successfully passing
the statistical analysis of its
salaries, we underwent an
internal audit entrusted to PwC
proving that we applied equal
pay for women and men.
Examples of our contribution
Water services
Onsite sampling and analysis
services for water quality
assurance help ensure that
waste water discharge is not
contributing to environmental
contamination. We are also
a signatory to the WASH
Pledge on safe water,
sanitation and hygiene
within our own business.
Read more online
World Class Service
(WCS) laboratories
Each year, more of our
laboratories adopt WCS
methodology to build a culture
of operational excellence
and resource efficiency –
optimizing use of raw
materials such as water.
Examples of our contribution
Energy efficiency services
We offer audit and
assessment against national
and international schemes
for calculating, monitoring
and mitigating the impacts
of energy use, as well as
advice and guidance on how
to make everyday business
more sustainable.
Read more online
EEB program and onsite
reduction projects
Our EEB program evaluates and
reduces the energy consumption
in new and existing buildings
across the group. The action
plans developed for each affiliate
provide specific guidance on
steps that can be taken to
become more energy efficient.
Each plan identifies the affiliate’s
key facilities, the KPIs that
need to be monitored and the
opportunities to improve energy
efficiency performance.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 82
Our contribution
to the SDGs
continued
Decent work and
economic growth
Through our sustainability solutions,
and our own workplaces, we
foster technological innovation
and sustainable economic growth.
Industry, innovation
and infrastructure
Our sustainability solutions contribute
to future-ready infrastructure,
sustainable industrialization and a
more inclusive, interconnected world.
Examples of our contribution
Human rights policy
and report
Human rights policy recently
updated to better reflect our
commitment. Our human
rights report (available in
the appendix) consolidates
the principles, policies and
initiatives that demonstrate our
commitment to human rights.
Process safety and risk
management services
Our services cover the
entire life cycle of risks,
from advising clients on
local safety regulations
and applying methods of
hazard identification and
risk estimation during the
design phase, through to the
development of and training
on risk management systems
and emergency plans.
New ESG services
Our ESG health check
services efficiently measure
the environmental, social and
governance performance
of an organization, supply
chain and investment
portfolio. To complement
it, our ESG gap analysis
evaluates actions needed
to improve performance
across ESG criteria and
disclosure, providing an action
plan for how to address the
identified gaps to improve
disclosures. With these new
ESG services and many more,
we’re supporting companies
in the implementation of
sustainable business practices
throughout their ESG journey.
Read more online
Examples of our contribution
Collaboration with
Microsoft to develop
new digital TIC services
The collaboration integrates
Microsoft’s cross-industry
expertise, advanced data
solutions and productivity
platforms, and our global
network and leading industry
competence to develop
innovative solutions for the
TIC industry’s customers.
Read more online
IoT testing
We provide our customers
with comprehensive
cybersecurity solutions such
as training, risk assessments
and testing for their IoT
devices. With the acquisition
of Brightsight in 2021, we are
integrating our solutions and
use our knowledge to create
new services for the industries
that we consider have to
have the most relevance
to security in a connected
environment: automotive,
medical, consumer IoT and
industrial application.
Watch our video on
cybersecurity solutions
and IoT
Management reportSGS | 2022 Integrated Report Responsible
consumption
and production
Our sustainability solutions,
and our own supply chains,
promote production and
consumption systems
that conserve resources
for the future.
Climate
action
Our climate change
strategy sets a clear path
to reduce our climate
impact. We are also
helping our customers
embrace the net-zero
economy.
Life
on land
We offer a range of sustainability
solutions that support responsible
stewardship of nature and ecosystems.
83
bluesign® certification
Our environment, health and
production safety approval
system helps the textile
industry optimize processes
to reduce raw material inputs
and costs, while enhancing
future competitiveness.
Read more online
TCFD consulting services
We provide assistance to
our customers to implement
the TCFD recommendations
and better understand the
financial impact of climate
change in their business.
Now part of the TNFD
We are now part of the
Taskforce on Nature-related
Financial Disclosures (TNFD).
As a member of this forum,
we are helping global financial
flows to achieve nature-
positive outcomes in a world
of evolving nature-related risk.
Read more online
Examples of our contribution
Sustainable packaging
SGS offers a one-stop solution
to help manufacturers produce
and supply sustainable
packaging to clients operating
in markets around the world.
Services include sustainable
fiber services for paper
and cardboard packaging,
determination of mixed tropical
hardwoods, biodegradability
and compostability testing and
sustainable packaging design
and prototyping.
Watch the video
Examples of our contribution
Portfolio scan
We support our customers
in reducing their carbon
emissions across their
real estate portfolio.
Our scan provides a ‘road
to zero carbon operations’
with refurbishment
actions and related
investment requirements.
Watch the video
Examples of our contribution
Forestry services
We enable organizations
to demonstrate that their
timber procurement is
verified sustainable and
traceable, including FSC™,
PEFC™, CFCC and EU timber
regulation solutions for both
forest management and
chain of custody.
Read more online
Environmental-DNA
(E-DNA) solutions
From our Global Biosciences
Center, we are trialling E-DNA
solutions for biodiversity
assessments in the mining,
construction and waste
sectors. Solutions using
E-DNA will support rapid and
remote biodiversity surveying
for clients.
Read more online
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 84
We are
ensuring
good corporate
governance.
This Corporate Governance report informs
shareholders, prospective investors and
society on SGS’s 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 18 June 2021 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.
Corporate governanceSGS | 2022 Integrated Report 85
86
4. Operations Council
97
7. Change of control
99
1.
Group structure
and shareholders
1.1. Group structure
1.2. Significant shareholders
1.3. Cross-shareholdings
86
86
86
4.1. Members of the
Operations Council
4.2. Other activities and
vested interests
4.3. Changes in the
Operations Council
2. Capital structure
87
4.4. Limits on external mandates
4.5. Management contracts
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
87
87
87
87
87
87
87
5.
Compensation,
shareholdings and loans
99
5.1. Content and method of
99
determining the compensation
and the shareholding programs
5.2. Rules on approbation by the
99
97
98
98
98
99
and defense measures
7.1. Duty to make an offer
7.2. Clauses on change of control
99
99
8. Auditors
8.1. Duration of the mandate and
term of office of the lead auditor
8.2. Audit fees
8.3. Additional fees
8.4. Information instruments
pertaining to the external audit
100
100
100
100
100
9.
Information policy
100
annual shareholders’ meeting
of executive pay
5.2.1. Rules on performance-
related pay and allocation of
equity-linked instruments
99
10. Quiet periods
100
Investor relations at SGS
101
3. Board of Directors
88
5.2.2. Rules on loans, credit
99
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
3.5.1. Allocation of tasks within
the Board of Directors
3.5.2. Members’ list, tasks and
area of responsibility for
each Committee of the
Board of Directors
3.5.3. Working methods
of the Board and
its committees
3.6. Definition of areas
of responsibility
3.7. Information and control
instruments vis-à-vis
the management
88
93
93
93
93
93
94
95
95
96
facilities and post-
employment benefits
5.2.3. Rules on vote on pay
6.
Shareholders’
participation rights
99
99
6.1. Voting rights and representation
99
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
99
99
99
99
99
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
86
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 2022, market capitalization
was approximately CHF 16 114 million (2021:
CHF 22 837 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 2022, 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 is structured into five divisions
with each 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 2022, the business
divisions were organized as follows:
This definition of materiality excludes
dormant companies, pure sub-holding
companies or entities used solely for the
detention of assets. Details of acquisitions
and disposals made by the SGS Group
during 2022 are provided in note 3 of the
consolidated financial statements included
on page 137 of this annual report.
• Connectivity & Products (C&P)
• Health & Nutrition (H&N)
• Industries & Environment (I&E)
• Natural Resources (NR)
• Knowledge (Kn)
Each division 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 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 187
to 189 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 2022 represent at
least 1% of the consolidated revenues and
includes the main operating entity in the
jurisdictions where the Group is active, even
when annual revenues do not reach 1% of
consolidated revenues.
1.2. Significant shareholders
To the knowledge of the Company the
shareholders owning more than 5% of its
share capital as at 31 December 2022, 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 2021: 19.11%) of
the share capital and voting rights of the
Company, and BlackRock Inc. with 5.18%,
(December 2021, less than 5%). As at
31 December 2022, the SGS Group held
1.68% of the share capital of the Company
(December 2021: 0.04%). During 2022, 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.
During 2022, the Company has published a
total of 2 reports regarding the composition
of its significant shareholders to the
Disclosure Office of the SIX Swiss Exchange
Ltd at www.sgs.com/en/investor-relations
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.
Group structure
Regions
Functions
Divisions
Chief Executive
Officer
Africa & Western
Europe
North & Central
Europe
Finance, M&A, IT
& Procurement
Connectivity
& Products
Health &
Nutrition
Eastern Europe &
Middle East
North East Asia
Human
Resources
Industries &
Environment
Natural
Resources
Latin America
South East Asia
& Pacific
North America
Knowledge
Investor
Relations,
Corporate
Communications
& Sustainability
Legal,
Compliance
& Corporate
Security
Corporate governanceSGS | 2022 Integrated Report 87
2. Capital structure
2.1. Issued share capital
The share capital of SGS SA is CHF 7 495
032 as of 31 December 2022 and comprises
7 495 032 fully paid-in, registered shares
of a par value of CHF 1. On 31 December
2022, SGS SA held 125 978 treasury shares
through an affiliate company (2021: 3 360).
On 21 June 2022, the Group announced a
share buyback program for the purposes
of capital reduction, which ended on
21 December 2022. Under the program, SGS
SA repurchased 113,499 shares on a second
trading line on SIX Swiss Exchange (equivalent
to 1.51% of the current share capital of SGS
SA), for a total amount of CHF 250 million, at
an average purchase price of CHF 2,202.66
per share.
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
SGS 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 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. 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 2022, no
options or similar instruments have been
issued by the Company or by any of the
Group’s subsidiaries.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 88
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,
2021 and 2022. 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 times,
the Board and its committees have the
required skills.
At the Annual Shareholders Meeting
of March 2022 Ms Phyllis Cheung was
appointed to the Board of Directors along
with the re-election of all incumbent
members of the Board of Directors.
Biographical information on former members
of the Board of Directors is available in the
corporate governance reports of prior years.
The members of the Board of Directors at
31 December 2022 were as follows:
Board members key industry experience based on the Global Industry Classification Standard (GICS):
Industrials
Consumer
Discretionary
Consumer
Staples
Healthcare
Financials
Information
Technology
Communication
Services
Calvin Grieder
Sami Atiya
Paul Desmarais
Ian Gallienne
Tobias Hartmann
Shelby R. du Pasquier
Kory Sorenson
Janet Vergis
Phyllis Ka Yan Cheung
Board composition at the end of 2022
Geographical spread
Gender
Length of tenure
Americas 22%
Europe, Africa and Middle East 67%
Asia Pacific 11%
Male 67%
Female 33%
3 years and less 54%
Between 3 and 6 years 36%
Between 7 and 9 years 10%
Corporate governanceSGS | 2022 Integrated Report 89
Sami Atiya
Nationality: German
Year of birth: 1964
Tenure: 2 years
Function in SGS
• Board of Directors
• Nomination Committee
• Chair: Remuneration Committee
Key experience
• Robotics
• Automation
• Medical technology
• Software and logistics
• Transportation
• Risk management
Professional history
2016 to present: ABB Ltd (CH, SE)
1997 to 2014: Siemens Group
1995 to 1997: Harald Balzer & Partner
1994 to 1995: Robert Bosch – Blaupunkt
1988 to 1993: Fraunhofer Institute Karlsruhe
Institute of Technology
Education
• Master of Business Administration (MBA),
Massachusetts Institute of Technology
(MIT), USA
• Master’s degree in Electrical Engineering
and Automation, Karlsruhe Institute of
Technology, Germany
• PhD in Electrical Engineering (Robotics,
Artificial Intelligence and Sensors),
University of Wuppertal/Karlsruhe Institute
for Technology, Germany
Phyllis Ka Yan Cheung
Nationality: Chinese
Year of birth: 1970
Tenure: 1 year
Function in SGS
• Board of Directors
• Sustainability Committee
Key experience
• Retail and consumption
• Digitalization and data driven organization
• Growth in Asian markets
• Enterprise level risk management
• Change management and company culture
• Risk management
Professional history
2015 to present: McDonald’s China; CEO
2012 to 2014: McDonald’s Singapore
and Malaysia
2000 to 2011: McDonald’s China
1998 to 2000: Leo Burnett, Hong Kong
1997 to 1998: Momentum Strategy
Consultant, India
1992 to 1997: Saatchi & Saatchi,
J Walter Thompsons, Hong Kong
Education
• Bachelor of Arts, The University of
Hong Kong, China
• Executive MBA, The Chinese University
of Hong Kong, China
Other activities and functions
Fellow, Aspen China Fellowship
Member, Aspen Global Leadership
Network
Calvin Grieder
Nationality: Swiss
Year of birth: 1955
Tenure: 3 years
Function in SGS
• Chair: Board of Directors
• Chair: Nomination Committee
• Sustainability Committee
Key experience
• Automation and control technology (USA)
• Telecom and digital services
• System engineering and services
• Food processing
• Risk management
Professional history
2001 to 2016: Bühler (CH); CEO
1999 to 2000: Swisscom (CH & DE)
1994 to 1998: SIG (CH)
1991 to 1994: Mikron (CH)
1984 to 1990: Bürkert (DE & USA)
1980 to 1983: Georg Fischer (CH & USA)
Education
• Master of Science in Process Engineering,
ETH Zurich
• Advanced Management Program (AMP),
Harvard University
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, Zurich (CH), Owner
Avenir Suisse, Zurich-Oerlikon (CH),
Member of the Board of Trustees
Advisory Board ETH – Department of
Mechanical & Process Engineering
* Listed company.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 90
Tobias Hartmann
Nationality: German, American
Year of birth: 1972
Tenure: 2 years
Function in SGS
• Board of Directors
• Audit Committee
Key experience
• Retail
• Technology
• Logistics and operations
• eCommerce and marketplaces
• IT
• Cybersecurity
• Risk management
Professional history
2018 to present: Scout24 SE; CEO
2017 to 2018: Hellofresh SE
2011 to 2015: eBay Enterprise
(part of eBay Inc.)
Education
• MBA, Clark University, USA
• Bachelor of Arts (BA) degree, Clark
University, USA
Paul Desmarais, Jr.
Nationality: Canadian
Year of birth: 1954
Tenure: 9 years
Function in SGS
• Board of Directors
Key experience
• Insurance and risk management
• Strategy
• Private equity
• Innovation
Professional history
1982 to 2020: Pargesa Holding SA; Chairman
1984 to 2020: Power Financial
1981 to 2000: Power Corporation of Canada
Education
• Bachelor of Commerce degree from
McGill University, Montreal
• MBA from the Institut Européen
d’Administration des Affaires
(INSEAD), France
• Honorary doctorates from various
Canadian universities
Other activities and functions
Groupe Bruxelles Lambert*, Brussels (BE),
Chairman of the Board of Directors
Great-West Lifeco Inc.*, Winnipeg (CA),
Member of the Board (including those
of its major subsidiaries)
IGM Financial Inc.*, Winnipeg (CA),
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 (CA)
Ian Gallienne
Nationality: French, Belgian
Year of birth: 1971
Tenure: 9 years
Function in SGS
• Board of Directors
• Remuneration Committee
• Nomination Committee
Key experience
• Strategy
• M&A
• Finance
• Consumer/retail management
• Risk management
Professional history
2012 to present: Group Bruxelles Lambert;
CEO
2005 to 2012: Ergon Capital Partners
1998 to 2005: Rhône Capital LLC
Education
• MBA from INSEAD, France
Other activities and functions
adidas* (DE), Vice Chairman of the Supervisory
Board, Member of the General Committee
Imerys*, Paris (FR), Member of the Board,
Chairman of the Strategic Committee, Member
of the Compensation Committee, Member of
the Appointments Committee
Pernod Ricard SA*, Paris (FR), Member of the
Board, Member of the Strategic Committee
and Member of the Remuneration Committee
Carpar SA (BE), Member of the Board
Compagnie Nationale à Portefeuille 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),
Paris (FR), Chairman of the Board
* Listed company.
Corporate governanceSGS | 2022 Integrated Report
91
Janet Vergis
Nationality: American
Year of birth: 1964
Tenure: 1 year
Function in SGS
• Board of Directors
• Audit Committee
Key experience
• Healthcare (pharmaceuticals, biotechnology
and device)
• US leadership across large, complex,
and heavily regulated businesses
• R&D background
• Board governance and CPG knowledge
• Risk management
Professional history
2013 to 2019: various private equity firms
2010 to 2012: OraPharma, Inc.; CEO
1988 to 2009: Johnson & Johnson
Education
• Bachelor of Science in Biology, Pennsylvania
State University, USA
• Master of Science in Physiology,
Pennsylvania State University, USA
Other activities and functions
Teva Pharmaceutical Industries*, Member of
the Board, Chair of Compliance Committee
and Member of the Human Resources/
Compensation Committee
Dentsply Sirona*, Member of the Board, Chair
of the Science & Technology Committee
Church and Dwight Company*, Member
of the Board, Chair of Governance
Committee, and Member of the Compensation
and Human Capital Committee
The Pennsylvania State University,
Biotechnology Advisory Board Chair
The Pennsylvania State University, Corporate
Engagement Advisory Board Vice-Chair
Shelby R. du Pasquier
Nationality: Swiss
Year of birth: 1960
Tenure: 17 years
Function in SGS
• Board of Directors
Key experience
• Corporate law
• Banking, stock exchange
and financial regulation
• Private equity
• M&A
• Risk management
Professional history
1994 to present: Lenz and Staehelin; Partner
Education
• Geneva University Business School
and School of Law
• Columbia University School of Law (LLM)
Other activities and functions
Swiss National Bank*, Member of the Board
since 2012, Chair of the Risk Committee
Pictet and Cie Group SCA, Chairman
of the Supervisory Board since 2013
* Listed company.
Kory Sorenson
Nationality: British
Year of birth: 1968
Tenure: 3 years
Function in SGS
• Board of Directors
• Remuneration Committee
• Chair: Audit Committee
• Chair: Sustainability Committee
Key experience
• Capital and risk management
• Audit and control
• Capital markets
• M&A
• Remuneration (executive and
wider workforce)
• Governance
• Sustainability
Professional history
2005 to 2010: Barclays Capital;
Managing Director
2001 to 2005: Credit Suisse
1998 to 2001: Lehman Brothers
1997 to 1998: Morgan Stanley
1995 to 1997: Commerz Financial Products
1992 to 1995: Total SA
Education
• Post-graduate (DESS) degree in corporate
finance, l’Institut d’études politiques de
Paris, France
• Master’s in applied economics, University
of Paris-Dauphine, France
• Bachelor’s in econometrics and political
science, American University, USA
• Governance programs from Harvard
Executive Education, INSEAD and the
Stanford Graduate School of Business
• Professional certificate IBM
Cybersecurity Fundamentals
Other activities and functions
Phoenix Group Holdings PLC*, London
(UK), Member of the Board and Chair of the
Remuneration Committee, Member of the
Risk and Sustainability Committees
Pernod Ricard SA*, Paris (FR), Member of
the Board and Chair of the Remuneration
Committee, Member of the Audit Committee
Bank Gutmann, Vienna (AU), privately owned,
Member of the Supervisory Board
Comgest, Paris (FR), Member of the Board
of Partners
AA Limited, Jersey (UK), Member of the Board
and Chair of Audit and Risk Committee
Premium Credit Limited, Member of the Board
and Chair of Audit and Risk Committee
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 92
Phyllis Ka Yan Cheung
Board Director
What made you decide
to become an SGS
board member?
I feel truly aligned with SGS’s purpose to
enable a better, safer and more interconnected
world, and I share the same values with the
teams I have met across SGS. I believe my
expertise in the consumer industry and Asian
markets means that I can offer a constructive
and different perspective to the Board.
How will your past
experiences help to drive
SGS to a thriving future?
As a practicing CEO, I keep up to date
with consumer trends, food supply chain
networks, sustainability practices, and I
manage enterprise level risks that involve
digitalization and cybersecurity. I believe
my hands-on experience and customers’
viewpoint can add value to the SGS
growth strategy.
We understand that you
have visited laboratories to
learn more about SGS, how
effectively did your visits
prepare you for your role
and responsibilities?
Calvin and Frankie designed a very effective
induction program for me. I met with the
global business unit leaders and visited the
local Life Science and I&E laboratories in
Switzerland, as well as the cosmetic and
softline labs in Shanghai.
These trips helped me to understand how
the global growth strategy is being translated
into each local market’s strategic focus, and
how our local management teams execute
with entrepreneurship, disciplined scientific
process and technical rigor. The chance to
speak with employees has given me a better
understanding of the talent and culture in
the organization.
All of this has helped me to understand the
opportunities and challenges that lie ahead
for SGS, making me, as a board member,
more insightful in the prioritization of issues
and resources.
What are your first
impressions of
SGS culture?
I can see that SGS is purposeful, we set high
standards of integrity and professionalism,
and are open-minded and action-oriented
to achieve results.
Corporate governanceSGS | 2022 Integrated Report 93
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 Chair of
the Board of Directors and the members of
the Remuneration Committee, is elected
annually 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 Chair 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.
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
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
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).
None of the members of the Board of
Directors exercise nor have they exercised
an executive role or operational management
tasks for the Company or any entity of the
Group. None of them have any significant
business connection with the Company
or the Group.
The remuneration of the members of
the Board of Directors is detailed in the
Remuneration report. The Chair of the
Board, jointly with members of the Board
of Directors, assesses 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.
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 interests
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
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, of which a maximum
of five memberships may be 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
association and other nonprofit organizations.
All board members have confirmed that they
comply with these rules.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 94
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 2022:
Remuneration
Audit
Sustainability
Nomination
Calvin Grieder
Sami Atiya
Ian Gallienne
Tobias Hartmann
Shelby R. du Pasquier
Kory Sorenson
Janet Vergis
Phyllis Ka Yan Cheung
Chair
Member
Calvin Grieder, Chair of the Board of
Directors, attends the meetings of the
Remuneration, Sustainability and Audit
Committees, with a consultative vote.
He chairs the Nomination 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 Chair 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 CEO 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 exercises oversight over the major
risks identified by the Board of Directors.
This includes specifically the risks of
cybersecurity. It receives regular reports
on cybersecurity incidents and measures
taken by management to address this risk.
The Audit Committee is assisted in this task
by the Board digital advisory committee
which provides advice on matters of digital
technology. The Audit Committee 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.
Meetings of
Board of Directors
Remuneration Committee
Audit Committee
Sustainability Committee
Nomination Committee
Sustainability Committee
A dedicated Sustainability Committee was
established in 2022 in response to the growing
importance of sustainability to the Company
and its stakeholders. The Committee plays
an important role in supporting the Company
to develop its sustainability plans and act
accordingly. The Committee oversees
sustainability-related issues that may affect
the Group and its customers, including
reputational and non-financial risks. It is also
responsible for reviewing and approving the
non-financial information included in the
Integrated Annual Report.
Nomination Committee
The Nomination 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 Board of Directors and its committees
hold physical meetings as well as meetings
by videoconference. The table below does
not make any distinction between physical
and remote meetings of the Board and
its committees.
Frequency
Average duration
6 times
3 times
5 times
3 times
2 times
5 hours
2.5 hours
3 hours
2.5 hours
2.5 hours
Corporate governanceSGS | 2022 Integrated Report 95
Attendance at board and committee meetings
The Board of Directors expects its members to attend and participate actively in 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 2022 at the
meetings of the Board and the respective standing committees.
Member
Calvin Grieder
Sami Atiya2
Paul Desmarais, Jr.
Ian Gallienne
Tobias Hartmann
Shelby R. du Pasquier3
Kory Sorenson
Janet Vergis
Phyllis Ka Yan Cheung1
Board meetings
Remuneration
3/3
2/2
3/3
1/1
3/3
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
4/4
Audit
5/5
5/5
5/5
5/5
Sustainability
Nomination
2/2
2/2
2/2
3/3
3/3
3/3
1. Elected to the Board in March 2022.
2. Elected Chair of Remuneration Committee in March 2022.
3. Stepped down from Remuneration Committee in March 2022.
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 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 CEO
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 Chair
of the Board.
The Chair of the Board is regularly informed
of the activities of the Operations Council
by the CEO, the Chief Financial Officer
and the General Counsel.
The Operations Council is chaired by the
CEO 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 and Legal
and Compliance)
The composition, role and organization of the
Operations Council are detailed in section 4.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 96
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 CEO 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 Nomination 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 CEO 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 CEO, 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 request 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 Chair 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 Chair 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 Audit Committee and the Board
of Directors and has direct access to the
Chair 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 Sustainability Committee.
The Committee monitors disciplinary
actions taken and the implementation
of corrective actions.
E. Other
In addition, the main divisions 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 marketplace; 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.
Corporate governanceSGS | 2022 Integrated Report 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 part of 2022, travel restrictions and
limitations have limited the ability of the
Operations Council to meet physically.
Meetings were held in part with the
assistance of video conference.
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 2022
were as follows:
Frankie Ng
Nationality: Swiss, Chinese
Year of Birth: 1966
Function in SGS
• Chief Executive Officer
Joined SGS in 1994
Education
• BA in Economics and
Electronics Engineering
Previous responsibilities
2011-2015: EVP, Industrial Services
2005-2011: EVP, Consumer Testing Services
2002-2004: Managing Director, US Testing
Other activities
Board Member and member of the Remuneration
Committee at Logitech
Dominik de Daniel
Nationality: Swiss, German
Year of Birth: 1975
Function in SGS
• Chief Financial Officer
Joined SGS in 2019
Education
• Degree in Banking
• CEFA Investment Analyst
Previous responsibilities
2015-2018: CFO and Chief Operating Officer, IWG
plc. UK, the global leader for flexible workspace
2006-2015: CFO Adecco Group, Switzerland
97
Olivier Merkt
Nationality: Swiss
Year of Birth: 1962
Function in SGS
• Chief Compliance Officer
Joined SGS in 2001
Fabrice Egloff
Nationality: French
Year of Birth: 1969
Function in SGS
• COO, Africa & Western Europe
Joined SGS in 1995
Education
• Doctorate in Law, admitted to the bar
in Switzerland
Education
• Master of Business Administration
in International Business Affairs
Previous responsibilities
2006-2008: VP, Corporate Development
Previous responsibilities
2017-2019: COO Africa
2001-2006: Senior Counsel
2009-2017: Managing Director, France
2004-2008: Managing Director,
Hong Kong
Luis Felipe Elias
Nationality: Peruvian
Year of Birth: 1959
Function in SGS
• COO, Latin America
Joined SGS in 2004
Education
• Industrial Engineering Degree and MBA
Previous responsibilities
2012-2018: Managing Director,
Ecuador and Peru
2004-2012: Deputy Managing
Director, Peru
Derick Govender
Nationality: South African
Year of Birth: 1970
Function in SGS
• EVP, Natural Resources
Joined SGS in 2002
Education
• Diploma in Analytical Chemistry
• Postgraduate in Business Management
Previous responsibilities
2015-2020: EVP Minerals Services
2014-2015: Minerals Manager, Chile
2010-2014: VP Minerals, Africa
Teymur Abasov
Nationality: Azerbaijani
Year of Birth: 1972
Function in SGS
• COO, Eastern Europe & Middle East
Joined SGS in 1994
Education
• Degree in Electrical Engineering
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
Nationality: Swiss
Year of Birth: 1972
Function in SGS
• EVP, Health & Nutrition
Joined SGS in 1994
Education
• MSc Economics
Previous responsibilities
2015-2020: EVP, Agriculture Food and Life
2013-2015: EVP, Agriculture
2009-2013: Vice President Seed and
Crop, Agricultural Services
Steven Du
Nationality: Chinese
Year of Birth: 1972
Function in SGS
• COO North East Asia
Joined SGS in 1999
Education
• MSc Logistics & Supply Chain Management
Previous responsibilities
2019-Jul 2021: Managing Director
Mainland China and Hong Kong SAR
2016-2019: Managing Director Mainland China
2014-2016: Managing Director Vietnam
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix Stephen Nolan
Nationality: American, Irish
Year of Birth: 1960
Wim Van Loon
Nationality: Belgian
Year of Birth: 1966
Function in SGS
• COO North America, since January 2021
Joined SGS in 2019
Function in SGS
• COO Northern & Central Europe
Joined SGS in 1989
98
Jessica Sun
Nationality: American
Function in SGS
• SVP, Human Resources
Joined SGS in January 2022
Education
• Bachelor’s degree in Law from the China
University of Politics & Law Science
• EMBA from the Chinese Europe International
Business School (CEIBS)
Previous responsibilities
2016-2021: Haier, USA, CHRO Global Appliances
2013-2016: Mallinckrodt Pharmaceuticals, VP of
Human Resources, International Mallinckrodt
2012-2013: Eaton Corporation, USA, HR Director,
Global CET Business
Charles Ly Wa Hoi
Nationality: French
Year of Birth: 1966
Function in SGS
• EVP, Connectivity & Products
Initially joined SGS in 1992, rejoined
in 2008
Education
• Degree in Electronics Engineering
from ENSEIRB-MATMECA
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
Education
• B.Comm in Finance
Previous responsibilities
2013-2018: Hudson Global, USA Chief Executive
Officer/Chief Financial Officer
2004-2012: Managing Director of Adecco
North America
Toby Reeks
Nationality: British
Year of Birth: 1976
Function in SGS
• SVP, Corporate Communications,
Sustainability & Investor Relations
Joined SGS in 2018
Education
• BA in Economics
Previous responsibilities
2013-2018: Executive Director,
Morgan Stanley
2011-2013: Director, Merrill Lynch
2005-2011: Vice President, Merrill Lynch
Malcolm Reid
Nationality: British
Year of Birth: 1963
Function in SGS
• COO, South East Asia & Pacific
Joined SGS in 1987
Jeffrey McDonald
Nationality: Australian, American
Year of Birth: 1964
Education
• BSc Chemistry
Function in SGS
• EVP, Knowledge
Joined SGS in 1995
Education
• Postgraduate Diploma in Education
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
Previous responsibilities
2012-2015: EVP, Consumer Testing Services
2007-2011: EVP, Systems and
Services Certification
2005-2007: Managing Director, Australia
Alim Saidov
Nationality: Azerbaijani/Canadian
Year of Birth: 1964
Function in SGS
• EVP, Industries & Environment
Joined SGS in 1993
Education
• PhD in Science
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
Education
• Engineering degree in Industrial Electro
Mechanic and Master’s degree in
Business Management
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
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 2022 Siddi Wouters, SVP Digital
& Innovation left the Operations Council
and the Group. 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
limit the number of mandates permissible to
members of the Operations Council, to no
more than four board memberships in entities
outside the Group, of which a maximum
of one membership may be 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.
Corporate governanceSGS | 2022 Integrated Report In addition, the articles of association set limits
to participations in boards of association 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.
5. Compensation,
shareholdings and loans
5.1. Content and method of
determining the compensation
and the shareholding programs
The Group’s overriding compensation
policies are defined by the Board of Directors.
The objectives of these policies are twofold:
1) to attract and retain the best talent available
in the industry, and 2) 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.
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 pages 105 to 107
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 2022
(same as at 31 December 2021), no loan or
advance is granted by the Group to members
of the Operations Council.
5.2.3. Rules on vote on pay
The Annual General Meeting approves the
following matters related to the compensation
of the Board and Operations Council:
• It approves the fixed fees payable to the
Board of Directors until the next Annual
General Meeting
• It approves in advance a prospective
maximum fixed remuneration to the
Operations Council during the next
financial year
• 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.
6.1. Voting rights and
representation restrictions
All registered shareholders can attend the
General Meetings of Shareholders and
exercise their right to vote. A shareholder may
also elect to grant power of attorney to an
independent proxy appointed by the Company
or to any other registered shareholder.
There are no voting restrictions, subject
to the exclusion of nominee shareholders
representing undisclosed principals, as
detailed in Section 2.6.
6.1.2. Rules on instructions to the
independent proxy and electronic
participation in the annual
shareholders’ meeting
Shareholders have the opportunity to give
general or specific voting instructions to the
independent proxy, who is elected by the
General Meeting of Shareholders.
99
Shareholders can give specific or generic
voting instructions to the independent proxy
on all matters on the agenda of the General
Meeting of Shareholders. These instructions
can be issued in written form, or by
electronic transmission.
The voting of resolutions by electronic votes
is authorized by the articles of association,
within the modalities defined by the Board
of Directors.
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 unless Swiss company
law mandates a special majority.
6.3. Convocation of General
Meetings of Shareholders
The rules regarding the convocation of General
Meetings of Shareholders are in accordance
with Swiss company law.
6.4. Inclusion of items
on the agenda
The agenda of the 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 an Annual General
Meeting. However, a technical notice of two
business days is required.
7. Change of control
and defense measures
No restriction on changes of 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.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 100
8. Auditors
8.1. Duration of the mandate and
term of office of the lead auditor
PwC was elected as auditor of the Company
and the SGS Group. 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 2022 Group financial statements.
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 2022 amounted
to CHF 6.1 million (2021: CHF 6.2 million).
8.3. Additional fees
An aggregate amount of CHF 1 million
was paid to PWC (2021: CHF 1 million) 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 2022, the Audit Committee met 5 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.
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. The audit
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 services above defined thresholds.
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.
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,
roadshows 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’s main registered office and contact
details by phone and email can be found
on page 236 of the annual report.
10. Quiet periods
Members of the Operations Council and
other employees having access to material
non-public information are banned from
trading in SGS shares during quiet periods,
preceding publication of yearly and half
yearly results.
These periods are set between December 31
until and including the date of publication of
the full year results and between June 30
until and including the date of the publication
of the half year results.
In addition to these fixed quiet periods, the
Company institutes additional trading bans
from time to time, prior to the release of
material non-public information, such as major
acquisitions or disposals, or trading updates.
Corporate governanceSGS | 2022 Integrated Report Investor relations
at SGS
We ensure clear, transparent and consistent
information to support the financial community
to make informed decisions.
101
Fostering transparency and trust
Our approach
Our team leads the communication with
current and prospective investors, analysts
and rating agencies. Our aim is to provide
clear and transparent information to the
financial community supporting investors
to make informed decisions.
We engage with analysts, existing and new
investors at our investor days, roadshows,
conferences globally and on an ad-hoc basis.
Over the course of 2022, we attended over
20 investor conferences and had a total of
over 470 touchpoints (a +10% year on year).
Investor days
Our Investor Days gives analysts and
investors the opportunity to visit our facilities
in the field, SGS and TIC industry themes
and concerns, and facilitate access to the
local management team and members
of our Operations Council in an open and
transparent way.
Following a pause during the pandemic,
when we held the virtual external
presentation of our 2020-23 plan, we
hosted our annual investor days in Istanbul.
During this two-day event, we updated the
audience on progress made towards our
2023 plan and addressed the key themes
of deglobalization, sustainability solutions
and digitalization.
We organized tours of Gunesli and Dilovasi
laboratories enabling participants to visit
our facilities, spend time with our local
operational management teams and get
a deeper, more tangible understanding of
our business.
The event was well-attended, with over 30
analysts and investors staying for the entire
duration of the trip and over 25% of our
shareholder base was represented.
Our investors
Our shareholder base largely consists
of long-term investors. Over 15% of our
institutional investors are based in the
United Kingdom and in Switzerland while
approximately over 10% are based in the
United States. Please see the chart below
full the full breakdown of our investor base.
How to connect with us
More information is available on our Investor
Relations webpage on sgs.com.
Investor engagements by region
Americas 30%
Europe, Africa and Middle East 59%
Rest of the World 11%
Institutional investors by geography
United Kingdom 32%
Switzerland 24%
United States 21%
Other 23%
IR results in annual investors survey
FY22 investor engagement feedback
Top 3
Top 2
for best IR program
for the Business
& Employment
Services sector in
both votes1
for best analyst/
investor event (in
both the buyside
and combined vote)
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?
1. There are two separate votes – one from investors
and one combined with analysts.
Do you view sustainability as integral to our strategy
and culture?
Average rating 1 – negative to 5 – very positive
4.7
4.5
3.8
4.1
4.1
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 102
Remuneration
report
We are
driving fair and
equitable remuneration
policies and practices
aligned with our
sustainability ambitions.
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 2022 business year. The SGS
Remuneration report has been prepared in
compliance with the ordinance against excessive
compensation (OaEC) at listed joint-stock
companies, 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.
SGS | 2022 Integrated Report
103
1.
Introduction by
the Remuneration
Committee
104
4. Remuneration awarded 115
to the Board Of Directors
2. Remuneration
105
policy and principles
to the Operations
Council members
5. Remuneration awarded 117
5.1. Fixed remuneration
117
5.2. Short-term variable remuneration 118
5.3. Long-term variable remuneration 120
121
5.4. Total remuneration
5.5. Remuneration mix
122
122
5.6. Other compensation elements
5.6.1. Severance payments
5.6.2. Other compensation
122
122
to members or former
members of governing
bodies
5.6.3. Loans to members or
122
former members of
governing bodies
Report of the
statutory auditor
123
2.1. Remuneration general principles 105
105
2.2. Remuneration policy for
the executive management
2.3. Remuneration governance
2.3.1. Remuneration
committee
2.3.2. Shareholders’
engagement
105
106
106
3. Remuneration model
107
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
107
108
108
108
108
112
114
114
3.2.7. Employment contracts
3.2.8. Timeline of remuneration
114
115
SGS | 2022 Integrated Report
Management reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
104
1. Introduction by the
Remuneration Committee
On behalf of the Remuneration Committee, I am pleased to present
the SGS Remuneration report for the year ended in December 2022.
I would like to start by thanking Shelby du Pasquier for his valuable
contribution during his tenure as Chair of the Remuneration
Committee and express my sincere gratitude for his support and
advice since I took over the role. I would also like to thank my
colleagues for their engagement throughout the year; there were
many challenges to overcome and accompanying opportunities
to be seized.
Our aim going forward is to further strengthen our attractiveness
and retention power towards our existing and future talents, driving
fair and equitable remuneration policies and practices aligned with
our sustainability ambitions, our diversity, inclusion and well-being
initiatives, and our purpose of enabling a better, safer and more
interconnected world.
During 2022 the Committee reviewed the remuneration of the
Board of Director members, with two main drivers: from one side,
align their remuneration level to the prevalent market practices of
the Swiss listed companies of similar size, and from the other side
deliver part of the remuneration in restricted shares, in support of the
newly introduced shareholding requirement. Details on the Board
of Directors’ new remuneration levels and vehicle, and shareholding
requirement, are disclosed in section 3.1. and 4. of this report.
In 2022 the transition of the long-term incentive for Operations
Council members and selected senior managers, from one grant
every three years to a system with annual grants, was completed
and, after the 2021 transition plan, the first annual plan was granted.
Details on the 2022 grant are disclosed in section 5.3. of this report.
The Committee reviewed and approved the contractual terms and
conditions, including remuneration, of one new member of the
Operations Council, appointed during 2022; 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
2022, and will continue with the same ‘say-on-pay’ vote structure
at the forthcoming Annual General Meeting 2023:
• 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 2022
• Binding vote on the prospective maximum fixed remuneration
amount of the Operations Council members for 2024
• Binding vote on the prospective maximum value of the grants
awarded under the long-term incentive plan to the Operations
Council members in 2023
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 2022. I hope that you find
this report informative. The Committee has sought to promote a
remuneration environment that 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
and trends.
I look forward to your support on the 2022 annual remuneration
report at the Annual General Meeting.
Sami Atiya
Chair 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)
Consultative vote on the remuneration report
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.
2018
2019
2020
89.79
94.50
93.05
2021
92.70
2022
83.94
98.72
98.09
98.13
95.51
97.81
75.61
80.28
95.58
94.37
96.11
95.97
97.17
97.39
96.95
97.02
96.63
–
–
96.40
96.88
Remuneration reportSGS | 2022 Integrated Report 105
In line with its anti-discrimination and dignity at work policy, SGS is
committed to promoting 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 and SMIM-listed companies not belonging to the
capital markets, insurance and pharmaceuticals sectors of
comparable size.
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.
The company has not used external paid advisors to perform salary
benchmarks since 2015, relying instead on available market data.
No third-party services provider was engaged to perform such
benchmark in 2022.
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 Chair and the directors. It also decides on
the remuneration and terms of employment of the CEO. 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, Art. 29, Art. 30, Art. 31 and Art.
32; link to the SGS articles of association: https://www.sgs.com/
en/-/media/sgscorp/documents/corporate/sgs-legal-status-en-fr.cdn.
en.pdf).
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 & innovation.
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
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 106
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 CEO) 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 staff and may
use third-party consultants that specialize in compensation matters.
In 2022, neither the committee nor the Board of Directors had
recourse to such external advisors.
CEO
Remuneration
Committee
Board of
Directors
Annual General
Meeting
Subject matter
Aggregate remuneration amount of the Board of Directors
Individual remuneration of the members of the Board of Directors
including the Chair 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 Annual General Meeting 2022 to 2023:
• Sami Atiya (Chair)
• Ian Gallienne
• Kory Sorenson
In 2022, the Committee met three times, attended by all members,
and handled several matters pertaining to remuneration outside
scheduled meetings. The Chair 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 Chair 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, the senior
vice president of human resources and the global head of total
reward 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 ordinance against excessive
compensation (OaEC) for Swiss corporations, 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 of 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 | 2022 Integrated Report 107
A summary of the shareholders’ votes on remuneration is described in the chart below:
Shareholders’ votes on remuneration summary
Shareholders’ vote
at the 2023 AGM
2022
2023
2024
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
AGM – Annual General Meeting
AGM 2023
AGM 2024
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’.
3. Remuneration model
3.1. Structure of remuneration of the Board of Directors
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 participation in board committees
(committee fees). The annual board retainer of the Chair of the Board
includes his or her attendance to any committee of the Board, whether
as a voting member or in an advisory capacity. By agreement with the
relevant tax authorities, part of the remuneration of the Chair 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 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)
Chair
Board
members
The remuneration to the members of the Board of Directors is subject
to employer social charges according to Swiss legislation.
The amounts of the remuneration elements for the Chair 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 publicly
traded companies belonging to the SMI or SMIM indexes, with market
capitalization of similar size, and not belonging to the capital markets,
insurance and pharmaceuticals sectors.
For the mandate Annual General Meeting 2022 to 2023, the Board of
Directors reviewed the remuneration of its members, and defined the
following changes:
• An increase of the board retainer for the Chair and the board
members, to align with prevalent practices of Swiss publicly traded
companies of similar size (see section 4. of this report for the
new amounts)
• A new remuneration settlement scheme, with a portion of
remuneration to be settled in restricted shares
• The introduction of shareholding requirements
The aggregate amount of the new board remuneration was submitted
to the Annual General Meeting for approval.
Each board member will receive 25% of the annual board retainer
in the form of shares restricted for a period of three years ending
on the third anniversary of their award. The restricted shares will be
awarded after the Annual General Meeting during which the board
member is elected to their position. The number of restricted shares
awarded will be determined by dividing the cash value of 25% of the
annual board retainer by the average closing share price during the
20-day period following the payment of the dividends after the Annual
General Meeting. Fractions will be rounded down to the nearest whole
number; the balance, if any, will be settled in cash, payable with the
next installment of the fees. Such restricted shares may not be sold,
donated, pledged or otherwise disposed of to third parties during the
three year restriction period. In case of change of control or liquidation,
or in case a member of the board ceases to exercise their 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.
Board members are required to accumulate during their tenure a
number of shares equivalent in value to two years of remuneration.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
108
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.
allowances according to local practices in their country of employment,
and in the form of benefits in kind.
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
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
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
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
Long-term incentive
Performance
share units
(PSUs)
Long-term financial
and non-financial
performance
Annual financial
performance, individual
performance
against leadership
competency model
and ESG1 metrics
Group revenue, group
NPAT2, group ROIC3,
group free cash flow,
regional and division
profit, regional and
division NWC4,
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
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 CEO 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.
3.2.2. 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.
3.2.3. Short-term variable remuneration
The CEO and the other members of the Operations Council are
eligible for 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.
The short-term incentive plan is reviewed annually to ensure its
alignment with the group’s business strategy and value to society
ambitions. For the performance year 2022, only a minor change in
the KPIs compared to 2021 was implemented: for the executive vice
presidents, heads of divisions, 10% of the incentive opportunity is
now linked to the division net working capital, replacing the division
operating free cash flow, to ensure better consistency between
divisions and regions in managing the net working capital.
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 | 2022 Integrated Report 109
The target incentive is expressed as a percentage of the annual base
salary and varies depending on the role. For the CEO, the target
incentive amounts to 100% of annual base salary, while the target
incentive for the other members of the Operations Council varies
between 65% and 90% of annual base salary.
The table below summarizes the annual incentive opportunity for
the CEO and the other members of the Operations Council.
Incentive frequency
Minimum incentive opportunity
as % of base salary
as % of target incentive
opportunity
Target incentive opportunity
as % of base salary
Maximum incentive opportunity
as % of target incentive
opportunity
as % of base salary
CEO
Annual
Other Operations
Council members
Annual
0%
0%
0%
0%
100%
65-90%
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 division (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 revenue
25%
Group NPAT
25%
Group revenue
25%
Group ROIC (Organic)
25%
Group ROIC (Organic)
25%
Group free cash
flow (organic)
25%
Group free cash
flow (organic)
25%
Division profit
40%
Division NWC
10%
Regional profit
40%
Regional NWC
10%
For each key performance indicator, a pay-out curve is defined according to the following principles:
• A threshold (minimum level of performance to trigger a pay-out, and below which the pay-out is zero), a target (expected level of
performance that triggers a pay-out equivalent to the target incentive), and a maximum (level of performance that triggers the highest
pay-out, and above which the pay-out is capped) are defined
• The lowest pay-out (triggered by the threshold performance) and the highest pay-out (triggered by the maximum performance) are defined
• The pay-out for performances between threshold and target and between target and maximum are calculated by linear interpolation
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 110
The chart below shows the pay-out curves for the group net operating profit after taxes (NPAT), group revenue, group return on invested
capital (ROIC), group free cash flow (FCF), divisional profit, regional profit.
Bottom-line, top-line, ROIC and FCF performance (pay -out curve)
250%
200%
%
t
u
o
-
y
a
P
150%
100%
50%
0%
80%
100%
133.3%
200%
Performance %
The pay-out curve for regional and divisional net working capital (NWC) is defined by the CEO at the beginning of the performance year
together with the objectives for each performance metric.
At the end of the performance period, the results for each key performance indicator are assessed against the pre-defined target and the
pay-out curve to determine a pay-out factor. The weighted average of the pay-out factors of each key performance indicator corresponds
to the overall financial performance pay-out factor.
An example of the calculation of the financial performance pay-out factor for an executive vice president is described in the chart below.
Financial performance pay-out factors for an executive vice president
Group NPAT
weight 25%
Group revenue
weight 25%
Division net
working capital
10%
Division profit
weight 40%
Financial
performance
pay-out
Performance
96%
Performance
120%
Performance
100%
Performance
110%
Pay-out
80%
80%
x 0.25
Pay-out
160%
160%
x 0.25
Pay-out
100%
100%
x 0.10
Pay-out
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 long-term incentives (LTI). Their final incentive amount is calculated by multiplying the financial performance
pay-out factor by a leadership multiplier.
The leadership multiplier is determined for each executive based on an assessment of their 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 | 2022 Integrated 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
111
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 December 31 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 at 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
December 31 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 December 31 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 December 31 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 December 31 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 at the Annual General Meeting.
The table below summarizes the rules in case of termination of employment.
Last day of employment
before December 31
Last day of employment
between December 31 and AGM
Incentive
opportunity
(target
incentive)
Zero
Termination
reason
Termination
for cause
Resignation
Zero
Incentive
pay-out
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
AGM – Annual General Meeting
Incentive
opportunity
(target
incentive)
Zero
Full
Full
Full
Incentive
pay-out
Zero
Payment
date
–
Payment
vehicle
–
Based
on actual
performance
After AGM
approval
100%
cash
Based
on actual
performance
Shortly after
the termination
date
100%
cash
Based
on actual
performance
After AGM
approval
100%
cash
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 112
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 CEO 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). 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.
The value of the grant is 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.
The table below summarizes the value of the incentive opportunity
for the CEO and other OC members.
Incentive frequency
Minimum incentive
opportunity value
Target incentive
opportunity value
as % of base salary
as % of target incentive opportunity
as % of base salary
Maximum incentive opportunity value
as % of target incentive opportunity
as % of base salary
CEO
Annual
0%
0%
167%
150%
250%
Other Operations
Council members
Annual
0%
0%
100-133%
150%
150-200%
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 (greenhouse
gas (GHG) 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).
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.
The long-term incentive plan is reviewed annually to ensure its
alignment with the group’s business strategy and value to society
ambitions. No change in the structure of the long-term incentive
plan was implemented in 2022; the only difference compared to
the 2021 transition plan was in the size of the grants. Details on
the value of the 2022 grants in comparison with the 2021 grants
are disclosed in section 5.3. of this report.
Performance conditions
The performance conditions of the long-term incentive consist
of the following key performance indicators:
• Relative total shareholder return (rTSR1) (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.
1. Total shareholder return: (Ending stock price – Beginning stock price) + Sum of all dividends received during the measurement period.
Remuneration reportSGS | 2022 Integrated Report The graphics below summarize the key performance indicators of the long-term incentive and their vesting levels:
Relative TSR vesting formula
113
%
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
• In the event of a corporate transaction or liquidation, unvested PSUs vest immediately. The vesting level is based on an estimation
of performance by the Board of Directors
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
114
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 their total
remuneration. The part of remuneration settled in equity instruments
(restricted shares and PSUs) represents, at target, 59% of their
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 pay-
out), at target (both short-term and long-term incentives at
100% pay-out) and at maximum (both short-term and long-term
incentives at maximum pay-out).
3.2.6. Shareholding ownership guidelines
A shareholding ownership guideline (SOG) in force since 2015,
requires 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 CEO,
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 | 2022 Integrated Report 115
3.2.8. Timeline of remuneration
The following chart outlines the timeline of payment of each remuneration element that was earned in 2022:
• The annual base salary is paid during 2022
• The cash portion of the short-term incentive is paid in March 2023, shortly after the Annual General Meeting
• The share portion of the short-term incentive is allocated in April 2023 and will be unblocked in April 2026
• The PSUs granted under the long-term incentive in 2022 will be earned over the performance period from 2022 to 2024 and will vest,
subject to performance conditions and continuity of employment, in February 2025
Timeline of remuneration
Timeline (performance period, time of payment)
Performance KPIs
Long-term
incentive
2022 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%)
Group ROIC (organic), Group FCF, Role
specific Profit, Role specific NWC (50%)
Multiplied by leadership multiplier
Fixed remuneration
2022
2023
2024
2025
2026
Shareholding Ownership Guideline
4. Remuneration awarded to the Board of Directors (audited)
As explained in section 3.1. of this report, The Board of Directors reviewed the remuneration of its members, to align with prevalent market
practices of Swiss publicly traded companies.
For the mandate from Annual General Meeting 2022 to 2023, the annual board retainer is CHF 665 000 for the Chair of the Board and
CHF 200 000 for the other Board of Directors members; this represents an increase of 33% compared to the prior mandate (board retainer
was CHF 500 000 for the Chair and CHF 150 000 for the other members). The Chair of the Audit Committee is entitled to an additional fee
of CHF 70 000; directors serving as Audit Committee members are entitled to an additional fee of CHF 50 000 (unchanged from the prior
mandate). The Chair of the Remuneration Committee is entitled to an additional fee of CHF 40 000; directors serving as Remuneration
Committee members are entitled to an additional fee of CHF 30 000 (unchanged from the prior mandate). The Chair of the Sustainability
Committee is entitled to an additional fee of CHF 30 000; directors serving as Sustainability Committee members and directors serving on
the Nomination Committee are entitled to an additional fee of CHF 30 000 (during the prior mandate, directors serving on the Governance
& Compliance Committee were entitled to an additional fee of CHF 30 000).
(CHF thousand, gross)
Chairmanship
Membership
Board
Retainer
Audit
Committee fee
Remuneration
Committee fee
Nomination
Committee fee
Sustainability
Committee fee
665
200
70
50
40
30
–
30
30
30
The total remuneration of the Board of Directors for the mandate from Annual General Meeting 2022 to 2023 is equal to CHF 2 655 000,
within the amount approved by the Annual General Meeting 2022 (CHF 2 700 000).
Each board member receives 25% of the annual board retainer in the form of shares restricted for a period of three years ending on the
third anniversary of their award; 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 restricted shares are awarded in the current fiscal year, after the Annual General
Meeting during which the board member is elected to their position.
The total remuneration of the Board of Directors for the mandate from Annual General Meeting 2021 to 2022 was equal to CHF 1 880 000,
within the amount approved by the Annual General Meeting 2021 (CHF 2 300 000).
Each board member could choose to receive up to 50% of his/her remuneration settled in shares or restricted shares. Two board members
decided to receive a portion (25% and 50%) of their remuneration in restricted shares; the remaining portion was settled in cash. The cash
part was paid partly in 2021 fiscal year and partly in 2022 fiscal year, on a pro-rata temporis basis. The shares or restricted shares were
granted in 2022 fiscal year, after the publication of the 2021 Group results.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 116
The table below details the remuneration elements and the settlement vehicle of the directors for the mandate Annual General Meeting
2022 to 2023.
(CHF thousand, gross) Chairmanship
Board
membership
Audit
Committee
membership
Remuneration
Committee
membership
Nomination
Committee
membership
Sustainability
Committee
membership
Total
remuneration
To be
settled
in cash
C. Grieder
S. Atiya
Ph. Cheung
P. Desmarais, Jr.
I. Gallienne
T. Hartmann
S. R. du Pasquier
K. Sorenson
J. S. Vergis
Total
665
–
–
–
–
–
–
–
–
–
200
200
200
200
200
200
200
200
665
1 600
–
–
–
–
–
50
–
70
50
170
–
40
–
–
30
–
–
30
–
100
–
30
–
–
30
–
–
–
–
60
1. Restricted shares were granted during fiscal year 2022.
–
–
30
–
–
–
–
30
60
To be
settled in
restricted
shares1
165
50
50
50
50
50
50
50
50
665
270
230
200
260
250
200
330
250
500
220
180
150
210
200
150
280
200
2 655
2 090
565
The table below details the remuneration elements and the settlement vehicle of the directors for the mandate Annual General Meeting
2021 to 2022.
(CHF thousand, gross)
Chairmanship
Board
membership
Audit
Committee
membership
Remuneration
Committee
membership
Governance
& Compliance
Committee
membership
Total
remuneration
Proportion
to be
settled in
cash
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
–
–
–
30
–
40
30
–
–
30
–
30
–
–
–
–
500
180
150
210
200
190
250
200
100%
100%
100%
100%
100%
75%
50%
100%
–
–
–
–
–
25%
50%
–
100
60
1 880
1. Restricted shares were granted during fiscal year 2022.
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 2022. It includes both
pro-rata temporis elements of remuneration for the mandate Annual General Meeting 2021 to 2022 and pro-rata temporis elements or
remuneration for the mandate Annual General Meeting 2022 to 2023.
(CHF thousand, gross)
C. Grieder
S. Atiya
Ph. Cheung1
P. Desmarais, Jr.
I. Gallienne
T. Hartmann
S. R. du Pasquier
K. Sorenson
J. S. Vergis
Total
1. As of the Annual General Meeting 2022.
Board
retainer
Representation
fees
Committee
fees
Total
remuneration
Cash
Restricted
shares value
Restricted
shares NB
Employer
social
charges
656
197
163
197
197
197
212
288
197
2 304
–
–
–
–
–
–
–
–
–
–
–
60
23
–
59
49
–
98
49
656
257
186
197
256
246
212
386
246
493
209
138
149
208
198
115
213
198
338
2 642
1 921
163
48
48
48
48
48
97
173
48
721
65
19
19
19
19
19
38
68
19
10
22
16
14
22
–
18
32
21
285
155
Remuneration reportSGS | 2022 Integrated Report 117
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 Annual General Meeting 2020 to 2021 and pro-rata temporis elements or
remuneration for the mandate Annual General Meeting 2021 to 2022.
(CHF thousand, gross)
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
Board
retainer
Representation
fees
Committee
fees
Total
remuneration
Cash
Restricted
shares value
Restricted
shares NB
Employer
social
charges
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
501
180
150
42
211
35
200
51
142
178
155
311
1 893
1 845
–
–
–
–
–
–
–
–
48
–
–
48
–
–
–
–
–
–
–
–
18
–
–
18
–
16
11
4
19
2
–
5
17
16
14
104
1. Until the Annual General Meeting 2021.
2. As of the Annual General Meeting 2021.
The overall remuneration paid to the Board of Directors in 2022 is higher than the overall remuneration paid in 2021; this reflects the
adjustment of the board fees to market conditions (as explained in section 3.1. of this report), the split of the Governance & Sustainability
Committee into two separate committees (the Nomination Committee and the Sustainability Committee), and the increase in the number
of board members (9 members in the mandate Annual General Meeting 2022 to 2023, 8 members in the prior mandate).
5. Remuneration awarded to the Operations Council members (audited)
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 CEO in 2022. All amounts disclosed in this section include the short-term incentive cash amount
and restricted shares that will be granted in April 2023 with respect to performance in 2022 (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 CEO in 2022.
(CHF thousand, gross)
Operations Council (including senior management)
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior management (including CEO)
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
7 499
–
–
7 499
2 325
–
–
2 325
1 200
–
–
1 200
867
–
–
867
142
–
–
142
64
–
–
64
–
748
–
748
–
271
–
271
–
112
–
112
–
343
–
343
–
21
–
21
–
8
–
8
8 366
1 091
–
9 457
2 467
292
–
2 759
1 264
120
–
1 384
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 2021 (CHF 14 000 000). For 2023, the 2022 Annual General Meeting already approved a maximum aggregate
total fixed remuneration for the members of the Operations Council (CHF 12 500 000).
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 118
The table below summarizes the fixed remuneration paid to the Operations Council, senior management and the CEO in 2021.
(CHF thousand, gross)
Operations Council (including senior management)
Base
salary
Other cash
allowances
Contributions
to pension
plans
Other contributions
and benefits
in kind
Total fixed
remuneration
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior management (including CEO)
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Chief Executive Officer
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
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 decrease in fixed remuneration compared with 2021 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 2022, the achievement of financial targets at group level, in the businesses and in the regions ranges from 74.8% to 123.6% (2021: 88.0%
to 133.3%).
The chart below summarizes the 2022 performance achievements against targets for the financial objectives (revenue, profitability, cash
generation and capital efficiency) used in the short-term incentive. No adjustment to the targets was made to account for the Covid-19
related lockdown in China and for the geopolitical crisis in Eastern Europe.
Threshold
Target
Maximum
2022 performance achievements against targets
Performance KPI
Group revenue
Group NPAT
Group ROIC
Group free cash flow
Pay-out %
100.8%
66.6%
63.4%
0.0%
Regional and business profit
57.6% 0.0% 115.7%
Regional and business cash generation
90.8% 48.5% 170.9%
Avg
Min
Max
Achievement
Average achievement
Performance range
The overall short-term incentive pay-out amounts to 63.5% of the target incentive opportunity for the CEO (2021: 121.9%) and ranges from
49.4% to 113.1% of the target incentive opportunity for the other members of the Operations Council (2021: 79.1% to 157.1%). For the
purpose of the short-term incentive, targets and performance achievement are measured at constant currency exchange rates. The table
below details the 2022 short-term incentive for the CEO.
CEO 2022 STI pay-out
KPI description
Target
Actual
Actual vs Target %
Pay-out %
Weight
Financial KPIs pay-out %
Leadership multiplier
Total pay-out %
Pay-out (CHF thousand, gross)
Revenue (CHF million) NPAT (CHF million)
ROIC (organic) (%)
FCF (CHF million)
Group financial KPIs
Pay-out
6 623
6 642
100.3%
100.8%
25%
630
588
93.3%
66.6%
25%
20.5
19.0
92.7%
63.4%
25%
677
507
74.8%
0.0%
25%
57.7%
110%
63.5%
762
Remuneration reportSGS | 2022 Integrated Report 119
In settlement of the equity portion of the short-term incentive 2022, SGS restricted shares will be allocated to the members of the
Operations Council in Q2 2023, after the approval of the total short-term incentive amount by the Annual General Meeting (in Q2 2022,
1 378 restricted shares were granted in settlement of the equity portion of the short-term incentive 2021). 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 CEO
for the 2022 performance year, and its comparison with the incentive opportunity.
(CHF thousand, gross)
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 CEO)
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Chief Executive Officer
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
–
–
–
–
–
–
–
–
–
–
–
–
3 106
–
3 106
6 212
1 080
–
1 080
2 160
600
–
600
1 200
7 765
–
7 765
15 530
2 700
–
2 700
5 400
1 500
–
1 500
3 000
2 216
–
2 216
4 432
662
–
662
1 324
381
–
381
762
The total short-term remuneration amount will be submitted for approval to the Annual General Meeting of 2023, 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 CEO
for the 2021 performance year, and its comparison with the incentive opportunity.
(CHF thousand, gross)
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 CEO)
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 2021 short-term remuneration amount was approved by the Annual General Meeting of 2022, and the settlement for both the cash
and the equity part were implemented shortly after.
The decrease in short-term variable remuneration compared to 2021 reflects the lower achievements against the financial targets.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
120
5.3. Long-term variable remuneration
In 2022, the group implemented a long-term incentive plan for the performance period 2022-2024. Under the long-term incentive plan 2022-
2024, a total of 3 296 performance share units (PSUs) were granted to the members of the Operations Council; this includes 1 301 PSUs
granted to senior management, of which 769 granted to the CEO.
The PSUs awarded under the long-term incentive 2022-2024 vest after the three-year performance period 2022-2024, in early 2025,
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 by 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.
A cash long-term incentive plan was implemented in 2022 for one Operations Council member who was newly appointed, as part of his
total compensation. This incentive mirrors the long-term incentive PSUs plan 2021-2023, with the exact same vesting and performance
conditions, from the date of the appointment to 31 December 2023.
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 CEO. The 2021-2023 long-term incentive plan was 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.
A cash long-term incentive plan was implemented in 2021 for one Operations Council member who was newly appointed, as part of his
total compensation. This incentive mirrors the long-term incentive PSUs plan 2021-2023, with the exact same vesting and performance
conditions, from the date of the appointment to 31 December 2023.
The table below summarizes the value of the long-term variable remuneration awarded to the Operations Council, senior management
and the CEO in 2022.
Operations Council (including senior management)
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior management (including CEO)
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,
gross)
–
–
3 296
3 296
–
–
1 301
1 301
–
–
769
769
618
–
8 577
9 195
–
–
3 386
3 386
–
–
2 001
2 001
1. The value of the grant for the equity part is defined as the number of PSUs granted multiplied by the average closing price of the share during a 20-trading day period preceding the grant date.
Remuneration reportSGS | 2022 Integrated Report The table below summarizes the value of the long-term variable remuneration awarded to the Operations Council, senior management and
the CEO in 2021.
121
Operations Council (including senior management)
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior management (including CEO)
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Chief Executive Officer
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Total value
of the grant1,2
Number of
PSUs granted
(CHF thousand,
gross)
–
–
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 value of the grant for the equity part is defined as the number of PSUs granted multiplied by the average closing price of the share during a 20-trading day period preceding the
grant date.
2. 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 is one third of the past plans.
5.4. Total remuneration
The tables below present all components of the remuneration earned in 2022 and 2021 by the Operations Council, senior management and
the CEO. The employer social charges are reported separately in the last column of the table.
Total remuneration 2022
(CHF thousand, gross)
Total fixed
remuneration
Total
short-term
variable
remuneration
Total 2022
remuneration
before LTI
Total
long-term
variable
remuneration
Total 2022
remuneration
Employer
social
charges
Operations Council (including senior management)1
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior management (including CEO)2
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Chief Executive Officer
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
1. 18 FTE (Full-Time Equivalent).
2. 3 FTE.
8 366
1 091
–
9 457
2 467
292
–
2 759
1 264
120
–
1 384
2 216
–
2 216
4 432
662
–
662
1 324
381
–
381
762
10 582
1 091
2 216
13 889
3 129
292
662
4 083
1 645
120
381
2 146
618
–
8 577
9 195
–
–
3 386
3 386
–
–
2 001
2 001
11 200
–
1 091
1 390
10 793
23 084
–
1 390
3 129
292
4 048
7 469
1 645
120
2 382
4 147
–
418
–
418
–
220
–
220
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
122
Total remuneration 2021
(CHF thousand, gross)
Operations Council (including senior management)2
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Senior management (including CEO)3
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Chief Executive Officer
Cash (including allowances)
Contributions and benefits in kind
Equity
Total
Total fixed
remuneration
Total short-
term variable
remuneration
Total 2021
remuneration
before LTI
Total long-
term variable
remuneration1
Total 2021
remuneration
Employer
social
charges
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 was two thirds of the past
plans, while as of 2022 the value of the grant will be one third of the past plans.
2. 19 FTE (Full-Time Equivalent).
3. 3 FTE.
5.5. Remuneration mix
In 2022, the part of remuneration at risk (short-term incentive and long-term incentive) for the CEO represents 70% of the total remuneration
(2021: 74%); the part of remuneration settled in equity instruments (restricted shares and PSUs) represents 60% of the total remuneration
(2021: 59%). For the other members of the Operations Council, the part of remuneration at risk represents, on average, 62% of the total
remuneration (2021: 65%); the part of remuneration settled in equity instruments represents, on average, 51% of the total remuneration
(2021: 48%). The long-term incentive of 2021 is considered at the individual’s 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 2022 and 2021.
Remuneration mix of 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
2021
2022
2021
2022
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 2022 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 2022 no other payment was made to any member or former member of the governing bodies (unchanged from prior year).
5.6.3. Loans to members or former members of the governing bodies
As at 31 December 2022, 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 | 2022 Integrated Report
123
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland Téléphone: +41 58 792 91 00, 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. 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 2022. The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Com-panies (Ordinance) contained in sections 4 and 5 (pages 115 to 122) 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 accord-ance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordi-nance). The Board of Directors is also responsible for designing the remuneration system and defining individual remunera-tion 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 re-port, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components 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 2022 complies with Swiss law and arti-cles 14–16 of the Ordinance. PricewaterhouseCoopers SA Guillaume Nayet Louise Rolland Audit expert Auditor in charge Geneva, 22 February 2023 SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 124
We are
delivering
resilient
results.
SGS | 2022 Integrated ReportFinancial statements 125
Report on the audit of the
financial statements
179
3. Historical data
183
3.1. SGS Group – Five-Year
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 2021-2022
4. Material operating
companies and
ultimate parent
183
184
185
185
186
187
1. SGS Group
126
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
Report on the audit
of the consolidated
financial statements
155
156
162
162
162
163
164
165
165
166
2. SGS SA
173
2.1. Income Statement
2.2. Statement of Financial Position
2.3. Notes
1. Significant accounting
policies
2. Subsidiaries
3. Corporate bonds
4. Total equity
5. Share capital
6. Financial income and
financial expenses
7. Extraordinary losses
8. Guarantees and
comfort letters
9. Remuneration
10. Shares and options held by
members of governing bodies
173
174
175
175
175
175
176
176
177
177
177
177
177
11. Significant shareholders
178
1.1. Consolidated Income Statement 126
1.2. Consolidated Statement
126
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
Significant accounting
2.
policies and exchange rates
5.
3. Business combinations
Information by business
4.
and geographical segment
Revenues from contracts
with customers
6. Government grants
7. Other operating expenses
8. Financial income
9. Financial expenses
10. Taxes
11. Earnings per share
and dividend 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
127
128
129
130
130
130
137
138
139
140
140
140
140
141
142
143
144
145
147
148
148
148
148
149
150
150
154
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
126
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
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.
7
4
8
9
10
11
11
1.2. Consolidated Statement of Comprehensive Income
Notes
25
10
For the years ended 31 December
(CHF million)
Actuarial (losses)/gains on defined benefit plans
Income tax on actuarial (losses)/gains
Items that will not be subsequently reclassified to income
statement
Exchange differences
Items that may be subsequently reclassified to income
statement
Other comprehensive (loss)/income for the period
Profit for the period
Total comprehensive income for the period
Attributable to:
Equity holders of SGS SA
Non-controlling interests
2022
6 642
(3 331)
(399)
(521)
(1 493)
898
20
(71)
2
849
(219)
630
588
42
78.86
78.67
2022
(20)
5
(15)
(148)
(148)
(163)
630
467
430
37
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
Financial statementsSGS | 2022 Integrated 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
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
127
Notes
2022
2021
12
13
14
15
10
16
5
17
18
19
23
24
13
10
25
26
27
5
24
13
26
907
577
1 755
350
20
153
125
3 887
59
210
988
223
132
1 623
3 235
7 122
7
954
(279)
682
81
763
2 833
442
79
47
96
3 497
671
228
165
1 009
162
58
569
2 862
6 359
7 122
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
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 128
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) 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
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase/(decrease) 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
2022
630
812
(162)
(250)
1 030
(329)
8
(67)
2
(3)
1
19
–
(369)
(599)
(43)
(9)
(268)
500
(251)
(64)
(183)
469
–
(448)
(70)
143
1 480
143
1 623
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
Financial statementsSGS | 2022 Integrated Report 129
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 2021
8
(230)
160
(1 307)
(241)
2 670
1 060
–
613
613
74
42
1 134
655
51
–
16
3
19
51
613
629
45
674
–
–
–
–
(599)
(599)
(41)
(640)
–
14
(178)
12
14
1
–
7
–
12
21
1
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 2021
Balance at 1 January 2022
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
–
–
–
–
–
–
(1)
7
7
–
–
–
–
–
–
–
Balance at 31 December 2022
7
–
–
–
–
–
–
222
(8)
–
–
–
–
12
–
(42)
130
–
–
–
–
–
–
(271)
(279)
–
–
–
–
18
–
(4)
144
–
(35)
(35)
–
–
–
–
–
(143)
(143)
–
–
–
–
(1 342)
(190)
2 520
1 117
85
1 202
(8)
130
(1 342)
(190)
2 520
1 117
–
588
588
85
42
1 202
630
(15)
–
(158)
(5)
(163)
(15)
588
430
37
467
–
–
–
–
(599)
(599)
(43)
(642)
–
(8)
(1)
18
(8)
(276)
682
–
2
–
81
18
(6)
(276)
763
(1 485)
(205)
2 500
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
130
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 2022.
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 2021 consolidated financial statements,
except for the Group’s adoption of new IFRSs effective 1 January 2022.
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 and geopolitical instability
COVID-19 and recent geopolitical events have impacted the economy and financial markets. Many industries are facing challenges, including
supply-chain disruption, inflation, deteriorating credit and liquidity concerns. Most notably, the Group’s operational performance was
temporarily affected by Covid-related restrictions in China, while its exposure to Russia and Ukraine is limited.
Consequently, these 2022 consolidated financial statements were prepared with particular attention to the below specific areas:
• Impairment of non-current assets: the Group has recognized a CHF 18 million impairment loss (2021: nil)
• Goodwill impairment test: the Group ran the annual impairment test with no impairment required (2021: nil)
• 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 2022, the Group recognized CHF 12 million as deduction of salaries and wage
expenses (2021: CHF 16 million)
Adoption of new and revised International Financial Reporting Standards and Interpretations
Several new amendments and interpretations were adopted effective 1 January 2022 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 187 to 189.
Financial statementsSGS | 2022 Integrated Report 131
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 | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 132
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 | 2022 Integrated Report 133
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, licenses, 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 | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 134
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 | 2022 Integrated Report 135
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 | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 136
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:
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
Statement of financial position
period-end rates
Income statement
period average rates
2022
62.70
68.20
0.11
13.29
98.47
0.07
111.47
1.31
3.01
92.43
2021
66.59
71.65
0.11
14.40
103.78
0.08
123.57
1.24
3.32
91.72
2022
66.33
73.40
0.11
14.20
100.52
0.07
118.01
1.43
3.21
95.44
2021
68.67
72.93
0.12
14.17
108.16
0.08
125.72
1.24
3.27
91.42
Financial statementsSGS | 2022 Integrated Report 137
3. Business combinations
The following business combinations occurred during 2022 and 2021:
Business combinations 2022
In 2022, the Group completed 7 business combinations for a total purchase price of CHF 75 million (note 21).
• 100% of Gas Analysis Services (GAS), a company specialized in instrumentation and gas analysis testing in Ireland (effective
28 February 2022)
• 100% of Ecotecnos, a company providing sea monitoring and oceanography services in Chile (effective 6 May 2022)
• 100% of AIEX, a company providing technical and welding inspection services in the nuclear and marine industries in France (effective
9 May 2022)
• 100% of Silver State Analytical Laboratories and Excelchem Laboratories, companies providing quality analytical and microbiological
testing and support services for clients in the environmental, water, utility, engineering, construction, food processing, chemical, mining,
healthcare, resort and hospitality industries (effective 1 July 2022)
• 100% of proderm GmbH, a company conducting clinical studies from initial consultation to final reports in Germany (effective 7 July 2022)
• 100% of Penumbra Security, a recognized leader providing various types of information security conformance testing to government
standards and regulatory compliance for multinational companies in the USA (effective 31 August 2022)
• 100% of Industry Lab, a company offering a comprehensive range of microbiological analysis services, from enumeration of indicator
organisms to detection of foodborne pathogens, located in Romania (effective 3 November 2022)
These companies were acquired for an amount of CHF 75 million and the total goodwill generated on these transactions amounted to
CHF 52 million.
All the above transactions contributed a total of CHF 20 million in revenue and CHF 3 million in operating income in 2022. Had all acquisitions
been effective 1 January 2022, the revenue for the period from these acquisitions would have been CHF 32 million and the operating income
would have been CHF 5 million.
On 7 July 2022, the Group has acquired proderm GmbH, a clinical research organization, specialized in advanced solutions for cosmetics and
personal care as well as medical clinical studies. This acquisition further supports the Group strategic expansion in cosmetics and hygiene.
proderm GmbH has contributed CHF 6 million to Group’s revenue and CHF 1 million to operating income in 2022. Had the company been
acquired on 1 January 2022 the revenue for the year would have been CHF 12 million and the operating income would have been CHF
2 million.
None of the goodwill arising on these acquisitions is expected to be tax deductible.
Divestment 2022
In 2022, the Group disposed of its US Drilling operations in the USA for a total consideration of CHF 2 million.
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 Ltd (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.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 138
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
Transaction and integration costs
Other non-recurring items
Operating income
* Alternative Performance Measures (APM), refer to the ‘2022 Full Year APM’ document.
Analysis of revenue and operating income
2022
1 023
(37)
(46)
(13)
(29)
898
2021
1 055
(39)
(15)
(24)
–
977
2022
(CHF million)
Connectivity & Products
Health & Nutrition
Industries & Environment
Natural Resources
Knowledge
Total
Revenue
1 311
892
2 157
1 583
699
6 642
Adjusted
operating
income*
Amortization
of acquisition
intangibles
Restructuring
costs
Transaction
and integration
costs
Other
non-recurring
items
Operating
income
by business
313
119
224
225
142
1 023
(5)
(9)
(19)
(1)
(3)
(37)
(12)
(6)
(15)
(10)
(3)
(46)
(1)
(4)
(6)
(1)
(1)
–
–
(29)
–
–
(13)
(29)
295
100
155
213
135
898
* Alternative Performance Measures (APM), refer to the ‘2022 Full Year APM’ document.
2021
(CHF million)
Connectivity & Products
Health & Nutrition
Industries & Environment
Natural Resources
Knowledge
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 ‘2022 Full Year APM’ document.
Restructuring costs
The Group incurred a pre-tax restructuring charge of CHF 46 million (2021: CHF 15 million). Total restructuring costs comprised personnel
reorganization of CHF 26 million (2021: CHF 13 million) as well as fixed asset impairment of CHF 2 million (2021: CHF nil million) and other
charges of CHF 18 million (2021: CHF 2 million).
Other non-recurring items
The Group reported as non-recurring items a charge of CHF 29 million in 2022, related to the decision to cease two key upstream projects
in Libya. This decision is driven by absence of cash collection for services rendered in 2022, resulting in an impairment of fixed assets of
CHF 16 million in addition to incurred personnel costs of CHF 3 million and other charges of CHF 10 million.
Revenue from external customers by geographical area
(CHF million)
Europe/Africa/Middle East
Americas
Asia Pacific
Total
2022
2 944
1 364
2 334
6 642
%
44.3
20.5
35.2
100.0
2021
2 954
1 212
2 239
6 405
%
46.1
18.9
35.0
100.0
Revenue in Switzerland from external customers for 2022 amounted to CHF 164 million (2021: CHF 160 million). No country represented
more than 20% of revenues from external customers in 2022 nor 2021.
Major customer information
In 2022 and 2021, no external customer represented 5% or more of the Group’s total revenue.
Financial statementsSGS | 2022 Integrated Report
139
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
2022
2 224
824
623
3 671
%
60.6
22.4
17.0
100.0
2021
2 317
819
643
3 779
%
61.3
21.7
17.0
100.0
Specific non-current assets in Switzerland for 2022 amounted to CHF 169 million (2021: CHF 162 million). No country represented more than
20% of non-current assets in 2022 nor 2021.
Reconciliation with total non-current assets
(CHF million)
Specific non-current assets as above
Deferred tax assets
Retirement benefit assets
Non-current loans to third parties
Total
Capital additions¹ by business segment
(CHF million)
C&P
H&N
I&E
NR
Kn
Total
2022
107
52
88
75
7
329
%
32.5
15.8
26.8
22.8
2.1
100.0
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
2022
3 671
153
59
4
3 887
2021
96
62
97
75
6
336
2022
39 906
19 370
37 483
96 759
98 152
2021
3 779
164
104
6
4 053
%
28.6
18.4
28.9
22.3
1.8
100.0
2021
39 239
18 092
35 966
93 297
96 216
(CHF million)
Connectivity & Products
Health & Nutrition
Industries & Environment
Natural Resources
Knowledge
Total
2022
2021
Services
transferred at
a point in time
Services
transferred
over time
Services
transferred at
a point in time
Services
transferred
over time
86%
84%
71%
84%
90%
81%
14%
16%
29%
16%
10%
19%
81%
84%
70%
85%
93%
80%
19%
16%
30%
15%
7%
20%
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 140
Assets and liabilities related to contracts with customers
(CHF million)
Unbilled revenue and work in progress
Trade receivables
Contract liabilities
2022
210
988
228
2021
175
928
221
Revenue evolution, timing and project maturity are the main factors impacting assets and liabilities related to contracts with customers.
In 2022, SGS has recognized revenue of CHF 159 million related to contract liabilities at 31 December 2021. In 2021, the revenue recognized
from contract liabilities at 31 December 2020 amounted to CHF 125 million. Revenue recognized from performance obligations satisfied in
previous periods were immaterial in 2022 and 2021.
The remaining performance obligations (unsatisfied or partially satisfied) expected to be recognized for long-term contracts amount
to CHF 918 million at 31 December 2022, out of which CHF 488 million are expected to be recognized in revenue within one year,
CHF 241 million between one year and two years and CHF 189 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 2022 and 2021 were not significant, while amortization and impairment losses were nil.
6. Government grants
Government grants for the period amount to CHF 12 million (2021: CHF 16 million), presented as a deduction of salaries and wages
expenses. The outstanding balance recognized in the statement of financial position amounted to CHF 5 million (2021: CHF 4 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)
Other financial income
Net financial income on defined benefit plans
Total
9. Financial expenses
(CHF million)
Interest expense
Loss on derivatives at fair value
Other financial expenses
Total
2022
546
314
168
115
116
53
22
(4)
163
1 493
2022
11
5
3
1
20
2022
43
19
9
71
2021
534
269
146
119
103
64
(3)
–
132
1 364
2021
12
4
–
–
16
2021
46
8
15
69
Financial statementsSGS | 2022 Integrated Report 10. Taxes
Major components of tax expense
(CHF million)
Current taxes
Deferred tax (credit) relating to the origination and reversal
of temporary differences
Total
141
2021
258
11
269
2022
227
(8)
219
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
2022
849
162
10
17
(3)
37
5
(10)
–
1
219
2022
153
(79)
74
2021
924
178
17
9
(4)
42
6
12
7
2
269
2021
164
(92)
72
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
2022
2021
Assets
Liabilities
Assets
Liabilities
–
44
25
7
56
126
3
54
315
122
11
8
14
11
–
75
–
241
–
44
25
13
59
132
2
51
326
126
9
6
22
12
–
79
–
254
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 142
Net change in deferred tax assets/(liabilities)
(CHF million)
Net deferred income tax asset (liability) at 1 January 2021
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
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 2022
The Group has unrecognized tax losses carried forward amounting to CHF 194 million (2021: CHF 161 million).
Unrecognized tax losses carryforwards at 31 December 2022
(CHF million)
Expiring in the next 3 years
Expiring in 4-10 years
Available without limitation
Total unrecognized tax losses
Total
108
(22)
(11)
(6)
3
72
(4)
8
5
(7)
74
9
43
142
194
At 31 December 2022, the unrecognized deferred tax assets amount to CHF 57 million (2021: CHF 48 million).
At 31 December 2022, the retained earnings of subsidiaries and foreign incorporated joint ventures consolidated by the Group include
approximately CHF 2 415 million (2021: CHF 2 805 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 and dividend 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)
2022
588
7 452
78.86
2021
613
7 488
81.91
Diluted earnings per share are calculated as basic earnings per share except that the weighted average number of shares only includes the
dilutive effect of the Group’s equity compensation plans detailed in note 29. For the year ended 31 December 2022, the Group calculated
17 540 dilutive potential shares (2021: 11 661):
Profit attributable to equity holders of SGS SA (CHF million)
Diluted weighted average number of shares (‘000)
Diluted earnings per share (CHF)
2022
588
7 470
78.67
2021
613
7 500
81.79
The Board of Directors will recommend to the Annual General Meeting (to be held on 28 March 2023) the approval of a dividend of CHF 80
per share (2021: CHF 80).
Financial statementsSGS | 2022 Integrated Report 12. Property, plant and equipment
(CHF million)
2022
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 2022
(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
143
Land &
buildings
Machinery
& equipment
Other tangible
assets
Total
463
11
4
(4)
(14)
460
267
17
–
–
(3)
(12)
269
191
2 327
154
2
(98)
(45)
2 340
1 826
184
17
1
(97)
(94)
1 837
503
719
126
4
(35)
(112)
702
491
52
1
2
(33)
(24)
489
213
Land &
buildings
Machinery
& equipment
Other tangible
assets
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
3 509
291
10
(137)
(171)
3 502
2 584
253
18
3
(133)
(130)
2 595
907
Total
3 321
298
29
(148)
9
3 509
2 449
249
1
13
(143)
15
2 584
925
Included in the other tangible assets are leasehold improvements, office furniture and IT hardware, as well as construction-in-progress assets
amounting to CHF 52 million (2021: CHF 63 million).
At 31 December 2022, the Group had commitments of CHF 6 million (2021: CHF 8 million) for the acquisition of land, buildings
and equipment.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 144
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 2022
Analyzed 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 2021
Analyzed as:
Current liabilities
Non-current liabilities
Total
Right-of-use assets
Total
Lease liabilities
Land &
buildings
Machinery
& equipment
Other tangible
assets
528
136
3
(139)
–
–
(26)
502
71
44
–
(42)
–
–
(4)
69
6
3
–
(3)
–
–
–
6
605
183
3
(184)
–
–
(30)
577
636
174
3
–
21
(199)
(31)
604
2022
162
442
604
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
Included in machinery & equipment are mainly vehicles for CHF 68 million (2021: CHF 67 million).
Financial statementsSGS | 2022 Integrated Report 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)
British Pound Sterling (GBP)
Hong Kong Dollar (HKD)
Chilean Peso (CLP)
Singapore Dollar (SGD)
Russian Ruble (RUB)
New Zealand Dollar (NZD)
Other
Total
145
2021
257
99
77
30
21
20
11
11
7
3
4
8
7
6
75
636
2022
241
93
63
24
18
17
13
12
8
7
7
6
6
5
84
604
The Group leases mainly offices, laboratory spaces and vehicles. During the year ended 31 December 2022, an additional CHF 9 million
(2021: CHF 6 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
Exchange differences
At end of the period
2022
2021
4
5
9
3
3
6
2022
2021
1 778
52
1
(76)
1 755
1 651
163
3
(39)
1 778
The Cash Generating Units (CGU) and groups of CGUs 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) division 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 Vehicle Compliance and Upstream activities. 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
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
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 146
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)
Connectivity & Products
Health & Nutrition1
Industries & Environment2
Natural Resources
Knowledge
Total
2022
166
471
904
115
99
2021
173
462
924
119
100
1 755
1 778
1. Within H&N, goodwill allocated to Nutrition CGU was CHF 184 million (2021: CHF 192 million) and goodwill allocated to Health Science and Cosmetics & Hygiene CGU was CHF 287 million
(2021: CHF 270 million).
2. Within I&E, goodwill allocated to I&E Europe/Africa/Middle East CGU was CHF 462 million (2021: CHF 476 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 2022. 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.
Pre-tax discount rate used in 2022 for the main CGUs or group of CGUs impairment testing
Connectivity & Products
Health & Nutrition1
Industries & Environment2
Natural Resources
Knowledge
2022
8.4%
7.9%-8.0%
7.6%-9.9%
8.4%
2021
10.5%
7.6%-8.5%
6.2%-14.5%
10.2%
6.7%-8.2%
8.7%-10.8%
1. Nutrition pre-tax discount rate was 8.0% (2021: 8.5%), while Health Science and Cosmetics & Hygiene pre-tax discount rate was 7.9% (2021: 7.6%).
2. Within I&E, I&E Europe/Africa/Middle East pre-tax discount rate was 7.8% (2021: 7.8%).
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 1%-2% (1% for CGUs where goodwill
allocated is significant), in line with market long-term inflation rates projections (2021: 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, with the exception of our CGU Vehicle Compliance Spain, for which goodwill amounts to CHF 115 million.
For this CGU:
• Recoverable amount currently exceeds carrying amount by CHF 9 million
• Expected annual growth rate has been assumed at 3% for the projected period. A reduction by more than 40% (1.3 pp1) would cause the
recoverable amount to equal the carrying amount
• Pre-tax discount rate has been assumed at 9%. An increase by 0.5 pp1 would cause the recoverable amount to equal the carrying amount
Technical consultancy USA goodwill impairment test assumptions
In 2021, Technical consultancy USA delivered lower results than expected, due to a slower recovery from unfavorable economic environment
created by Covid-19.
In 2022, the CGU’s results bounced back as expected, delivering revenue growth above 50% (above prior year assumptions), as well as
delivering margin in line with prior year assumptions. The recoverable amount currently exceeds the carrying amount by CHF 117 million.
The following key assumptions have been used in the impairment test for this CGU:
• Pre-tax discount rate of 6.7% (2021: 10.8%, assuming a risk size premium of 3.49%)
• After a strong recovery in 2022, assumptions consider an average revenue growth of 12.6% for 2023-2027 (2021: revenue growth rate
above 50% for 2022, average revenue growth rate of 14% for 2023-2026)
• Average EBITDA margin to gradually reach its historical trend prior to the Covid-19 pandemic, but capped in the low 20s by 2026
• Long-term growth rate of 1% after 2027 (2021: long-term growth rate of 2%)
No reasonably possible change in any of the above key assumptions above would cause the recoverable amount to fall below the carrying
amount for this CGU, for which the Group’s share of goodwill is CHF 82 million.
1. Percentage points.
Financial statementsSGS | 2022 Integrated Report
15. Other intangible assets
(CHF million)
2022
Cost
At 1 January
Additions
Acquisition of subsidiaries
Disposals
Exchange differences and other
At 31 December
Accumulated amortization
and impairment
At 1 January
Amortization
Acquisition of subsidiaries
Disposals
Exchange differences and other
At 31 December
Net book value at 31 December 2022
(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
147
Trademarks
and Other
Customer
relationships
Internally
generated
Purchased
Total
Computer software
and Other assets
92
–
–
–
(3)
89
66
5
–
–
(3)
68
21
454
–
17
(2)
(23)
446
176
32
–
(2)
(7)
199
247
202
17
–
–
1
220
159
18
–
–
(1)
176
44
200
21
1
(6)
(11)
205
165
11
1
(6)
(4)
167
38
948
38
18
(8)
(36)
960
566
66
1
(8)
(15)
610
350
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
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 148
16. Other non-current assets
(CHF million)
Non-current loans or amounts receivable from third parties
Retirement benefit asset
Other non-current assets
Total
2022
4
59
62
125
2021
6
104
63
173
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 8.0%.
In 2022, other non-current assets included deposits for guarantees and restricted cash of CHF 38 million (2021: CHF 37 million).
Typical examples of restricted cash are cash deposits for performance bonds, rentals and other operating obligations.
At 31 December 2022 and 2021, 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
18. Other receivables and prepayments
(CHF million)
Accrued income, prepayments
Derivative assets
Other receivables
Total
2022
1 149
(161)
988
2022
(162)
(1)
(16)
10
8
(161)
2022
86
12
125
223
2021
1 090
(162)
928
2021
(176)
–
2
9
3
(162)
2021
78
11
115
204
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
2022
1 623
–
1 623
2021
1 479
1
1 480
Financial statementsSGS | 2022 Integrated Report 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
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 of property, land and equipment
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) in unbilled revenues and inventories
(Increase) in trade receivables
(Increase) in other receivables and prepayments
Increase in trade and other payables
Increase in other creditors and accruals
Increase/(decrease) in other provisions
(Increase)/decrease in working capital
Notes
12
12 and 15
13
15
8 and 9
10
149
2021
249
2
183
65
(3)
53
(2)
12
–
–
269
828
2021
(14)
(74)
(27)
37
61
(27)
(44)
2022
253
18
184
66
22
51
(13)
18
(4)
(2)
219
812
2022
(53)
(125)
(25)
7
25
9
(162)
20.3. Changes in liabilities arising from financing activities
(CHF million)
2022
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
3 100
5
33
636
26
3 800
249
469
(4)
(183)
(5)
526
–
–
1
–
–
1
–
3
–
3
5
11
–
–
–
174
–
174
(39)
(8)
(1)
(26)
–
(74)
3 310
469
29
604
26
4 438
1. Other movements include interest accruals and payments, amortization under effective rate method, currency effects and other contingent consideration movements.
(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)
3 100
–
(2)
(5)
2
5
33
636
26
(53)
3 800
1. Other movements include interest accruals and payments, amortization under effective rate method, currency effects and other contingent consideration movements.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
150
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
Net cash outflow on acquisitions
Fair value on
proderm GmbH
Fair value on other
acquisitions
Total fair value
on acquisitions
December 2022
Total fair value
on acquisitions
December 2021
2
2
13
–
2
1
3
(4)
(6)
–
13
31
44
(3)
–
–
41
5
1
4
–
3
1
3
(5)
(2)
–
10
21
31
(3)
(5)
3
26
7
3
17
–
5
2
6
(9)
(8)
–
23
52
75
(6)
(5)
3
67
16
9
74
2
12
8
20
(35)
(27)
(5)
74
163
237
(20)
(3)
–
214
In compliance with IFRS 3, fair value on acquisition remains provisional for a 12-month period following the date of acquisition, during which
the Group can finalize 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 5 million (2021: CHF 8 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.
Financial statementsSGS | 2022 Integrated Report Currently, the Group has certain exposure to interest and credit risks and no exposure to equity price risk.
(CHF million)
2022
2021
2022
2021
Notional amount
Market value
Foreign exchange forward contracts
151
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
(15)
(5)
(5)
(34)
(22)
(4)
441
(119)
18
1
(3)
–
3
(6)
(13)
1
–
1
(268)
(10)
(38)
(77)
(8)
(25)
11
(26)
(7)
(3)
186
(141)
(20)
2
(1)
(4)
2
(11)
(15)
(4)
2
3
(237)
(17)
(24)
(337)
–
(1)
–
(3)
–
–
–
2
–
–
–
–
–
–
(1)
–
–
–
7
–
(1)
3
–
1
–
1
–
–
–
(2)
–
–
–
–
–
–
–
–
–
(1)
2
1
–
2
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 2022, the Group has unbilled revenue and work in progress of CHF 210 million (2021: CHF 175 million) which is net
of an allowance for expected credit losses of CHF 20 million (2021: 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 2022:
(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%
910
47
47
25
14
10
96
1 149
2
10
19
15
10
9
96
161
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
152
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 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
As part of financial management activities, the Group enters into various types of transaction 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 2022 is the
carrying amount of financial assets including derivatives.
In addition, the Group has issued CHF 181 million (2021: CHF 178 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.
Analysis of financial assets by class and category at 31 December 2022:
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
1 623
1 623
Trade receivables
Other receivables¹
Unbilled revenues and
work in progress
Loans to third parties –
non-current
Derivatives
988
132
210
4
–
988
132
210
4
–
Total financial assets
2 957
2 957
–
–
–
–
–
–
–
1. Excluding VAT and other tax related items.
Analysis of financial assets by class and category at 31 December 2021:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12
12
12
12
1 623
1 623
988
132
210
4
12
988
132
210
4
12
2 969
2 969
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.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11
11
11
11
1 480
1 480
928
132
175
6
11
928
132
175
6
11
2 732
2 732
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). Derivative assets (2022: CHF 12 million; 2021: CHF 11 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.
Financial statementsSGS | 2022 Integrated Report
153
Liquidity risk management
The objective of the Group’s liquidity and funding management is to ensure that all its foreseeable financial commitments can be met when
due. Liquidity and funding are primarily managed by Group Treasury in accordance with practices and limits set in the risk management
policies and objectives approved by the Board of Directors.
The nature of the Group’s business requires keeping a significant part of the cash reserves in the operating units.
Due to the significant cash position, liquidity risk is limited. The Group has various committed and uncommitted bilateral credit facilities
with its banks.
Analysis of financial liabilities by class and category at 31 December 2022:
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
360
130
360
130
3 792
3 606
604
4 886
604
4 700
–
–
29
–
29
–
–
29
–
29
–
–
21
–
21
–
–
21
–
21
360
130
360
130
3 842
3 656
604
4 936
604
4 750
(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 3 124 million (2021: CHF 3 166 million).
Other financial liabilities include CHF 29 million qualifying as fair value Level 3 (2021: CHF 33 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.
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 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.
Undiscounted contractual maturities of financial liabilities including interest payments at 31 December 2022:
(CHF million)
Trade
payables
Other
payables¹
Gross settled
derivative
financial
instruments
outflows
Gross settled
derivative
financial
instruments
inflows
Loans
and Other
financial
liabilities
On demand or within one year
360
130
1 301
(1 299)
1 014
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.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
283
409
716
747
771
Lease
liabilities
173
125
89
64
45
135
Total
1 679
408
498
780
792
906
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
154
Undiscounted contractual maturities of financial liabilities including interest payments at 31 December 2021:
(CHF million)
Trade
payables
Other
payables¹
Gross settled
derivative
financial
instruments
outflows
Gross settled
derivative
financial
instruments
inflows
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.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Loans
and Other
financial
liabilities
285
535
274
250
710
1 189
Lease
liabilities
171
135
98
73
57
189
Total
978
670
372
323
767
1 378
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 (2021: CHF 2 million) represents the net nominal value expressed in CHF of the Group’s foreign currency
contracts outstanding at 31 December 2022.
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 2022 and 2021 with all other variables remaining constant.
Sensitivity analysis based on net hedged positions at 31 December 2022 and 2021:
(CHF million)
US Dollar (USD)
Euro (EUR)
CFA Franc BEAC (CFA)
Canadian Dollar (CAD)
U.A.E. Dirham (AED)
2022
2021
Income
statement impact
income/(expense)
Equity impact
increase/(decrease)
Income
statement impact
income/(expense)
Equity impact
increase/(decrease)
4
(2)
2
–
(1)
(2)
–
–
2
–
4
(2)
2
–
–
(2)
–
–
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 2022 would increase/decrease by CHF 5 million
(2021: CHF nil million).
23. Share capital and treasury shares
Balance at 1 January 2021
Treasury shares released into circulation
Treasury shares cancelled
Balance at 31 December 2021
Treasury shares released into circulation
Treasury shares purchased for equity compensation plans
Treasury shares purchased for cancellation
Balance at 31 December 2022
Shares in
circulation
7 469 238
22 434
–
7 491 672
3 381
(12 500)
(113 499)
7 369 054
Treasury
shares
96 494
(22 434)
(70 700)
3 360
(3 381)
12 500
113 499
125 978
Total shares
issued
Total share capital
(CHF million)
7 565 732
–
(70 700)
7 495 032
–
–
–
7 495 032
8
–
(1)
7
–
–
–
7
Issued share capital
SGS SA has a share capital of CHF 7 495 032 (2021: CHF 7 495 032) fully paid in and divided into 7 495 032 (2021: 7 495 032) 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.
Financial statementsSGS | 2022 Integrated Report
155
Treasury shares
On 31 December 2022, SGS SA held 125 978 treasury shares (2021: 3 360 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 2022, 3 381 treasury shares were sold or given in relation with the equity compensation plans and 12 500 were repurchased.
On 21 June 2022, SGS SA announced a CHF 250 million share buyback program for the purpose of capital reduction. The program ended on
21 December 2022 and 113 499 shares were repurchased for a total amount of CHF 250 million at an average price of CHF 2 203 per share.
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 and commercial paper
Corporate bonds
Put option on acquisition
Other financial liabilities
Derivatives
Total
Current
Non-current
2022
469
3 310
29
26
8
3 842
1 009
2 833
2021
5
3 100
33
26
7
3 171
282
2 889
In 2022, the Group started to issue commercial paper out of its EUR 1 billion Euro Commercial Paper (ECP) program, for an amount of
EUR 472 million (CHF 465 million) as at 31 December 2022.
Depending on the nature of the loan, currency and date of maturity, interest rates on long-term loans from third parties range between
0.125% and 13.22%, and on short-term loans from third parties range between 0.25% and 54.00%.
The loans from third parties exposed to fair value interest rate risk amounted to CHF 3 778 million (2021: CHF 3 104 million) and the loans
from third parties exposed to cash flow interest rate risk amounted to CHF less than 0.7 million (2021: 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
08.05.2015
08.05.2015
03.03.2017
29.10.2018
29.10.2018
06.05.2020
06.05.2020
05.09.2022
05.09.2022
Face value in
CHF Million
Coupon in %
Year of
Maturity
Issue
price in %
Redemption
price in %
250
325
225
375
225
175
175
325
150
350
1.750
0.250
0.875
0.550
0.750
1.250
0.450
0.950
1.250
1.700
2024
2023
2030
2026
2025
2028
2023
2026
2025
2029
101.019
100.079
100.245
100.153
100.068
101.157
100.117
100.182
100.000
100.197
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
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
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 156
The currency composition of bank loans, corporate bonds and other financial liabilities is as follows:
(CHF million)
Swiss Franc (CHF)
Euro (EUR)
Singapore Dollar (SGD)
US Dollar (USD)
British Pound Sterling (GBP)
Canadian Dollar (CAD)
New Zealand Dollar (NZD)
Other
Total
Bank loans and corporate bond
Put option and other financial liabilities
2022
2 574
1 201
3
–
–
–
–
1
3 779
2021
2 325
775
5
–
–
–
–
–
3 105
2022
12
20
13
1
1
4
3
1
55
2021
15
20
13
1
1
4
3
2
59
25. Defined benefit obligations
The Group mainly operates defined benefit pension plans in Switzerland, the USA, the UK, the Netherlands, Germany, Italy, France, Belgium,
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 2022 of CHF 5 million (2021: CHF 11 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 12 years (2021: 14 years).
The Group expects to contribute CHF 5 million to this plan in 2023.
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.
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 duration of the expected benefit payment is approximately 10 years (2021: 13 years).
The Group expects to contribute CHF 6 million to this plan in 2023.
Financial statementsSGS | 2022 Integrated Report
157
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 duration of the expected benefit payments from the combined plans is approximately 14 years (2021: 19 years).
The Group expects to contribute CHF nil million to this plan in 2023.
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 4 million to those plans
in 2023.
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)
2022
Fair value of plan assets
Present value of funded defined benefit obligation
Funded/(unfunded) status
Present value of unfunded defined benefit obligation
Unrecognized asset due to asset ceiling
Net asset/(liability) at 31 December
(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
Unrecognized asset due to asset ceiling
Net asset/(liability) at 31 December
CH
UK
USA
Other
Total
494
(357)
137
(5)
(98)
34
134
(115)
19
–
–
19
156
(150)
6
(3)
–
3
77
(79)
(2)
(41)
(1)
(44)
861
(701)
160
(49)
(99)
12
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
The net asset of CHF 12 million (2021: net asset of CHF 20 million) includes CHF 59 million (2021: CHF 104 million) of pension fund assets
recognized in the item other non-current assets in note 16 and CHF 47 million (2021: CHF 84 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)
2022
Service cost expense
Net interest income 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
8
–
–
8
8
–
8
–
(1)
1
–
1
(1)
–
1
–
1
2
2
–
2
6
–
–
6
6
–
6
15
(1)
2
16
17
(1)
16
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 158
(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
Amounts recognized in the statement of other comprehensive income:
(CHF million)
2022
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)
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
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
CH
UK
USA
Other
Total
–
(87)
3
(21)
98
(7)
–
(68)
7
99
–
38
–
(43)
(1)
50
–
6
(1)
(34)
3
14
1
(17)
(1)
(232)
12
142
99
20
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)
In 2022, the Group recognized a CHF 99 million asset ceiling (2021: CHF 1 million), mainly made of a CHF 98 million (2021: CHF nil million)
increase for the SGS Swiss Pension Plan. The maximum economic benefit available in the SGS Swiss Pension Plan was determined applying
the common approach prescribed by IFRIC 14, and reflects the present value of reductions in future contributions to the plan. In making
this estimate, assumptions used for future service costs are consistent with those used to determine the defined benefit obligation as at
31 December 2022.
Movements in the net asset/(liability) during the period:
(CHF million)
2022
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
29
(8)
7
6
–
–
34
61
–
(38)
–
–
(4)
19
4
(2)
(6)
7
–
–
3
(74)
(6)
17
13
3
3
(44)
20
(16)
(20)
26
3
(1)
12
Financial statementsSGS | 2022 Integrated Report (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
Change in the defined benefit obligation is as follows:
(CHF million)
2022
159
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
2
20
CH
UK
USA
Other
Total
Opening present value of the defined benefit obligation
456
194
197
159
1 006
Current service cost
Interest cost
Plan participants’ contributions
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
(CHF million)
2021
8
1
5
(24)
–
(87)
3
–
362
–
4
–
(7)
–
(68)
7
(15)
115
1
6
–
(10)
–
(43)
(1)
3
153
6
2
1
(9)
(1)
(34)
3
(7)
120
15
13
6
(50)
(1)
(232)
12
(19)
750
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
2
5
–
–
–
(10)
1
(10)
(4)
8
Defined benefit obligation at 31 December
456
194
197
6
1
–
(1)
–
(7)
(1)
(3)
34
(2)
159
997
17
9
4
(1)
8
(42)
(1)
(35)
36
14
1 006
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 160
Change in fair value of plan assets is as follows:
(CHF million)
2022
Opening fair value of plan assets
Interest income on plan assets
Return on plan assets excluding amounts included in net
interest expense
Actual employer contributions
Actual plan participants’ contributions
Actual net benefit payments
Actual admin expenses paid
Exchange differences
Fair value of plan assets at 31 December
(CHF million)
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
CH
UK
USA
Other
Total
485
1
21
6
5
(24)
–
–
494
255
5
(99)
–
–
(7)
(1)
(19)
134
201
6
(50)
7
–
(10)
(1)
3
156
85
2
(14)
16
1
(9)
–
(4)
77
1 026
14
(142)
29
6
(50)
(2)
(20)
861
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
There are no reimbursement rights included in plan assets. The actual return on plan assets was a loss of CHF 128 million (2021: gain
of CHF 67 million).
The major categories of plan assets at the balance sheet date are as follows:
(CHF million)
2022
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)
2021
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
136
68
3
217
44
–
494
12
15
106
–
–
–
1
134
–
17
138
–
–
–
1
156
18
–
1
21
–
–
37
77
56
168
313
24
217
44
39
861
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
Financial statementsSGS | 2022 Integrated Report 161
In 2022 and 2021, the Group did not occupy any property that was included in the plan assets.
Properties are rented at fair market rental rates. There are no SGS SA shares or any other financial securities used by the Group included
in plan assets.
The plan assets are primarily held within instruments with quoted market prices in an active market, with the exception of the property
and insurance policy holdings.
The investment strategy in Switzerland is to invest, within the statutory and legal requirements, in a diversified portfolio with the aim of
generating long-term returns, which will enable the Board of the foundation to grow the accounts of the members of the pension fund,
whilst taking on the lowest possible risk in order to do so.
In the USA, the pension plan target policy is determined by both quantitatively and qualitatively assessing the risk tolerance level and return
requirements of the plan as determined by the Investment Committee. The investment portfolio asset allocation and structure are developed
based on the results of this process. In the UK, the Trustees review the investment strategy of the scheme and the plan on a regular basis
in order to ensure that they remain appropriate. The last review for both the scheme and plan was recently undertaken and is in the process
of being implemented.
Actuarial assumptions vary according to local prevailing economic and social conditions. The principal weighted average actuarial assumptions
used in determining the cost of benefits for both 2022 and 2021 are as follows:
(Weighted average %)
2022
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 %)
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
CH
2.1
UK
4.7
LPP 2020, CMI
2019 1.25%
SNA03M104%/
F94% CMI 2021
1.25%
1.7
–
–
–
CH
0.3
2.5
3.0
–
–
UK
1.9
LPP 2020 CMI
2019 1.25%
SNA03M104%/
F94% CMI 2020
1.25%
1.5
–
3.0
3.0
2.6
3.2
–
–
USA
Other
5.2
PRI 2012 MP
2021
3.3
–
6.7
4.5
2030
3.9
–
3.1
0.4
–
–
USA
Other
3.0
PRI 2012 MP
2021
3.3
–
7.0
4.5
2030
1.6
–
2.7
0.5
–
–
The weighted average rate for each assumption used to measure the benefits obligation is also shown. The assumptions used to determine
the 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 22 million; a 0.5% increase in assumed salary would increase the obligation by CHF 1 million; and a one-year increase in members’ life
expectancy would increase the obligation by approximately CHF 8 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 8 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 3 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 8 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.
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 2022 was CHF 81 million (2021: CHF 78 million).
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 162
26. Provisions
(CHF million)
At 1 January 2022
Charge to income statement
Release to income statement
Payments
Exchange differences
At 31 December 2022
Analyzed as:
Current liabilities
Non-current liabilities
Total
Legal and
warranty claims on
services rendered
Demobilization and
reorganization
Other provisions
38
10
(3)
(9)
3
39
50
38
(1)
(24)
(3)
60
62
7
(5)
(8)
(1)
55
2022
58
96
154
Total
150
55
(9)
(41)
(1)
154
2021
60
90
150
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
2022
360
311
671
2021
368
319
687
Trade accounts and other payables principally comprise amounts outstanding for trade purchases and ongoing operating costs.
At 31 December 2022 and 2021, 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
2022
461
189
650
2021
553
205
758
The Group has issued unconditional guarantees of CHF 461 million (2021: CHF 553 million), as well as performance bonds and bid bonds of
CHF 189 million (2021: CHF 205 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 | 2022 Integrated Report 163
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 2022, a total of 285 restricted shares were granted to members of the Board of Directors, in settlement of part of their remuneration
for the Annual General Meeting 2021 to 2022 mandate (68 restricted shares) and for the Annual General Meeting 2022 to 2023 mandate
(217 restricted shares). The restricted shares are blocked for a period of three years from the grant date, until January 2025 and May 2025
respectively. The value at grant date of the restricted shares granted was: i) for the 68 restricted shares related to the Annual General Meeting
2021 to 2022 mandate, CHF 174 352 (defined as the closing price of the share on the date of the publication of the annual results), and ii) for
the 217 restricted shares related to the Annual General Meeting 2022 to 2023 mandate, CHF 546 710 (defined as the average closing price
of the share during a 20-day period following the payment of the dividends after the Annual General Meeting 2022).
ii) Grants to members of the Operations Council
In 2022, a total of 3 296 performance share units (PSUs) under the long-term incentive plan 2022-2024 were granted to members of the
Operations Council. The PSUs vest after a three-year performance period 2022-2024, in February 2025, 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 8 577 181.
More information on the long-term incentive plan for the members of the Operations Council is disclosed in the SGS Remuneration report.
In 2022, a total of 1 378 restricted shares were granted to members of the Operations Council, in settlement of 50% of the annual incentive
related to the 2021 performance. The restricted shares are blocked for a period of three years from the grant date, until April 2025. 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 Annual General Meeting 2022, was CHF 3 471 733.
50% of the annual incentive related to the 2022 performance will be settled in restricted shares. The grant of the restricted shares will be
done after the Annual General Meeting 2023; 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 Annual
General Meeting 2023, rounded up to the nearest integer. The restricted shares will be blocked for a period of three years from the grant
date, until April 2026.
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 2022, a total of 5 611 performance share units (PSUs) under the long-term incentive plan 2022-2024 were granted to selected senior
managers. The PSUs vest after a three-year performance period 2022-2024, in February 2025, 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 14 601 505.
In 2022, a total of 2 915 restricted share units (RSUs) were granted to selected key employees under the restricted share units plan 2022.
The RSUs vest three 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 7 585 705.
Performance share unit (PSU) and restricted share unit (RSU) plans
Units
Outstanding at
31 December
2021
Granted
Forfeited
Vested
Description
SGS-PSU-21
SGS-PSU-22
SGS-RSU-19
SGS-RSU-20
SGS-RSU-21
SGS-RSU-22
Total
Vesting
period
from
Feb.24
Feb.25
Apr.22
Apr.23
Apr.24
Apr.25
15 992
–
–
8 907
1 678
2 148
1 865
–
21 683
–
–
2 915
11 822
Units
Outstanding at
31 December
2022
15 072
8 796
–
1 948
1 689
2 830
(880)
(111)
–
(200)
(176)
(85)
(40)
–
(1 678)
–
–
–
(1 452)
(1 718)
30 335
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 2022, the equity overhang, defined as the total number of unvested share units, (30 335 units) divided by the total
number of outstanding shares (7 495 032 shares) amounted to 0.40%.
The company’s burn rate, defined as the number of equities (shares, restricted shares and share units) granted in 2022 (13 485 units) divided
by the total number of outstanding shares, was 0.18%.
The Group recognized during the year a total expense of CHF 20 million (2021: CHF 14 million) in relation to equity compensation plans.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 164
Shares available (required) for future plans:
At 1 January 2021
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
Repurchased shares
Granted SGS-RSU-22 plan
Granted SGS-PSU-22 plan
Shares for PSU forfeited
Shares for RSU forfeited
Shares used for Restricted Shares plan as settlement of Short-Term Incentive
At 31 December 2022
At 31 December the Group had the following shares available to satisfy various programs:
Number of shares held
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 allocated for 2022 RSU plan
Shares allocated for 2022 PSU plan
Shares required for future equity compensation plans at 31 December
Total
(4 579)
–
(1 935)
(16 337)
4 693
383
(548)
(18 323)
12 500
(2 915)
(8 907)
991
461
(1 663)
(17 856)
2022 Total
2021 Total
12 479
–
(1 948)
(1 689)
(15 072)
(2 830)
(8 796)
(17 856)
3 360
(1 678)
(2 148)
(1 865)
(15 992)
–
–
(18 323)
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
2022
2021
15
1
12
28
17
1
20
38
1. 2022 represents the value at grant of restricted share units and performance share units granted in 2022 while 2021 represents the value at grant of restricted share units granted in 2021.
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 2022 and 2021, 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 2 797 000 (2021: CHF 1 997 000).
The total compensation (cash and shares/options), including social charges, received by the Operations Council (including senior
management) amounted to CHF 24 474 000 (2021: CHF 36 228 000).
Financial statementsSGS | 2022 Integrated Report 165
Loans to members of governing bodies
As at 31 December 2022, 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 2022 and in 2021, the Group did not perform any activity generating revenue for the other related parties.
During 2022 and 2021, 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 2022, Groupe Bruxelles Lambert (acting through Serena SARL and URDAC) held 19.11% (December 2021: 19.11%) and
BlackRock Inc. held 5.18% (December 2021: below 5%) of the share capital and voting rights of the Company. At the same date, the Group
held 1.68% of the share capital of the Company (December 2021: 0.04%).
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 22 February 2023, and will be submitted for approval on 28 March 2023 during the
Annual General Meeting. There are no subsequent events to be reported in these consolidated financial statements.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 166
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
2022, the consolidated statement of financial position as at 31 December 2022, 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 (pages 126 to 165 and 187 to 189) give a true and fair view of the
consolidated financial position of the Group as at 31 December 2022 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 Standards
on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s
responsibilities for the audit of the consolidated financial statements' section of our report. We are independent of the
Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the
International Code of Ethics for Professional Accountants (including International Independence Standards) of the Inter-
national 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 obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
Overview
Overall Group materiality: CHF 42 million
We concluded full scope audit work at 22 reporting units and audits of specific
balances were performed on a further 17 reporting units. Our audit scope ad-
dressed over 68 % 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
• Testing the Vehicle Compliance Spain CGU for impairment
• Unbilled revenue and work in progress (WIP)
• Taxation
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, 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.
Financial statementsSGS | 2022 Integrated Report
167
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 3 SGS SA | Report of the statutory auditor to the General Meeting 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 42 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 con-trols, 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 116 coun-tries 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 balances (principally revenue, accounts receivable, work in progress and unbilled revenue). These teams audit the respective ac-count balances as well as classes of transactions and report to us on their audit results in response to the audit instruc-tions we sent to them. As Group auditor, we ensure the quality of the audit teams' work by means of planning presentations with all teams, con-ducting 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 pre-pared centrally, and audit the consolidation. The latter includes, in particular, the central consolidation adjustments, the treatment of share-based compensation, tax balances, equity and intercompany eliminations as well as business combi-nation 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. 168
Financial statementsSGS | 2022 Integrated Report 4 SGS SA | Report of the statutory auditor to the General Meeting 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 2022. We identified the valuation and recoverability of goodwill and other intangible assets allocated to the Technical Con-sultancy USA CGU as a key audit matter because despite reaching the final stage of the recovery phase of declining operations, the business has been historically sensitive to the economic conditions. 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 Con-sultancy 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 discount 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 Technical 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 financial forecasts that were 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 analysing and performing substan-tive detail testing on a sample of the 2022 backlog and on the 2023 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 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. Testing the Vehicle Compliance Spain CGU for impairment Key audit matter How our audit addressed the key audit matter The Group’s share of goodwill allocated to the Vehicle Compliance Spain CGU (cash generating unit) amounts to CHF 115 million as at 31 December 2022. We identified the valuation and recoverability of goodwill and other intangible assets allocated to the Vehicle Com-pliance Spain CGU as a key audit matter because tech-nical assumptions used in the determination of the CGUs recoverable amount are highly sensitive to the current economic situation. At the same time, the business is highly dependent on the renewal of concessions in the coming years. The discounted cash flow model is based on the value- in-use methodology and on a five-year plan. We obtained the Group’s impairment test for the Vehicle Spain Compliance CGU and, in particular: • We assessed the appropriateness of the impairment testing methodology; • We reconciled the five-year projections to the financial forecasts that were approved by management; • We challenged management to substantiate the key as-sumptions used in the cash flow projections of the Vehi-cle Compliance Spain CGU's business during the fore-casted period; • We obtained comfort over the appropriateness of cash flow assumptions by corroborating them with external market data; 169
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 5 SGS SA | Report of the statutory auditor to the General Meeting 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 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 Vehicle Compli-ance Spain 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 210 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. 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. 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. • 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. 170
Financial statementsSGS | 2022 Integrated Report 6 SGS SA | Report of the statutory auditor to the General Meeting 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. Taxation Key audit matter How our audit addressed the 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 165 million as at 31 December 2022). 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. 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 judgmental processes and the provisions. On the basis of the procedures performed, we conclude that management’s tax estimates were reasonable. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the remunera-tion report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information 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 and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial state-ments 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. Board of Directors' responsibilities 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 171
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 7 SGS SA | Report of the statutory auditor to the General Meeting 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 SA-CH 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 influ-ence 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 SA-CH, we exercise professional judgment and maintain pro-fessional 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 re-lated 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 Group's ability to continue as a going concern. If we conclude that a material uncertainty ex-ists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evi-dence 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. • 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. 172
Financial statementsSGS | 2022 Integrated Report 8 SGS SA | Report of the statutory auditor to the General Meeting Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and PS-CH 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 Louise Rolland Audit expert Auditor in charge Geneva, 22 February 2023 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 expenses
Total operating expenses
Operating result
Financial income
Exchange gain, net
Financial expenses
Liquidation of subsidiaries, net
Financial result
Extraordinary losses
Profit before taxes
Taxes
Withholding taxes
Profit for the year
173
Notes
2022
2021
696
696
(4)
(4)
692
48
30
(51)
–
27
(67)
652
3
(6)
649
734
734
(6)
(6)
728
46
1
(41)
(1)
5
(8)
725
(1)
(10)
714
6
6
7
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 174
2.2. Statement of Financial Position at 31 December
(Before appropriation of available retained earnings)
(CHF million)
Assets
Current assets
Cash and cash equivalents
Derivative assets
Other financial assets
Amounts due from subsidiaries
Other receivables and prepayments
Total current assets
Non-current assets
Loans to subsidiaries
Other financial assets
Other assets
Investments in subsidiaries
Total non-current assets
Total assets
Shareholder’s equity and liabilities
Current liabilities
Bank overdraft
Derivative liabilities
Trade and other payables
Amounts due to subsidiaries
Corporate bonds
Deferred income and accrued expenses
Provisions
Total current liabilities
Non-current liabilities
Other financial liabilities
Amounts due to subsidiaries
Corporate bonds
Total non-current liabilities
Shareholder’s equity
Share capital
Legal reserve
Retained earnings
Treasury shares for share buyback
Reserve for treasury shares held by a subsidiary
Total shareholder’s equity
Total shareholder’s equity and liabilities
Notes
2022
2021
424
12
–
434
4
874
324
2
7
691
2
1 026
1 666
1 279
2
3
3
4 to 5
4 to 5
4 to 5
4 to 5
4 to 5
5
2
2 008
3 681
4 555
9
9
10
590
500
12
–
1 130
–
623
2 075
2 698
7
34
907
(250)
29
727
4 555
–
3
1 981
3 263
4 289
9
6
–
209
250
38
1
513
2
772
2 075
2 849
7
34
878
–
8
927
4 289
Financial statementsSGS | 2022 Integrated Report 175
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 (2021: 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 transactions and from the translation at year end exchange rates of assets and liabilities denominated
in foreign currencies are recognized in profit or loss.
Derivatives
SGS SA 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.
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 187 to 189.
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. Corporate bonds
SGS SA made the following bond issuances:
Date of issue
8 May 2015
6 May 2020
Short-term bonds
27 February 2014
8 May 2015
3 March 2017
29 October 2018
29 October 2018
6 May 2020
5 September 2022
5 September 2022
Long-term bonds
Face value in
CHF million
Coupon in %
Year of
maturity
325
175
500
250
225
375
225
175
325
150
350
2 075
0.250
0.450
1.750
0.875
0.550
0.750
1.250
0.950
1.250
1.700
2023
2023
2024
2030
2026
2025
2028
2026
2025
2029
Issue
price in %
100.079
100.117
101.019
100.245
100.153
100.068
101.157
100.182
100.000
100.197
Redemption
price in %
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
As at 31 December 2022, two bonds in the above table are classified as short-term liabilities as the due date is less than a year.
On 5 September 2022, SGS SA issued two bonds, one CHF 150 million with a 1.250% coupon and one CHF 350 million with a 1.700% coupon.
The Company has listed all bonds on the SIX Swiss Exchange.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 176
4. Total equity
(CHF million)
Balance at 1 January 2021
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
Dividends paid
Increase in the reserve for own shares
Share buyback program
Profit for the year
Balance at 31 December 2022
5. Share capital
Share
capital
Legal reserve
Reserve for
treasury shares
held by a
subsidiary
Treasury
shares for
share buyback
Retained
earnings
8
–
–
–
(1)
–
7
–
–
–
–
7
34
–
–
–
–
–
34
–
–
–
–
34
62
–
(54)
–
–
–
8
–
21
–
–
29
(169)
–
–
169
–
–
–
–
–
(250)
–
(250)
878
(599)
54
(169)
–
714
878
(599)
(21)
–
649
907
Total
813
(599)
–
–
(1)
714
927
(599)
–
(250)
649
727
Balance at 1 January 2021
Treasury shares released into circulation
Capital reduction by cancellation of treasury shares
Balance at 31 December 2021
Treasury shares released into circulation
Treasury shares purchased for equity
compensation plans
Treasury shares purchased for cancellation
Balance at 31 December 2022
Shares In
circulation
7 469 238
22 434
–
7 491 672
3 381
(12 500)
(113 499)
7 369 054
Treasury shares
Total shares
issued
Total share capital
CHF (million)
96 494
(22 434)
(70 700)
3 360
(3 381)
12 500
113 499
125 978
7 565 732
–
(70 700)
7 495 032
–
–
–
7 495 032
8
–
(1)
7
–
–
–
7
Issued share capital
SGS SA has a share capital of CHF 7 495 032 (2021: CHF 7 495 032) fully paid-in and divided into 7 495 032 (2021: 7 495 032) registered
shares of a par value of CHF 1. All shares, other than treasury shares, participate equally in the dividends declared by the Company and
have equal voting rights.
Treasury shares
On 31 December 2022, SGS SA held 125 978 treasury shares, thereof 113 499 directly and 12 479 through an affiliate company.
On 21 June 2022, SGS SA announced a CHF 250 million share buyback program for the purpose of capital reduction. The program
ended on 21 December 2022 and 113 499 shares were repurchased for a total amount of CHF 250 million at an average purchase price
of CHF 2 203 per share.
Further, in 2022 12 500 shares have been repurchased through an affiliate company for covering future equity compensation plans,
whilst 3 381 shares were released into circulation.
On 31 December 2021, SGS SA held 3 360 treasury 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 cancellation of 70 700 treasury shares directly held by SGS SA, while the shares to cover the
equity compensation plans are held by a subsidiary company.
Financial statementsSGS | 2022 Integrated Report 6. Financial income and financial expenses
(CHF million)
Financial income
Interest income third party
Interest income Group
Financial income
Financial expenses
Interest expenses third party
Interest expenses Group
Other financial expenses
Financial expenses
177
2022
2021
1
47
48
(21)
(14)
(16)
(51)
–
46
46
(24)
(8)
(9)
(41)
7. Extraordinary losses
The extraordinary loss is composed of impairment respectively on investments in subsidiaries of CHF 52 million and on loan to subsidiaries of
CHF 15 million (2021: CHF 8 million).
8. Guarantees and comfort letters
(CHF million)
Guarantees
Performance bonds
Total
2022 issued
2022 utilized
2021 issued
2021 utilized
2 511
55
2 566
1 563
55
1 618
2 759
71
2 830
1 117
53
1 170
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 105 to 107.
9.2. Remuneration model
This section appears in the SGS Remuneration report paragraph 3 in the annual report on pages 107 to 115.
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 115 to 117.
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 117 to 122.
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 2022:
Name
C. Grieder
S.R. du Pasquier
P. Desmarais
P. Cheung
K. Sorenson
I. Gallienne
S. Atiya
T. Hartmann
J. Vergis
Shares
485
66
56
19
104
20
111
19
19
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 178
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. Gallienne
S. Atiya
T. Hartmann
J. Vergis
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 2022:
Name
F. NG
Corporate responsibility
Chief Executive Officer
D. de Daniel
Chief Financial Officer
O. Merkt
General Counsel and Chief Compliance Officer
Restricted shares
648
406
144
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
Details of the various plans are explained in the SGS Remuneration Report.
Restricted shares
528
238
124
Shares
90
28
37
36
1
92
–
–
Shares
3 556
1 165
287
Shares
3 385
1 165
250
11. Significant shareholders
To the knowledge of the Company the shareholders owning more than 5% of its share capital as at 31 December 2022, or at 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 2021: 19.11%) and BlackRock Inc. with 5.18% (December 2021: below 5%) of the share capital and voting
rights of the company.
As at 31 December 2022, the SGS Group held 1.68% of the share capital of the Company (2021: 0.04%).
Proposal of the Board of Directors for the appropriation of available retained earnings
(CHF)
Profit for the year
Balance brought forward from previous year
Dividend paid on treasury shares released into circulation in 2021 prior the Annual General Meeting
in March 2021
Dividend paid on treasury shares released into circulation in 2022 prior the Annual General Meeting
in March 2022
Capital reduction by cancellation of shares
Share buyback program
(Transfer to)/Reversal from the reserve for treasury 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.
2022
2021
649 821 069
714 760 947
278 541 020
110 997 119
–
(1 688 800)
(85 841)
–
(250 000 741)
–
70 700
–
(20 841 198)
53 734 814
657 434 309
877 874 780
(589 524 320)
(599 333 760)
67 909 989
278 541 020
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 22 February, 2023 and will be submitted for approval by the Annual General Meeting
to be held on 28 March 2023.
Financial statementsSGS | 2022 Integrated Report 179
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 2022, and the statement of financial position as at 31 December 2022, and notes to the financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements, presented on pages 173 to 178, 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 Standards on Auditing (SA-CH). 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 Company 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
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 account the structure of the Company, the accounting
processes and controls, and the industry in which the Company operates.
As key audit matter the following area of focus has been identified:
Valuation of investments in subsidiaries
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
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.
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, 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 | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
180
3 SGS SA | Report of the statutory auditor to the General Meeting 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 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 financial statements as a whole. Overall materiality CHF 42 million Benchmark applied Total assets Rationale for the materiality benchmark 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 statements. In particular, we considered where subjective judgements were made; for example, in respect of significant accounting 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. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Valuation of investments in subsidiaries Key audit matter How our audit addressed the key audit matter As at 31 December 2022, SGS SA's investments in subsidiaries amount to CHF 2,008 million. Given the significance of this amount in the financial statements and because of the judgement used by management in determining its value, we consider the valuation of investments in subsidiaries a key audit matter. The Company measures individually the investment in each subsidiary. The Company conducts an annual risk assessment based on several impairment indicators to identify investments with an impairment risk. For those investments in 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 of the five-year plan, the long-term growth rate beyond the detailed forecast period and the discount rate. We obtained the Company’s work on the valuation of investments in subsidiaries, and we performed the following procedures: • We obtained an understanding of management's process and controls relating to the valuation of investments in 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 historical profitability and capacity to pay dividends. • We also performed testing by calculating revenue and operating profit multipliers based on the market capitalisation of the Group and comparing those to the respective multiples of the individual investments in subsidiaries. Financial statementsSGS | 2022 Integrated Report 181
4 SGS SA | Report of the statutory auditor to the General Meeting An impairment is recognised if the recoverable amount of an individual investment is lower than the associated carrying value. The results of management’s impairment testing indicated that some investments in subsidiaries were impaired. As a result, management recognised an impairment in the amount of CHF 52 million. Refer to note 1 - Accounting policies For those investments in 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 forecast projections by comparing forecasted revenue and margin growth to historical and market trends as well as by holding discussions with group management to assess their intention and ability to execute the strategic initiatives. • We evaluated, with the support of PwC's valuation specialists, 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 subsidiaries. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the remuneration report and our auditor’s reports thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the 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. Board of Directors' responsibilities 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 Company'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 Company 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 SA-CH 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. SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 182
5 SGS SA | Report of the statutory auditor to the General Meeting As part of an audit in accordance with Swiss law and SA-CH, 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 Company'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 significant doubt on the Company'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 Company 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 PS-CH 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 Mario Berckmoes Audit expert Auditor in charge Audit expert Geneva, 22 February 2023 Financial statementsSGS | 2022 Integrated Report 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
2022
6 642
(3 331)
(399)
(521)
–
(1 493)
898
20
(71)
2
849
(219)
630
588
42
13.5
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
96 759
93 297
89 098
94 494
96 492
183
2018
6 706
(3 422)
(387)
(317)
–
(1 634)
946
20
(58)
–
908
(218)
690
643
47
14.1
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
184
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
2022
907
577
2021
925
605
1 755
1 778
350
20
153
125
382
26
164
173
3 887
4 053
59
210
988
223
132
–
1 623
3 235
7 122
7
954
(279)
682
81
763
2 833
442
79
47
96
3 497
671
228
165
1 009
162
58
569
2 862
6 359
7 122
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
2020
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
2019
926
611
1 281
187
35
174
149
3 363
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
2 954
638
155
145
38
154
74
574
1 778
4 732
6 327
2018
969
–
1 224
202
36
203
133
2 767
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
2 350
685
112
127
412
–
21
618
1 975
4 325
6 068
Financial statementsSGS | 2022 Integrated Report 185
3.3. SGS Group – Five-Year Statistical Share Data
(CHF unless indicated Otherwise)
2022
2021
2020
2019
2018
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
7 369 054
7 495 032
7 491 672
7 565 732
7 469 238
7 565 732
7 552 390
7 633 732
7 550 707
3 076
2 002
2 150
1
92.56
78.86
80.00
80.00
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
149.20
141.91
200.37
220.86
81.91
80.00
80.00
64.05
80.00
80.00
87.45
80.00
80.00
84.54
78.00
78.00
590
590
599
599
598
598
604
604
589
589
1. Calculation of the basic earnings per share (weighted average for the year) is disclosed in note 10 of SGS Group Results.
2. As proposed by the Board of Directors.
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 2022 market capitalization was approximately CHF 16 114 million (2021:CHF 22 837 million). Shares are quoted on the
SIX Swiss Exchange.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 186
3.5. Closing prices for SGS & the Swiss market index (SMI) 2021-2022
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
2021
F M A M J
J
2022
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 | 2022 Integrated Report 4. Material operating companies and ultimate parent
The disclosure of legal entities is limited to entities whose contribution to the Group revenues in 2022 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.
187
Country
Albania
Algeria
Angola
Argentina
Australia
Austria
Azerbaijan
Bangladesh
Belarus
Belgium
Botswana
Brazil
Bulgaria
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 Do Brasil LTDA
SGS Bulgaria Ltd., Sofia
Burkina Faso
SGS Burkina SA, Ouagadougou
Cambodia
Cameroon
Canada
SGS (Cambodia) Ltd., Phnom Penh
SGS Cameroun SA, Douala
SGS Canada Inc., Mississauga
Central African Republic SGS Centrafrique SA, Bangui
Chile
China
China
Colombia
Congo
Croatia
SGS Minerals S.A., Santiago de Chile
SGS-CSTC Standards Technical
Services Co. Ltd., Beijing
SGS-CSTC Standards Technical Services
(Shanghai) Co., Ltd., Shanghaï
SGS Colombia SAS, Bogota
SGS Congo SA, Pointe-Noire
SGS Adriatica d.o.o., 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 Laboratory Services Ghana Limited, Accra
Great Britain
SGS United Kingdom Limited, Ellesmere Port
Greece
Guam
Guatemala
Guinea-Conakry
SGS Greece SA, Peristeri
SGS Guam Inc., Guam
SGS Central America SA, Guatemala-City
SGS Mineral Services (Guinée) Sàrl
Unipersonnelle
Issued capital
currency
Issued capital amount
% held by
Group
Direct /
indirect
ALL
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
CDF
USD
EGP
EUR
ETB
EUR
EUR
USD
EUR
EUR
GHS
GBP
EUR
USD
GTQ
GNF
15 100 000
50 000 000
30 000
230 603 536
200 000
185 000
100 000
10 000 000
20 000
35 995 380
1 000
648 683 068
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
506 000
46 144 617
25 000
1 500 000
42 174
15 000
260 000
3 172 613
80 000
1 210 000
7 490 000
13 501 602
8 000 000
301 731
25 000
14 568 000
50 00 000
100
100
49
100
100
100
100
100
100
100
100
100
100
100
100
98.9
100
100
100
85
85
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
D
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 | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 188
Country
Hong Kong
Hungary
India
Indonesia
Iran
Ireland
Italy
Ivory Coast
Japan
Jordan
Kazakhstan
Kenya
Name and domicile
SGS Hong Kong Limited, Hong Kong
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
SGS Kazakhstan Limited, Almaty
SGS Kenya Limited, Mombasa
Korea (Republic of)
SGS Korea Co., Ltd., Seoul
Kuwait
Kyrgyzstan
Lao (People’s
Democratic Republic)
SGS Kuwait W.L.L
SGS Bishkek LLC, Bishkek
SGS (Lao) Sole Co., Ltd., Vientiane
Latvia
Lebanon
Liberia
Lithuania
Luxembourg
Madagascar
Malaysia
Mali
Mauritius
Mexico
Moldova
Mongolia
Morocco
Mozambique
Myanmar
Netherlands
New Zealand
Nigeria
Norway
Oman
Pakistan
Panama
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
SGS MCNET Moçambique Limitada, Maputo
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 Inspection and Testing Services SPC
SGS Pakistan (Private) Limited, Karachi
SGS Panama Control Services Inc., Panama
Papua-New-Guinea
SGS PNG Pty. Limited, Port Moresby
Paraguay
Peru
Philippines
Poland
Portugal
SGS Paraguay SA, Asunción
SGS del Perú S.A.C., Lima
SGS Philippines, Inc., Manila
SGS Polska Sp.z o.o., Warsaw
SGS Portugal – Sociedade Geral de
Superintendência SA, Lisboa
Qatar
SGS Qatar WLL, Doha
Issued capital
currency
Issued capital amount
% held by
Group
Direct /
indirect
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
EUR
QAR
200 000
518 000 000
960 000
872 936
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
3 000 000
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
12 022 190
200 000
1 250 000
800 000
2 300 000
7 899 339
2
1 962 000 000
43 813 182
24 620 000
27 167 800
500 000
200 000
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
100
49
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
D
I
D
D
D
D
I
D
Financial statementsSGS | 2022 Integrated Report Country
Romania
Russia
Saudi Arabia
Senegal
Serbia
Sierra Leone
Singapore
Slovakia
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Switzerland
Taiwan
Tanzania
Thailand
Togo
Name and domicile
SGS Romania SA, Bucharest
AO SGS Vostok Limited, Moscow
SGS Inspection Services Saudi Arabia Ltd.,
Jeddah
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
SGS South Africa (Proprietary) Limited,
Johannesburg
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
United Arab Emirates
SGS Uganda Limited, Kampala
SGS Ukraine, Foreign Enterprise, Odessa
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
189
Issued capital
currency
Issued capital amount
% held by
Group
Direct /
indirect
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
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
1 018 250
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
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
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 | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 190
Non-financial
statements
We are
reporting with
transparency.
Our approach to
sustainability reporting
191
Databank
192
192
193
193
194
Compliance and integrity
Customer relationship management
Public policy
Sustainable procurement and
supply chain
Human rights
195
195
Information security and data privacy
195
Workforce breakdown
Learning and development
197
197
Employee engagement
198
Talent attraction and retention
Remuneration
199
199
Operational integrity
Community investment
200
Climate change – energy consumption 201
Climate change – energy efficiency
201
in buildings program
Climate change – greenhouse
gas emissions
Water and waste management
202
203
2022 GRI content index
204
Sustainable Accounting
Standards Board (SASB)
framework alignment
Independent Limited
Assurance Report
212
213
SGS | 2022 Integrated Annual Report
SGS | 2022 Integrated Report 191
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.
Assurance and basis of preparation
Each year, around 10% of our affiliates are
selected to be audited on all data reported
and procedures in place to collect and
consolidate data. Each audit is carried
out by a qualified Sustainability Report
Assurance (SRA) auditor.
External assurance of the sustainability
performance indicators and the non-financial
performance indicators is an important
part of our approach, and our sustainability
reporting has been independently assured
since 2011.
In 2021, we appointed PricewaterhouseCoopers
SA (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 2022.
Documents relating to independent external
assurance in the years prior to 2022 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 2022 independent assurance
report on pages 213 and 214 of this
integrated annual report
Scope and boundaries
The scope of the sustainability information
contained in this integrated annual report
covers all regions and divisions of the SGS
Group for the 2022 calendar year. A list of
SGS affiliates can be found on pages 187 to
189 of this report. Unless stated otherwise,
our reported data scope covers the Group
business and targets for the period 1 January
to 31 December 2022.
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 42 of this report
We report key performance indicators
(KPIs) from all of our facilities, subsidiaries,
and other business units, as determined
by our reporting boundaries.
Under the control approach, we endeavor
to account for 100% of the KPIs from
operations over which we have control.
We do not account for KPIs from operations
in which we own an interest but not a
control. Control is defined in financial terms.
For joint ventures, we will use an equity
accounting basis. Where we do not have
accurate information for a given KPI we will
exclude it from our accounting and reporting.
We will indicate this exclusion in the report.
As an example, we currently do not account
for district heating and refrigerants in our
total carbon dioxide (CO2) emissions.
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.
Data collection process
Robust data gathering is important to
set targets and monitor performance.
More than 60% of our data is collected
locally through centralized software
(SOLARIS), then reviewed and consolidated
in a centralized manner. The remaining data
are gathered directly from global functions
like the Global Legal & Compliance,
Global Procurement and Global Corporate
Communications departments.
All sustainability data collected through
SOLARIS is gathered on a half-year basis.
Remaining data is collected annually at
the full year.
External standards
We have published sustainability reports at
SGS for more than ten 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.
Since 2013, our non-financial information
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 for
the Professional & Commercial Services
Industry (SASB). Our reporting approach is
explained further in our Sustainability Basis
of Reporting.
Where GRI or SASB standards do not
provide a methodology for a sustainability
performance indicator, or their methodology
is not appropriate, we apply the methodology
provided in our Basis of reporting.
For carbon emissions-related indicators,
we follow the Greenhouse Gas Protocol
(GHG Protocol) Corporate Standard
(financial control approach).
The London Benchmarking Group is used
as a guide to define indicators related to
community investment.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 192
Databank
Compliance and integrity
Integrity is one of our six business principles. Our code of integrity acts as a blueprint for our employees, affiliated companies, contractors,
subcontractors, joint venture partners and agents.
Any employee or third party can report violations through our Integrity Helpline. All the reports received are considered and evaluated.
Based on the data received we assess whether an investigation is needed or whether more information is needed. Reported issues might
be discarded only if the information provided was not sufficient or if the issue reported is not in the scope of the code of integrity.
Total number of integrity issues reported through integrity helplines¹
Total number of substantiated breaches of the code of integrity received through integrity helplines¹
Broken down by type of breach:
Integrity of services
Integrity of financial records
Conflict of interest
Employee relations
Fair competition
Compliance with laws
Gifts and entertainment
Confidentiality
Use of company assets and resources
Environment, health & safety
Bribery and corruption
Intellectual property
External communication
Insider dealing
Political donations and charitable contributions
Consequences adopted during the reporting year, broken down by type2:
Termination
Disciplinary action
Improvement in the processes
No action possible or needed
Under decision process
2022
374
73
23
3
12
10
–
7
–
2
2
7
7
–
–
–
–
38
29
12
18
–
2021
262
35
2020
208
17
6
4
–
9
–
2
–
1
6
–
7
–
–
–
–
11
18
17
5
7
3
1
2
9
–
1
–
–
–
1
–
–
–
–
–
3
6
13
–
8
Percentage of employees signing the code of integrity
Percentage of employees trained on the code of integrity
Percentage of operations analyzed for risks related to corruption
Number and nature of confirmed incidents of corruption identified through corporate helplines1,3
Public legal cases regarding corruption brought against the organization/employees
100.0%
100.0% 100.0%
99.9%
99.0%
99.0%
100.0%
100.0% 100.0%
7
–
7
–
–
–
1. “Helplines” means channels used by employees and external parties to report suspected violations of the Code of integrity and submitted online, by phone call, sent via fax, email or post.
2. Consequences adopted during the reporting year. Some of these consequences may refer to breaches confirmed in previous years.
3. Measures taken for these 7 cases were the following: termination of employees (8), disciplinary action (1) and improvement in the processes (1).
Non-financial statementsSGS | 2022 Integrated Report 193
Customer relationship management
How well we manage our customer relationships determines what we are able to achieve as a business, in the long term. That’s why
we aim to anticipate and respond to customer needs as they arise. We track customer sentiment annually through our global Voice of the
Customer (VoC) program. Customer satisfaction (CSAT) results were slightly lower than prior years due to the expansion of location and
type of customers surveyed, but very close to our 2023 target of 85%. Results are shared with all relevant stakeholders across the
organization and corrective actions are developed to increase customer satisfaction.
Following a change in the methodology, data of the actual year is now reported.
Customer satisfaction score
(As a % score)
Group’s revenue covered by Voice of the Customer surveys
(As a % of total revenue)
Countries participating in Voice of the Customer survey
(# of countries)
Responses in Voice of the Customer surveys
(# of responses)
2022
2021
2020
84.5%
88.0%
88.0%
76.0%
34.0%
48.0%
27
12
15
19 000
12 560
7 990
Public policy
We do not provide any financial or in-kind support, given directly or indirectly, to political parties, their elected representatives or persons
seeking political office. We support some industry associations, but the sum is not material, representing less than 0.01% of our revenue.
Lobbying, interest representation or similar
(CHF)
Contributions to local, regional or national political campaigns/organizations/candidates
(CHF)
Trade associations or tax-exempt groups (e.g. think tanks) 1
(CHF)
Other (e.g. spending related to ballot measures or referendums)
(CHF)
Total contributions and other spending
(CHF)
Contribution to industry associations as % of revenue
(As % of revenue)
2022
2021
2020
–
–
–
–
–
–
1 121 161
716 652
523 622
–
–
–
1 121 161
716 652
523 622
Under
0.01%
Under
0.01%
Under
0.01%
1. The main associations we contributed to in 2022 were: TIC Council: CHF 76 264.05; Energy Institute: CHF 61 870.11; World Travel and Tourism Council: CHF 50 228.75; Swissholding:
CHF 50 000; IMD International Institute for Management Development: CHF 50 000.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 194
Databank
continued
Sustainable procurement and supply chain
Our supply chain is diverse and covers over 100 countries from large industrial to small developing countries. These suppliers
are key stakeholders to SGS and we are committed to engage in an ongoing dialog to reach the highest social, economic and
environmental standards.
Spend analyzed for sustainability risks1
(As a %)
Tier 1 Suppliers analyzed for sustainability risks2
(As a % of total Tier 1 suppliers)
Number of local suppliers
(As a % of total suppliers)
Number of global suppliers
(As a % of total suppliers)
Spend of local suppliers
(As a % of total spend)
Spend of global suppliers
(As a % of total spend)
2022
2021
2020
100.0%
100.0% 100.0%
100.0%
100.0% 100.0%
98.0%
98.0%
97.0%
2.0%
2.0%
3.0%
84.0%
82.0%
80.0%
16.0%
18.0%
20.0%
1. Potential sustainability risks identified in the supply chain (as a % of spend): − Economic risk: Low: 59%; Medium: 40%; High: 1% − Social risk: Low: 65%; Medium: 35%; High: 0%
− Environmental risk: Low: 49%; Medium: 49%; High: 2%.
2. Tier 1 suppliers within the scope of the SAQ.
Sustainable procurement and supply chain
Spend by SGS supra-region
Spend by SGS Category
Americas 20%
Europe, Africa and Middle East 46%
Asia Pacific 34%
CAPEX 14%
External services 23%
Material and supplies 20%
General repairs
and maintenance 6%
Travel and vehicles 15%
Other OPEX 22%
Non-financial statementsSGS | 2022 Integrated Report 195
Human rights
Our group human rights policy clearly sets out our commitment to treat everyone with whom we come into contact with fairness, dignity
and respect. It is in line with leading international human rights legislation and principles, and it applies to all those working for SGS or in our
supply chains.
Number of operations identified as having a significant risk of incidences of child labor, forced
or compulsory labor, or where the right to exercise freedom of association may be violated
Total number of proven incidents of discrimination3
Number of grievances identified through helplines1 related to human rights3
Total number of employees trained on our human rights principles2
Percentage of employees trained on our human rights principles2
Percentage of employees covered by collective bargaining4
2022
2021
2020
–
4
4
–
–
–
–
–
–
79 893
78.4%
46%
39 137
39.4%
44%
36 390
39.0%
41%
1. “Helplines” means channels used by employees and external parties to report suspected violations of the Code of integrity and submitted online, by phone call.
2. Each year, the human rights training course is launched on December and all employees must have passed it by March. Employees that completed the training offline are not included,
which we are working to do next year.
3. Measures taken for these 4 cases were the following: 2 terminations and 2 disciplinary actions.
4. Employees covered by collective consultation/representation processes. The scope is limited to those affiliates where collective bargaining exists according to the International Labour
Organization database for coverage rate.
Information security and data privacy
Protection of personal data is key to every part of our business. It is at the heart of our commitment to our clients, our values, our principles,
our conduct and our success and is essential to maintaining trust. We are committed to conducting our business in accordance with all
relevant data protection and privacy laws of the countries in which we operate and in line with the highest standards of ethical conduct.
Number of complaints received from outside parties and substantiated by the organization
(# of complaints)
Substantiated complaints concerning breaches of data customer policy
(# of complaints)
Number of complaints from regulatory bodies
(# of complaints)
Completion rate of data protection and privacy e-learning
(As a % of people invited to the e-learning)
2022
2021
2020
–
–
–
–
1
–
–
–
–
0%1
99.0%
98.8%
1. In 2022 there has been no global data privacy training for employees. New hires must take the Data Privacy Get Started e-learning course as part of the Shine program.
Workforce breakdown
Our workforce is characterized by diversity in generation, nationality and gender identity.
Type of contract
Number of employees
(# of employees)
Permanent workers
(As a % of total employees)
Casual workers
(As a % of total employees)
2022
2021
2020
101 860
99 374
93 269
92%
91%
91%
8%
9%
9%
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 196
Databank
continued
Workforce breakdown continued
Gender, generation and other diversity indicators
Employees by gender (female)
(As a % of total employees)
Employees by gender (male)
(As a % of total employees)
Employees by age – Under 30 years old (female)
(# of employees by ranges of age)
Employees by age – Under 30 years old (male)
(# of employees by ranges of age)
Employees by age – 30 to 50 years old (female)
(# of employees by ranges of age)
Employees by age – 30 to 50 years old (male)
(# of employees by ranges of age)
Employees by age – Over 50 years old (female)
(# of employees by ranges of age)
Employees by age – Over 50 years old (male)
(# of employees by ranges of age)
Manager employees
(# of manager employees)
Manager by gender (female)
(As a % of managers)
Manager by gender (male)
(As a % of managers)
CEO-3 employees
# of CEO-3 employees
CEO-3 by gender (female) – ‘Women in Leadership’
(As a % of CEO-3 employees)
CEO-3 by gender (male)
(As a % of CEO-3 employees)
Women in management positions in revenue-generating functions
(As a % of women)
Women in STEM-related positions
(As a % of women)
Employees from vulnerable groups
With disabilities
Employees with disabilities – Female
Employees with disabilities – Male
With other vulnerabilities
Employees with other vulnerabilities – Female
Employees with other vulnerabilities – Male
Nationality
2022
Employees by top 5 nationalities1
(As % of share in total workforce)
Management workforce by top 5 nationalities1
(As % of share in total workforce)
Chinese
Indian
Spanish
German
Peruvian
17.4%
Chinese
5.4%
4.5%
4.0%
3.7%
Indian
French
German
Brazilian
1. This data covers 96% of our employees as USA employees are not included in this breakdown.
2022
2021
2020
37.0%
36.5%
35.5%
63.0%
63.5%
64.5%
10 995
10 162
14 248
13 877
22 255
21 229
39 695
39 672
4 394
4 875
10 271
9 559
–
–
–
–
–
–
8 490
8 246
8 249
33.9%
34.8%
33.1%
66.1%
65.2%
66.9%
1 235
1 274
1 211
31.1%
29.0%
28.0%
68.9%
71.0%
72.0%
31.8%
34.4%
33.8%
2 287
795
369
426
1 489
547
945
31.1%
1 299
660
290
370
639
269
370
1 275
657
274
383
618
264
354
2022
13.5%
5.3%
5.0%
4.6%
4.4%
Non-financial statementsSGS | 2022 Integrated Report 197
Learning and development
Each year we invest in the upskilling our employees’ capabilities in line with our business priorities and growth strategy. 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.
Training ratio1
(As a % of total employment cost spent on training)
Training hours per FTE
(# of hours per FTE)
Job related training hours per FTE
(# of hours per FTE)
Total training hours2
(# million of hours)
Job related training hours
(# million of hours)
Performance reviews
(As a % of employees eligible to performance review)
2022
2021
2020
3.0%
2.6%
2.5%
54.7
45.8
48.8
43.3
38.9
42.0
5.3
4.2
4.3
3.6
4.3
3.7
85%
88%
86%
1. Training and hours spent cost per total employment cost, including safety training hours. On a constant currency basis.
2. Broken down by type of training: Management and leadership development: 2%; Apprentice & trainee training programs: 4%; Technical training: 16%; Non-Technical training: 2%;
Operational integrity training: 55%; Compliance training: 14%; Other: 7%.
Employee engagement
We value feedback and encourage employees to voice their opinions via our voluntary annual employee engagement survey. Our managers
then use this input to launch improvement actions with their teams. Each year we survey different geographies, and we benchmark ourself
against external norms; local management takes appropriate actions to improve our scores.
Employees invited to participate in the employee engagement survey
(# of employees)
Response rate
(As a %)
Engagement Index
(As score out of 100)
Actively engaged employees
(As a %)
Manager effectiveness index
(As a score out of 100)
2022
2021
2020
28 569
30 129
32 262
79%
86%
74%
69
75
70
64%
73%
65%
72
78
72
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 198
Databank
continued
Talent attraction and retention
Our recruitment process is designed to enable us to select creative, innovative people who have passion, potential and integrity. We make
our selection based on a combination of candidates’ skills, competencies, experience and motivation. Through this approach and targeted
talent attraction strategies, we have welcomed 28 430 new hires (internal and external) in 2022.
New hires
(# of employees)
Internal new hires
(As a % of total new hires)
New hires (female)
(As a % of internal hires)
New hires (male)
(As a % of internal hires)
External new hires
(As a % of total new hires)
New hires (female)
(As a % of external hires)
New hires (male)
(As a % of external hires)
Voluntary turnover
(As a % of permanent employees)
Total turnover
(As a % of total permanent employees)
Total turnover female
(% of total female)
Total turnover male
(% of total male)
2022
2021
2020
28 430
29 486
18 546
15.1%
14.8%
19.7%
50.3%
50.3%
45.4%
49.7%
49.7%
54.6%
84.9%
85.2%
80.3%
36.8%
35.2%
34.3%
63.2%
64.8%
65.7%
14.8%
14.7%
10.1%
20.3%
20.5%
18.1%
19.6%
20.1%
16.0%
20.8%
20.7%
19.3%
Talent attraction and retention during the reporting year
Internal new hires
External new hires
Employees that left on their own will
Male 49.7%
Female 50.3%
Male 63.2%
Female 36.8%
Male 60.6%
Female 39.4%
<30 years old 31.0%
30-50 years old 63.9%
>50 years old 5.1%
<30 years old 47.0%
30-50 years old 46.2%
>50 years old 6.8%
<30 years old 38.3%
30-50 years old 54.6%
>50 years old 7.1%
Top
management 0.5%
Middle
management 4.9%
Junior
management 32.1%
Non-management
positions 62.5%
Top
management 0.2%
Middle
management 2.2%
Junior
management 7.8%
Non-management
positions 89.8%
Top
management 1.6%
Middle
management 3.0%
Junior
management 9.6%
Non-management
positions 85.7%
Non-financial statementsSGS | 2022 Integrated Report 199
Remuneration
Our goal is to offer our existing and future talent a competitive compensation package, to attract, engage, motivate and retain them.
We systematically assess the competitiveness of our reward practices in all the markets in which we operate.
Mean Gender Pay Gap1
(As % of difference between men and women employees)
Median Gender Pay Gap1
(As % of difference between men and women employees)
Mean Bonus Gap1
(As % of difference between men and women employees)
Median Bonus Gap1
(As % of difference between men and women employees)
CEO and mean employee compensation ratio2
2022
2021
2020
2.4%
3.0%
(7.3%)
(4.7%)
21.0%
17.3%
(6.3%)
(20.1%)
28.5
40.6
25.6
1. This data covers 98.1% of all SGS employees.
2. To make the ratio comparable, we have implemented cost of living adjustments using the Purchasing Power Parity conversion rates and it is calculated based only on base salary
and bonuses (excluding pension funds and extra hours).
Operational integrity
Employee health and safety along with environmental protection are a priority. As detailed in our business principles, protecting employees
and the environment from harm are fundamental behaviors at SGS. In 2022, we have continued to make progress towards our target and
have achieved a further reduction in our incident rates.
Total Recordable Incident Rate (TRIR)¹
(occurrences per 200 000)
TRIR variation
(As a % against a 2018 baseline)
Number of recordable incidents²
(# of incidents)
Lost Time Incident frequency Rate (LTIR)³
(occurrences per 200 000)
LTIR variation
(As a % against a 2018 baseline)
Number of near misses4
(# of near misses)
Safety training hours
(# of hours)
Operational Integrity training per employee
(# of hours per FTE)
Total absence rate5
(As a % of days of sickness absence plus days lost per incidents with lost time per total days
worked)
Sickness absence rate
(As a % of days of sickness absence per total days worked)
Work-related absence rate
(As a % of days of days of lost time and restricted duty due to recordable incidents per total
days worked)
2022
2021
2020
0.35
0.37
0.36
(15.9%)
(9.4%)
(13.2%)
346
357
334
0.19
0.22
0.23
(24.9%)
(14.3%)
(8.4%)
2 180
2 273
1 959
2 937 914 2 692 702 2 483 305
30.4
28.9
27.9
2.22%
1.85%
1.61%
2.20%
1.82%
1.58%
0.02%
0.03%
0.03%
1. Number of lost time, restricted duty, medical treatment incidents and fatalities per 200 000 hours worked.
2. Number of lost time, restricted duty, medical treatment incidents and fatalities.
3. Number of lost time incidents per 200 000 hours worked.
4. Event, situation or physical environment with the potential to cause injury, damage or loss to people, property and the environment, but which was avoided by circumstance.
5. Days of sickness absence and restricted duty per total days worked.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 200
Databank
continued
Community investment
We are committed to investing in the communities where we operate, and we do so across three pillars: empowerment, education and
environmental sustainability. In doing so, we are helping to tackle global challenges such as poverty, equal opportunities, health, education,
climate change and environmental degradation. In 2022, we have increased our investment in community and doubled the number of
volunteering hours.
Investment in community (in cash, in kind and volunteering hours)
(CHF thousands on constant currency basis)
Investment in community variation
(As a % against a 2019 baseline)
Total community projects
(# of projects)
Community hours
(# of hours dedicated to community)
Community hours variation
(As a % against a 2019 baseline)
Community investment
2022
2021
2020
1 991
1 384
1 196
54.3%
7.3%
(7.3%)
526
382
323
18 691
9 284
9 151
8.7%
(46.0%)
(46.8%)
Investment per type
Investment per nature of contribution
Investment per pillar
Community investment 50.1%
Cash contributions 71.3%
Empowerment 46.6%
Occasional charitable donation 39.2%
Volunteering contributions 17.8%
Education 11.0%
Philanthropic sponsorship 10.7%
In-kind contributions 7.3%
Environmental sustainability 42.4%
Management contributions 3.6%
Non-financial statementsSGS | 2022 Integrated Report 201
Climate change – energy consumption
As a sustainability leader that recognizes the threat posed by global climate change, we are setting the benchmark for reduced energy
consumption. Through initiatives such as our Energy Efficiency in Buildings (EEB) program, sustainable transport and Green IT, we are
actively reducing our own energy consumption at source. We are also moving away from fossil fuel based sources of energy by transitioning
to renewable energy.
Total energy consumption by source
(MWh)
Vehicle fuels energy
(MWh)
Non-transport fuels energy4
(MWh)
Total electricity
(MWh)
Standard electricity1
(MWh)
Renewable electricity2
(MWh)
Total renewable electricity
(As % of total electricity consumption)
Energy intensity per revenue3
(MWh/CHF million)
Energy intensity per FTE
(MWh/FTE)
Electricity intensity per revenue3
(KWh/CHF million)
Electricity intensity per FTE
(MWh/FTE)
2022
2021
2020
947 571
927 625
862 525
310 792
300 594
288 856
149 182
147 242
132 883
487 597
479 788
440 786
15 541
15 673
19 922
472 056
464 116
420 864
97%
97%
95%
142.7
149.1
158.0
9.8
9.9
9.7
73.4
77.1
80.8
5.0
5.1
4.9
1. Electricity bought from a non renewable tariff linked to Energy Attribute Certificates.
2. Electricity bought from local renewable sources of production and through energy attribute certificates. Emissions related to Distric heating are currently not included in this figure.
3. On a constant currency basis.
4. From non renewable sources.
Climate change – energy efficiency in buildings program
The energy used in our offices and laboratories worldwide accounts for 67% of our global energy consumption. It is therefore a key area of
focus for us to reduce energy use. In 2022, additional buildings were included in the program and further measures were identified across
the network.
Buildings covered by the EEB program
(# of buildings)
Energy consumption from buildings covered by the EEB program
(As % of total electricity and non transport fuels consumed by SGS buildings)
Energy conservation measures identified
(# of measures identified since beginning)
2022
2021
2020
701
694
678
80.0%
83.0%
83.0%
786
708
471
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 202
Databank
continued
Climate change – greenhouse gas emissions
We have committed to reducing greenhouse gas emissions through the Science Based Targets initiative (SBTi), which advocates the setting
of targets and deadlines in line with climate science in order to future-proof growth. In 2022, we received approval for our 1.5ºC and net-zero
targets from the SBTi and we will continue our efforts towards these targets by focusing on our major source of scope 1 and 2 emissions
(vehicle emissions) and our scope 3 emissions associated to our supply chain.
Total scope 1 + 2 emissions (market-based)2,3
(CO2e tonnes)
Scope 1 emissions from vehicles
Scope 1 emissions from buildings
Scope 2 electricity emissions (market-based)3
Voluntary carbon-offsetting CO2 credits retired4
(CO2e tonnes)
Scope 2 electricity emissions (location-based)
Scope 3 emissions
(CO2e tonnes)
Purchased goods and services
Capital goods
Fuel and energy related activities (not included in Scope 1 and Scope 2)
Waste generated in operations
Business travel
Employee commuting
Scope 1 + 2 emissions variation
(As a % against a 2019 baseline)
Scope 3 emissions variation
(As a % against a 2019 baseline)
Scope 1+2 intensity per revenue market-based1,2,3
(CO2e tonnes/CHF million)
Scope 1+2 intensity per FTE market-based2,3
(CO2e tonnes/FTE)
Scope 3 intensity1
(CO2e tonnes/CHF million)
Estimated district heating CO2 emissions (excluded from scope 2)
(CO2e tonnes)
Vehicle fleet average theoretical emissions
(gCO2/km)
2022
2021
2020
116 505
115 303
110 137
77 261
30 785
8 459
74 491
30 084
10 728
71 629
26 644
11 864
116 504
131 542
122 952
220 398
223 190
207 009
850 621
820 776
689 902
525 111
516 742
409 869
131 003
132 908
138 991
87 454
19 128
18 125
69 800
76 651
15 389
16 239
62 847
71 922
13 793
12 813
42 514
(10.5%)
(11.4%)
(15.4%)
8.2%
4.4%
(12.3%)
17.5
18.5
20.2
1.2
1.2
1.2
128.1
131.9
126.4
6 867
6 577
5 697
128.3
134.6
136.2
1. On a constant currency basis.
2. Refrigerant gas emissions are not included in this figure.
3. District Heating emissions are not included in this figure.
4. We invest in verified off-setting projects that directly benefit communities where we have an impact, in 2022 we have off-set 58 303 tCO2 with Uttarakhand run-of-the river project
and 58 303 tCO2 with Gansu Jinta solar power generation project.
Non-financial statementsSGS | 2022 Integrated Report 203
Water and waste management
While our water consumption and waste impact is relatively small compared to other industries, we monitor our impact and reduce our
resources’ footprint.
Water purchased
(m3)
Water use/FTE
(m3/FTE)
Weight of waste generated
(metric tonnes)
Weight of hazardous waste generated
(metric tonnes)
SGS offices and labs
Client samples
Weight of non-hazardous waste generated
(metric tonnes)
SGS offices and labs
Client samples
Weight of waste recovered
(metric tonnes)
Weight of hazardous waste recovered
(metric tonnes)
SGS offices and labs
Client samples
Weight of non-hazardous waste recovered
(metric tonnes)
SGS offices and labs
Client samples
Environmental incidents
(As # of environmental incidents including significant spills)
2022
2021
2020
1 985 965 1 919 430 1 715 493
20.5
20.6
19.3
78 560
65 199
55 536
16 217
14 688
11 121
10 829
11 020
5 388
3 667
7 503
3 618
62 343
50 511
44 415
36 558
28 518
24 153
25 785
21 993
20 262
24 783
20 888
15 293
5 107
2 343
2 764
4 832
3 745
1 087
2 711
1 775
936
19 676
16 056
12 582
8 943
10 733
8 063
7 993
5 556
7 026
26
45
48
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 204
Reporting
standards
2022 GRI
content index
SGS has reported the information cited in this
GRI content index for the period 1 January
2022 to 31 December 2022 with reference
to the GRI Standards.
GRI standard and disclosure
Reference
Reported performance
Assurance
GRI 2: General Disclosures 2021
2-1
2-2
2-3
2-4
2-5
2-6
Organizational details
Page 130
Entities included in
the organization’s
sustainability reporting
Reporting period, frequency
and contact point
Pages 187-189
Pages 191, 213-214, 236
Restatements of information
Page 191
External assurance
Pages 213-214
Activities, value chain and
other business relationships
Pages 18-21, 72-73, 194
2-7
Employees
Pages 195-196
Information regarding the total number of non-guaranteed
hours employees, full-time employees and part-time
employees including its breakdown by gender and by
region is not disclosed. Information not broken down
by region as this is considered confidential information
2-8
2-9
2-10
2-11
2-12
2-13
2-14
Workers who are
not employees
Governance structure
and composition
Nomination and selection of
the highest governance body
Chair of the highest governance
body
Role of the highest governance
body in overseeing the
management of impacts
Delegation of responsibility
for managing impacts
Role of the highest governance
body in sustainability reporting
Page 195
Pages 86-96
Page 93
Page 89
Page 94
Page 36 and 94
Page 36 and 94
2-15
Conflicts of interest
Page 93
2-16
Communication of
critical concerns
Pages 192, 234
2-17
Collective knowledge of the
highest governance body
Pages 36 and 93
The newly created sustainability committee receives periodic
information about SGS sustainability programs and initiatives.
New regulations or requirements are analyzed during the
regular meetings to assess their potential impact in SGS
operations, supply chain and services. Specific analysis
sessions are organized on demand depending on the level
of complexity of a given topic and additional training needs
are constantly evaluated
2-18
Evaluation of the performance
of the highest governance body
Page 93
2-19
Remuneration policies
Pages 104-122
2-20
Process to determine
remuneration
Pages 104-122
* Additional information to the GRI requirements.
– Spend by SGS Category*
– Spend by SGS supra-region*
– Spend analyzed for sustainability
risks (As a %)*
– Tier 1 suppliers analyzed
for sustainability risks
(As a % of total Tier 1 suppliers)*
– Number of employees
(# of employees)
– Permanent workers
(as a % of total employees)
– Casual workers
(as a % of total employees)
– Casual workers
(as a % of total employees)
– Total number of substantiated breaches
of the Code of Integrity received
through integrity helplines and broken
down by type of breach
– Total number of integrity issues
reported through integrity helplines
SGS | 2022 Integrated Report 205
GRI standard and disclosure
Reference
Reported performance
Assurance
2-21
Annual total compensation ratio
Pages 104-123, 199
2-22
Statement on sustainable
development strategy
Pages 8-11
2-23
Policy commitments
Pages 23, 228-235
2-24
Embedding policy commitments
Page 23
2-25
2-26
2-27
Processes to remediate
negative impacts
Mechanisms for seeking
advice and raising concerns
Compliance with laws
and regulations
Pages 46-49 , 228-235
Pages 228-235
As indicated in our Code of Integrity, SGS complies with
applicable laws in the countries where it does business.
During 2022 the SGS Group was not condemned to any
significant fines or penalties for non-compliance with
any kind of laws and regulations
2-28 Membership associations
Page 193
2-29
Approach to stakeholder
engagement
Pages 40-41, 193
– CEO and mean employee
compensation ratio
– Customer satisfaction score
(As a % score)
– Engagement index*
2-30
Collective bargaining agreements We respect our employees’ right to have collective
– Percentage of employees covered
representation and to enter into collective bargaining
agreements where this is accepted by local law
by collective bargaining
– Total economic value generated
– Total economic value distributed
– Total economic value retained
GRI 3: Material Topics 2021
3-1
Process to determine
material topics
Page 195
Pages 42, 191
3-2
List of material topics
Pages 42, 191
As a result of this year’s materiality review, the “corporate
governance” and “sustainable supply chain” are now included
as key material topics for the company
3-3
Management of material topics
Pages 42, 191
GRI 201: Economic Performance 2016
3-3
Management of material topics
Pages 52-57
201-1
Direct economic value
generated and distributed
201-2
Financial implications and other
risks and opportunities due to
climate change
201-3
Defined benefit plan obligations
and other retirement plans
201-4
Financial assistance received
from government
* Additional information to the GRI requirements.
– Total economic value generated: CHF 6 662 Mio (Revenue:
CHF 6 642 Mio; Financial and other income: CHF 20 Mio)
– Total economic value distributed: CHF 6 666 Mio (Salaries
and wages: CHF 3 331 Mio; Subcontractors’ expenses:
CHF 399 Mio; Depreciation, amortization and impairment:
CHF 521 Mio; Other operating expenses: CHF 1 493 Mio
(including Other taxes: 37 Mio and Community contributions
and charitable donations: CHF 1 Mio); Financial expenses:
CHF 71 Mio; Expected dividends due to non-controlling
interests and to shareholders as proposed by the Board of
Directors: CHF 632 Mio; Income taxes CHF 219 Mio
– Total economic value retained: CHF -4 Mio
Pages 215-227
Page 134
Only qualitative information is disclosed
SGS does not receive any significant financial assistance from
governments, but we benefit from incentives in the form of
grants from certain government schemes, such as energy-
saving incentives. However, these benefits are of low value.
This information is based on our global information gathering
system. We are not aware of any significant incentives granted
by governments or any financial aid granted to political parties
at local level during 2022
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 206
Reporting
standards
2022 GRI
content index
continued
GRI standard and disclosure
Reference
Reported performance
Assurance
GRI 202: Market Presence 2016
3-3
Management of material topics
Page 199
202-1
Ratios of standard entry level
wage by gender compared to
local minimum wage
SGS is committed to comply with the applicable labor
regulations in the countries where we operate. Whenever
possible, we improve the minimum wages set by the local
legislation. The quantitative information breakdown is unavailable.
The deployment of our global HR data management tool is
under review. We are currently evaluating alternative reporting
options and expect to report in coming years
GRI 203: Indirect Economic Impacts 2016
3-3
Management of material topics
Pages 50-51 and 80-83
203-2
Significant indirect
economic impacts
GRI 204: Procurement Practices 2016
Pages 50-51 and 80-83
3-3
Management of material topics
Pages 72-73
204-1
Proportion of spending
on local suppliers
Pages 187-189, 194
The percentage of global and local suppliers is calculated
considering 85% of the global spend.
We consider global suppliers those managed by Global
Procurement at corporate level and local suppliers those
managed by local procurement teams at affiliate/regional
level, regardless of where the supplier is based or the number
of affiliates where it provides its services/deliver its products
– Number of local suppliers
(As a % of total suppliers)
– Number of global suppliers
(As a % of total suppliers)
– Spend of local suppliers
(As a % of total spend)
– Spend of global suppliers
(As a % of total spend)
GRI 205: Anti-corruption 2016
3-3
Management of material topics
Pages 48, 66
205-1
Operations assessed for risks
related to corruption
205-2
Communication and training
about anti-corruption policies
and procedures
205-3
Confirmed incidents of corruption
and actions taken
Our non-financial macro risk assessment model analyzes
economic, political, social and environmental risks across 220
geographies and includes our own employees, suppliers,
indigenous people, migrant labor and local communities.
The analysis of economic and political risks includes the
following categories: government instability, policy instability,
state failure, recession, inflation, currency depreciation,
capital transfer, sovereign default, under-development, tax
issues, corruption, infrastructural disruption, energy security,
cybersecurity commitment, data protection and regulatory.
The results of this economic and political risks analysis in
2022 resulted in the following risk exposure:
– Direct operations (as a % of revenue): Low 58%; Medium
40%; High 2%
– Supply chain (as a % of spend): Low 59%; Medium 40%;
High 1%
Pages 66-69, 192
Breakdown by gender and employee category is not reported
as 99.99% of the employees have been trained on the Code
of Integrity
Page 192
In 2022, there were no public legal cases regarding corruption
brought against the organization or its employees.
2021 confirmed incidents of corruption was restated to reflect
the actual number confirmed during the year
– Percentage of employees trained
on the Code of Integrity
– Number and nature of confirmed
incidents of corruption identified
through corporate helplines
GRI 206: Anti-competitive Behavior 2016
3-3
Management of material topics
We are committed to using competitive and fair practices. As
such, we do not engage in any understandings or agreements
that may improperly influence markets, or discuss pricing,
competitive bid processes, contractual terms, division of
territories or customer and market allocations with competitors.
We do not make disparaging or untruthful allegations regarding
competitors, or endeavor to obtain confidential information about
them using illegal or unethical means. Finally, our services and
capabilities are never advertised in any way that could appear to
be deceptive or misleading. We provide customers with detailed
quotes and invoices so that they are informed about every aspect
of our service, including pricing. Our Global Pricing Initiative,
developed through expert review of pricing practices across the
Group, ensures robust pricing processes and governance
SGS | 2022 Integrated Report 207
GRI standard and disclosure
Reference
Reported performance
Assurance
206-1
Legal actions for anti-competitive
behavior, anti-trust, and monopoly
practices
In 2022, we did not identify any legal actions related to
anti-competitive behavior, antitrust and monopoly practices.
This information is based on our global information gathering
system based on incidents reported via the SGS integrity
helplines. We are not aware of any significant incidents of
this type at a local level during 2022
– Number of legal actions pending
or completed during the reporting
period regarding anti-competitive
behavior and violations of anti-trust
and monopoly legislation in which
the organization has been identified
as a participant
GRI 207: Tax 2019
3-3
Management of material topics
Pages 141-142
GRI 302: Energy 2016
3-3
Management of material topics
Pages 76-77
302-1
Energy consumption within
the organization
Pages 76-77, 201
The information reported is limited to the total fuel and the
total electricity consumption broken down by renewable
and non-renewable electricity
302-3 Energy intensity
Pages 76-77, 201
302-4 Reduction of energy consumption Page 201
Compared to 2019, our energy consumption has increased
by 1.4% in 2022
GRI 303: Water and Effluents 2018
3-3
Management of material topics
Pages 76-77
303-1
303-2
Interactions with water
as a shared resource
Management of water
discharge-related impacts
Pages 76-77
Pages 76-77
– Total energy consumption
by source (MWh)
– Vehicle fuels energy (MWh)
– Non-transport fuels energy (MWh)
– Total electricity (MWh)
– Standard electricity (MWh)
– Renewable electricity (MWh)
– Total renewable electricity (As %
of total electricity consumption)
– Energy intensity per revenue
(MWh/CHF million)
– Energy intensity per FTE (MWh/FTE)
303-5 Water consumption
Page 203
– Water purchased (m3)
GRI 304: Biodiversity 2016
3-3
Management of material topics
The information reported is limited to the total
water consumption
Not applicable. Being a service based company, SGS
does not have a significant impact on biodiversity
GRI 305: Emissions 2016
3-3
Management of material topics
Pages 76-77
305-1 Direct (Scope 1) GHG emissions
Pages 76-77, 202
We are currently improving our refrigerant gases collection
system to ensure the accuracy of the data. To date, reliable
data about refrigerant consumption is unavailable and
therefore they are excluded from the Group’s carbon footprint
305-2
Energy indirect (Scope 2)
GHG emissions
Pages 76-77, 202
305-3
Other indirect (Scope 3)
GHG emissions
Pages 76-77, 202
– Scope 1 emissions from vehicles
– Scope 1 emissions from buildings
– Scope 2 Electricity emissions
(location-based)
– Scope 2 Electricity emissions
(market-based)
– Scope 3 emissions
(CO2e tonnes)
– Purchased goods and services
– Capital goods
– Fuel and energy related activities
(not included in Scope 1 and
Scope 2)
– Waste generated in operations
– Business travel
– Employee commuting
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 208
Reporting
standards
2022 GRI
content index
continued
GRI standard and disclosure
Reference
Reported performance
Assurance
– Scope 1+2 intensity per revenue
market-based (CO2e tonnes/
CHF million)
– Scope 1+2 intensity per FTE
market-based (CO2e tonnes/FTE)
– Scope 3 intensity
(CO2e tonnes/CHF million)
– Scope 1+2 emissions variation
(as a % against a 2019 baseline)
– Scope 3 emissions variation
(as a % against a 2019 baseline)
– Weight of waste generated
(metric tonnes)
– Weight of hazardous waste
generated (metric tonnes)
– Weight of non-hazardous waste
generated (metric tonnes)
– Environmental incidents (As # of
environmental incidents including
significant spills)
– Weight of waste recovered
(metric tonnes)
– Weight of hazardous waste
recovered (metric tonnes)
– Non-hazardous waste recovered
(metric tonnes)
– Tier 1 suppliers analyzed for
sustainability risks (as a %
of total Tier 1 suppliers).
– Spend analyzed for sustainability
risks (as a %)
– New hires (# of employees)
– Voluntary turnover (As a %
of permanent employees)
– Total turnover by gender (As a %
of total permanent employees)
305-4 GHG emissions intensity
Pages 76-77, 202
305-5 Reduction of GHG emissions
Pages 76-77, 202
GRI 306: Waste 2020
3-3
Management of material topics
Pages 76-77
306-1
306-2
Waste generation and significant
waste-related impacts
Pages 76-77, 203
Management of significant
waste-related impacts
Pages 76-77, 203
306-3
(2020) Waste generated
Pages 203
306-3
(2016) Significant spills
Pages 203
306-4 Waste diverted from disposal
Pages 76-77, 203
GRI 308: Supplier Environmental Assessment 2016
3-3
Management of material topics
Pages 72-73
308-2
Negative environmental
impacts in the supply chain
and actions taken
Page 194
The information reported is limited to the number of suppliers
assessed for environmental impacts
GRI 401: Employment 2016
3-3
Management of material topics
Pages 66-69
401-1
New employee hires
and employee turnover
Page 198
Information not broken down by region
401-2
Benefits provided to
full-time employees that
are not provided to temporary
or part-time employees
401-3 Parental leave
We offer benefits such as healthcare plans and occupational
pension plans to our employees considering their type of
contract, in accordance with local market practices
Many of our affiliates provide paid maternity and paternity
leave in excess of legally required minimum. For example,
SGS Switzerland offers 16 weeks of maternity leave paid at
100%. SGS Australia offers 8 weeks of paid maternity leave
in excess of the local legally required minimums and SGS
South Africa, offers 5 paid days while local regulation provides
3 paid days. We also provide different childcare facilities in
many of our affiliates. Some of our offices count with special
rooms equipped with armchairs and freezes dedicated to
breastfeeding. We also offer our employees the possibility
of flexible working arrangements such as flexible check-in
and checkout, remote or part-time working to promote
worklife balance
No quantitative information available
SGS | 2022 Integrated Report 209
GRI standard and disclosure
Reference
Reported performance
Assurance
GRI 402: Labor/Management Relations 2016
3-3
Management of material topics
We strictly adhere to tariff structures and arrangements
negotiated with trade unions, while we also inform and consult
employees on relevant business activities. We respect statutory
minimum notice periods and give reasonable notice of any
significant operational changes in line with local practices and
labor markets. Our affiliates’ communication and consultation
processes are tailored to local needs
402-1
Minimum notice periods
regarding operational changes
GRI 403: Occupational Health and Safety 2018
3-3
Management of material topics
Pages 66-69
403-1
403-2
Occupational health and safety
management system
Pages 66-69
Hazard identification,
risk assessment, and
incident investigation
All site managers are expected to perform risk assessments
and to develop associated action plans. Employees have
the right to stop work at any time, without reprisal, if they
consider there to be a health, safety or environmental risk.
Any such instances are reported through our Crystal OI
system. Our OI management system defines the criteria to
be met to comply with our own requirements and with the
local laws and regulations. To ensure compliance, we audit
regions and countries centrally, while local OI managers audit
our laboratories, offices and facilities. The audit results go into
our performance reports, along with incidents and hazards
information captured in Crystal
403-3 Occupational health services
Pages 66-69
403-4
Worker participation, consultation,
and communication on
occupational health and safety
Pages 66-69
403-5
Worker training on occupational
health and safety
403-6 Promotion of worker health
Each role at SGS requires specific OI knowledge to support
the safety and well-being of our employees. All employees
are given training on-site standard operating procedures,
along with regular training sessions on Group OI management
systems and Rules for Life. We also operate a behavior-based
safety peer-topeer observation program
In line with our culture of care, we promote initiatives to
enhance the physical and mental well-being of our employees
so as to ensure their fitness for work. This includes the
provision of preventative health measures, such as vaccinations,
mental and physical health programs focused on awareness,
support and resilience
403-7
403-8
Prevention and mitigation of
occupational health and safety
impacts directly linked by
business relationships
Workers covered by an
occupational health and safety
management system
Pages 66-69
Page 38
We only report on the number of sites certified
and the number of employees covered by certified
management systems
403-9 Work-related injuries
Page 199
No fatalities occurred in 2022
403-10 Work-related ill health
Page 199
Information not broken down by gender and employee
category. No fatalities occurred in 2022
– Workers covered by an occupational
health and safety management system
(ISO 45001)
– Number of sites with a ISO 45001
– The number of fatalities as a result
of work-related injury.
– Total Recordable Incident Rate
(TRIR) (occurrences per 200 000)
– Lost Time Incident frequency Rate
(LTIR) (occurrences per 200 000)
– Sickness absence rate (As a %
of days of sickness absence
per total days worked)
– Total absence rate (As a % of days
of sickness absence plus days lost
per incidents with lost time per total
days worked)
– The number of fatalities as a result
of work-related ill health
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 210
Reporting
standards
2022 GRI
content index
continued
GRI standard and disclosure
Reference
Reported performance
Assurance
GRI 404: Training and Education 2016
3-3 Management of material topics
Pages 62-63
404-1
Average hours of training
per year per employee
Page 197, 199
Information not broken down by gender
and employee category
404-2
404-3
Programs for upgrading
employee skills and transition
assistance programs
Pages 62-63
Percentage of employees
receiving regular performance and
career development reviews
Page 197
GRI 405: Diversity and Equal Opportunity 2016
3-3
Management of material topics
Pages 66-69
– Training ratio (As a % of total
employment cost spent on training)*
– Percentage of employees trained
on the Code of Integrity*
– Safety training hours*
– Completion rate of data protection and
privacy e-learning (As a % of people
invited to the e-learning)*
– Performance reviews (As a
% of employees eligible to
performance review)
405-1
Diversity of governance bodies
and employees
Pages 89-98, 196
The Board of Directors is composed by 9 members
(6 men and 3 women)
The Operations’ Council is composed by 17 members
(16 men and 1 woman)
– Percentage of employees by gender
– Percentage of managers by gender
– CEO-3 employees by gender
(# of CEO-3 employees)
– Diversity on the Board and Operations
Council by gender, nationality and age
405-2
Ratio of basic salary and
remuneration of women to men
Page 199
GRI 406: Non-discrimination 2016
3-3
Management of material topics
Pages 66-69, 228-235
406-1
Incidents of discrimination
and corrective actions taken
Page 195
GRI 407: Freedom of Association and Collective Bargaining 2016
3-3
Management of material topics
Pages 228-235
407-1
Operations and suppliers in
which the right to freedom
of association and collective
bargaining may be at risk
Page 194, 228-235
GRI 408: Child Labor 2016
3-3
Management of material topics
Pages 228-235
408-1
Operations and suppliers at
significant risk for incidents
of child labor
Page 194, 228-235
GRI 409: Forced or Compulsory Labor 2016
3-3
Management of material topics
Pages 228-235
409-1
Operations and suppliers at
significant risk for incidents of
forced or compulsory labor
Page 194, 228-235
* Additional information to the GRI requirements.
– Total number of proven incidents
of discrimination
– Number of operations identified as
having a significant risk of incidences
of child labor, forced or compulsory
labor, or where the right to exercise
freedom of association may be
violated
– Number of operations identified as
having a significant risk of incidences
of child labor, forced or compulsory
labor, or where the right to exercise
freedom of association may be violated
– Number of operations identified as
having a significant risk of incidences
of child labor, forced or compulsory
labor, or where the right to exercise
freedom of association may be violated
SGS | 2022 Integrated Report 211
GRI standard and disclosure
Reference
Reported performance
Assurance
GRI 413: Local Communities 2016
3-3
Management of material topics
Pages 72-73
413-1
Operations with local community
engagement, impact assessments,
and development programs
Pages 72-73, 200
We have implemented such programs in 56.3%
of our affiliates
413-2
Operations with significant actual
and potential negative impacts on
local communities
Pages 50-51, 72-73
GRI 414: Supplier Social Assessment 2016
3-3
Management of material topics
Pages 72-73
414-2
Negative social impacts in the
supply chain and actions taken
Page 194
The information reported is limited to the number
of suppliers assessed for social impacts
GRI 415: Public Policy 2016
3-3
Management of material topics
Page 193
415-1 Political contributions
Page 193
GRI 417: Marketing and Labeling 2016
3-3
Management of material topics
We provide customers with detailed quotes and invoices
so that they are informed about every aspect of our service,
including pricing. Our Global Pricing Initiative, developed
through expert review of pricing practices across the Group,
ensures robust pricing processes and governance
417-2
Incidents of non-compliance
concerning product and service
information and labeling
In 2022, we were not issued with any significant fines or
penalties for non-compliance with regulations concerning
product and service information and labelling
417-3
Incidents of non-compliance
concerning marketing
communications
In 2022, we were not issued with any significant fines or
penalties for non-compliance with regulations concerning
marketing communications.
GRI 418: Customer Privacy 2016
3-3
Management of material topics
Pages 62-63
418-1
Substantiated complaints
concerning breaches of
customer privacy and losses
of customer data
Pages 62-63, 195
The total number of identified leaks, thefts, or losses
of customer data is not reported
– Investment in community
(CHF thousands on constant
currency basis)
– Total community projects
(# of projects)
– Community hours (# of hours
dedicated to community)
– Tier 1 suppliers analyzed for
sustainability risks (as a % of total
Tier 1 suppliers).
– Spend analyzed for sustainability
risks (as a %)
– Contributions to local, regional
or national political campaigns/
organizations/candidates (CHF)
– Total number of incidents of non-
compliance with regulations and/or
voluntary codes concerning product
and service information and labeling
– Total number of incidents of non-
compliance with regulations and/or
voluntary codes concerning marketing
communications, including advertising,
promotion, and sponsorship
– Number of substantiated complaints
concerning breaches of data
customer policy
– Number of complaints from
regulatory bodies
– Number of complaints received from
outside parties and substantiated by
the organization
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 212
Reporting
standards
Sustainable Accounting
Standards Board
(SASB) framework
alignment
The following tables illustrate how the
Company’s sustainability disclosures align
with the SASB Disclosure Topics for the
Professional & Commercial Services industry,
and where specific information may be found.
Sustainability disclosure topics & accounting metrics
Topic
Code
Accounting
metric
Data
Security
SV-PS-230a.1
Description of approach to identifying and addressing data
security risks
Level of
disclosure
Page number(s)
and/or URL(s)
Disclosed
Pages 46-48
SV-PS-230a.2
Description of policies and practices relating to collection,
usage, and retention of customer information
Disclosed
Privacy at SGS
Privacy policy
SV-PS-230a.3
(1) Number of data breaches
Disclosed
Page 195
Workforce
Diversity &
Engagement
Professional
Integrity
(2) Percentage involving customers’ confidential business
information (CBI) or personally identifiable information (PII)
(3) Number of customers affected
SV-PS-330a.1
Percentage of gender and racial/ethnic group representation for
Disclosed
Pages 89-91, 97-98, 196
(1) Executive management, and
(2) All other employees
SV-PS-330a.2
(1) Voluntary, and
Disclosed
Page 198
(2) Involuntary turnover rate for employees
SV-PS-330a.3
Employee engagement as a percentage
SV-PS-510a.1
Description of approach to ensuring professional integrity
Disclosed
Disclosed
Page 197
Pages 66-69
SV-PS-510a.2
Total amount of monetary losses as a result of legal
proceedings associated with professional integrity
Disclosed
Code of integrity
Privacy policy
In 2022, we were not issued with
any significant fines or penalties
for non-compliance with regulations
associated with professional integrity
Activity metrics
Activity metric
Number of employees by:
(1) Full-time and part-time
(2) Temporary, and
(3) Contract
Code
Level of
disclosure
Page number(s)
and/or URL(s)
SV-PS-000.A
Partial1
Page 196
Employee hours worked; percentage billable
SV-PS-000.B
Not available2
–
1. FTEs, number of employees and percentage of casual and permanent workers are disclosed. We are working on reporting the requested breakdown in future reports.
2. The employee hours worked are only available at theoretical level. We are working on reporting these figures in future reports.
SGS | 2022 Integrated Report 213
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Geneva 2, Switzerland Téléphone: +41 58 792 91 00, 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. Independent Limited Assurance Report on selected 2022 sustainability indicators included in the 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 selected 2022 sustainability indicators (including the GHG statement) of SGS SA and its consolidated subsidiaries (“SGS”) included in the Integrated Report (“Report”) for the year ended 31 December 2022. Our limited assurance engagement focused on selected 2022 sustainability indicators as presented in the 2022 GRI Content Index of the Report of SGS SA on pages 204 to 211 marked with the check mark . The reporting criteria used by SGS is described in the SGS Basis of Reporting document in the section “2. REPORTING PRINCIPLES AND EXTERNAL STANDARDS” defining those procedures, by which the related sustainability indicators are internally gathered, collated and aggregated. The SGS Basis of Reporting document is based on the GRI Sustaina-bility Reporting Standards (GRI Standards) published by the Global Reporting Initiative (GRI) and the GHG Protocol Corporate Accounting and Reporting Standard, Corporate Standard, Revised edition, among others. Our evaluation of the selected 2022 sustainability indicators (including the GHG statement) is against applicable GRI-Criteria and the GHG Protocol Corporate Standard (hereafter referred to as the “related GRI-Criteria”). Inherent limitations The accuracy and completeness of sustainability indicators (including the GHG statement) are subject to inherent limita-tions given their nature and methods for determining, calculating and estimating such data. Our assurance report should therefore be read in connection with SGS Basis of Reporting document, its definitions and procedures on sustainability 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 2022 sustainability indicators (including the GHG statement) in the Report in accordance with the SGS Basis of Prepara-tion document. This responsibility includes the preparation of the SGS Basis of Reporting document and the design, im-plementation, and maintenance of related internal control relevant to this reporting process that is free from material mis-statement, whether due to fraud or error and the appropriate record keeping. Independence and quality management We are independent of the SGS SA 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). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. PricewaterhouseCoopers SA applies International Standard on Quality Management 1, which requires the firm to de-sign, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Practitioner’s responsibility Our responsibility is to express a limited assurance conclusion on selected 2022 sustainability indicators (including the GHG statement) as presented in the 2022 GRI Content Index of the Report on pages 204 to 211 marked with the check mark . We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised) ‘Assurance engagements other than audits or reviews of historical financial information’ and the International Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements ('ISAE 3410'), 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 selected 2022 sustainability indicators (including the GHG statement) presented in the 2022 GRI content index are not free from material misstatement evaluated against the related GRI-Criteria. 214
Reporting
standards
SGS | 2022 Integrated Report PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Geneva 2, Switzerland Téléphone: +41 58 792 91 00, 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. Independent Limited Assurance Report on selected 2022 sustainability indicators included in the 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 selected 2022 sustainability indicators (including the GHG statement) of SGS SA and its consolidated subsidiaries (“SGS”) included in the Integrated Report (“Report”) for the year ended 31 December 2022. Our limited assurance engagement focused on selected 2022 sustainability indicators as presented in the 2022 GRI Content Index of the Report of SGS SA on pages 204 to 211 marked with the check mark . The reporting criteria used by SGS is described in the SGS Basis of Reporting document in the section “2. REPORTING PRINCIPLES AND EXTERNAL STANDARDS” defining those procedures, by which the related sustainability indicators are internally gathered, collated and aggregated. The SGS Basis of Reporting document is based on the GRI Sustaina-bility Reporting Standards (GRI Standards) published by the Global Reporting Initiative (GRI) and the GHG Protocol Corporate Accounting and Reporting Standard, Corporate Standard, Revised edition, among others. Our evaluation of the selected 2022 sustainability indicators (including the GHG statement) is against applicable GRI-Criteria and the GHG Protocol Corporate Standard (hereafter referred to as the “related GRI-Criteria”). Inherent limitations The accuracy and completeness of sustainability indicators (including the GHG statement) are subject to inherent limita-tions given their nature and methods for determining, calculating and estimating such data. Our assurance report should therefore be read in connection with SGS Basis of Reporting document, its definitions and procedures on sustainability 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 2022 sustainability indicators (including the GHG statement) in the Report in accordance with the SGS Basis of Prepara-tion document. This responsibility includes the preparation of the SGS Basis of Reporting document and the design, im-plementation, and maintenance of related internal control relevant to this reporting process that is free from material mis-statement, whether due to fraud or error and the appropriate record keeping. Independence and quality management We are independent of the SGS SA 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). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. PricewaterhouseCoopers SA applies International Standard on Quality Management 1, which requires the firm to de-sign, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Practitioner’s responsibility Our responsibility is to express a limited assurance conclusion on selected 2022 sustainability indicators (including the GHG statement) as presented in the 2022 GRI Content Index of the Report on pages 204 to 211 marked with the check mark . We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised) ‘Assurance engagements other than audits or reviews of historical financial information’ and the International Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements ('ISAE 3410'), 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 selected 2022 sustainability indicators (including the GHG statement) presented in the 2022 GRI content index are not free from material misstatement evaluated against the related GRI-Criteria. A limited assurance engagement undertaken in accordance with ISAE 3000 (revised) and ISAE 3410 (including the GHG statement) involves assessing the suitability in the circumstances of SGS’ use of applicable criteria as the basis for the preparation of selected 2022 sustainability indicators (including the GHG statement), assessing the risks of material misstatement of these sustainability indicators whether due to fraud or error, responding to the assessed risks as neces-sary in the circumstances, and evaluating the overall presentation of these sustainability indicators. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assess-ment procedures, including an understanding of internal control, and the procedures performed in response to the as-sessed risks. The procedures selected depend on the assurance practitioner’s judgement. Summary of the work performed Our limited assurance procedures included: •Reviewing the SGS Basis of Reporting document and the SGS Group Sustainability Manual and observing the appli-cation•Interviewing SGS representatives at Group and country level in Thailand, Japan, India, Argentina, Turkey, Vietnamand Cameroon responsible for the data collection and reporting•Inquiries of personnel involved in the preparation of the Report regarding the preparation process, the internal controlsystem 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 selected 2022 sustainability indicators concerningcompleteness, accuracy, adequacy and consistencyWe have not carried out any work on data other than outlined in the scope and subject matter section 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 selected 2022 sustainability indicators (including the GHG statement) as presented in the 2022 GRI Content Index of the Report marked with the check mark are not prepared and disclosed in all material respects in accordance with the related GRI-criteria. Restriction of use and purpose of the report This 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 selected 2022 sustainability indicators (including the GHG statement) as presented in the 2022 GRI Content Index of the Report marked with the check mark 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 may be used, or to any other person to whom our report is shown or into whose hands it may 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 ena-ble the Board of Directors to demonstrate that they have discharged their governance responsibilities by commissioning an independent assurance report over the selected 2022 sustainability indicators (including the GHG statement) as pre-sented in the 2022 GRI Content Index of the Report marked with the check mark 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 as-sume responsibility to anyone other than the Board of Directors of SGS SA for our work or this report. PricewaterhouseCoopers SA Guillaume Nayet Maegan Gokarn Geneva, 22 February 2023 ‘The maintenance and integrity of SGS SA’s website and its content are the responsibility of the Board of Direc-tors; the work carried out by the assurance provider does not involve consideration of the maintenance and in-tegrity of the SGS SA website and, accordingly, the assurance providers accept no responsibility for any changes that may have occurred to the reported sustainability indicators or criteria since they were initially presented on the website. 2 SGS SA | Independent Limited Assurance Report Non-financial
statements
Appendix
215
We are
leading the
way on climate
change.
TCFD Report
Introduction
Governance
Strategy
Risk management
Metrics and targets
215
216
217
219
226
227
This report presents SGS’s
governance, strategy,
management practices and
metrics in relation to climate
change and its impact on the
organization. This report follows
TCFD recommendations and
methodology, which we will
further adopt going forward.
SGS | 2022 Integrated Report
SGS | 2022 Integrated ReportManagement reportFinancial statementsRemuneration reportCorporate governance 216
Appendix:
TCFD Report
Introduction
As a sustainability leader, SGS is committed to
a climate change strategy and to help our customers
transition to a low carbon economy. This supports
our purpose of enabling a better, safer and more
interconnected world.
Our stakeholders already require detailed
and comprehensive information on our
sustainability performance, including climate
change related analysis and discussion,
much of which you can find in our 2022
Integrated Report. To add to our industry
leading sustainability performance and
reporting, and to meet future reporting
requirements, we are publishing our
TCFD report.
The purpose of the TCFD is to promote
international financial stability through
consistent information provided to financial
market participants that assess and value
climate-related risks and opportunities.
The additional reporting in this document
includes: our strategy to address climate
related risks and opportunities, the results
of our scenario analysis, and our main
climatic risks and opportunities and
related impact in our organization.
This increases our transparency and will
help our stakeholders make more informed
decisions when engaging with SGS. It will
also help us align with the Swiss regulation,
according to which, from 2024, large Swiss
firms will be legally bound to report on
climate issues including climate-related
risks and opportunities.
Helping in the fight against climate change
through changing our company behavior and
the provision of services to our customers
is a key factor in our purpose of enabling a
better, safer and more interconnected world.
This is reflected by the upgrade in 2022
of our science-based targets, from 2.0°C
to 1.5°C by 2030, and our commitment to
achieve Net Zero by 2050.
This whilst also continuing to compensate
our remaining carbon emissions, further
developing our Sustainable Solutions
Framework and maintaining our capital
allocation decisions and management
incentivization to sustainable criteria.
During 2022, we also continued to embed
climatic risks and opportunities in our
company decision making, and quantified
the financial impact of some of our key risks
and opportunities.
SGS | 2022 Integrated Report 217
Management’s role
Structural overview
Our Operations Council is made up of five
executive vice presidents, seven Chief
Operating Officers and two functional
Senior Vice Presidents, as well as our CEO,
CFO and General Counsel. The council
formulates, approves and implements group
strategy, approving and implementing more
detailed strategies, policies and targets
through all operations across the Group and
including those related to climate change.
The Operations Council, which is chaired by
the CEO, typically meets every month.
Sustainability and climate change are an
agenda item and the corporate sustainability
team often attends these meetings to
present and discuss sustainability and
climate change topics.
The Operations Council is comprised
of a wide range of senior management
representing the full breadth of the
SGS Group:
• The chief operating officers provide insight
in terms of our operations at a regional
level (e.g. the impact that a climate
mitigation program could have on the
regions or how to best implement it)
• The executive vice presidents provide
insight in relation to our services (e.g.
how to maximize the opportunities that
climate change brings in relation to our
service offer)
• The senior vice presidents (including
the SVP of Corporate Communications,
Sustainability & Investor Relations) provide
insight in relation to our functions (for
example, the chief compliance & legal
officer advises on the legal implications of
climate change and associated regulation),
processes and risks, including those
related to climate change.
• These are monitored on an ongoing basis
by the Board of Directors with the approval
of the Operations Council.
Governance
Board oversight
Structural overview
The competencies sought by the Group
for its Board of Directors include the
experience of senior executive leadership in
international businesses, strategic planning,
finance, technology, cybersecurity, digital,
innovation and sustainability. When selecting
candidates for the Board of Directors, the
company has due regard to experience,
professional qualifications, areas of
expertise, age, gender, national background
and leadership style, so that at all times,
the Board and its committees have the
required skills.
The directors bring a wide range of
experience and skills to the Board.
They participate fully in decisions on key
issues facing the Group including risks
from and services provided to customers
to address climate change. Their combined
expertise in the areas of finance, commercial
law, digital, innovation, strategy and
sustainability, and their respective positions
of leadership in various industrial sectors
are important factors contributing to the
successful governance of SGS.
In 2022, a Sustainability Committee of the
Board was created to reflect the growing
importance of sustainability to all our
stakeholders and build on the substantial
progress already made by the company
and its employees.
The Sustainability Committee assists the
Board in defining the group policies and
strategies relating to sustainability, including
matters relevant to the Group non-financial
reporting and targets of reduction of
greenhouse gas emissions.
Please refer to the Corporate
Governance section of our 2022
Integrated Report for more information
Oversight
The SGS Board of Directors is ultimately
responsible for the direction of the Group.
This includes assessing risks facing the
business and reviewing risk management
and mitigation policies. The Board is
ultimately responsible for SGS’s group
strategy, mission and values, including those
related to climate change.
In 2022, the Sustainability Committee met
three times. In addition, the members of the
Board regularly receive reports on progress
against our corporate targets.
Our 2030 Sustainability Ambitions were
approved by the Board and include specific
climate targets for 2023 and 2030.
These targets include our science-based
targets, that we upgraded in 2022, moving
from a 2ºC ambition to 1.5ºC. This made us
the first TIC company to receive approval
for our 1.5ºC and net-zero targets from the
Science Based Target initiative (SBTi).
Our sustainability ambitions are embedded
in our remuneration policy with 20% of
the long-term incentive based on the key
priorities of decarbonization, health and
safety and diversity.
The risk assessment and evaluation of
climate change risks is integrated within
the Group’s risk assessment model and
follows the same paths and procedures of
evaluation. In this regard, as part of our risk
assessment strategy, we assess the climate
change risks for the entire organization
twice a year, and corrective and follow-up
actions are planned to mitigate the climate-
related risks.
The Board of Directors, the Sustainability
Committee and the Audit Committee
review, discuss and approve our climate
change risk strategy and assess 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. They also review and guide
our risk management policies and ensure
that the standards and policies of the Group
are respected. The cross-membership
organization of the board contributes to the
robustness of discussions and transparency.
By reviewing and guiding risk management
policies, the Board gains the information it
needs to follow up on climate change risk
issues and give direction to the organization,
as this information enables it to mitigate risks
and identify potential areas for improvement.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 218
Appendix:
TCFD Report
Governance
continued
In addition, an annual risk assessment
process is conducted as follows:
• Main divisions and functions at local,
regional and global levels proceed to
identify potential risks. The risks are
then classified and evaluated by their
criticality (magnitude of impact and
likelihood of occurrence), also reflecting
SGS’s risk appetite and risk tolerance
levels. The respective lines of business
and functions also define and implement
required mitigation actions to address
the existing risks.
• After risks are identified, the Group
Risks Steering Committee, followed by
Operations Council, chaired by our CEO,
validates the results. The results and
conclusions are also shared with the Board
of Directors and the Audit Committee
• The Board of Directors and the Audit
Committee review and discuss with
management the outcome of the above
risk assessment and propose further
actions. Special focus is placed on
ensuring that all main risks (whether
internal or external) relevant to SGS
organizations, are sufficiently covered,
with proper action plans in place to
regularly monitor the impact and
mitigation of such risks.
Incentive structure
Environment, social and governance (ESG)
metrics are included in the long-term
incentive scheme for all executive members
and local management teams across the
organization, accounting for 20% of the
incentive opportunity.
These 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).
In addition, the drivers of our short-term
variable incentive include annual financial
performance, individual performance
against leadership competency model
and sustainability metrics.
SGS | 2022 Integrated Report Strategy
219
Time horizons
We have defined the following time horizons for climate-related risks and opportunities:
Time horizon
Short term
Time period
Present to 2023
Time horizon
Medium term
Time period
2023 to 2030
Time horizon
Long term
Time period
2030 to 2050
Rationale
Our Sustainability Ambitions
2030 set short-term targets
Rationale
Our Sustainability Ambitions
2030 set medium-term targets
Rationale
We are committed to achieving
Net Zero by 2050
These horizons were chosen because they are aligned with our business and sustainability strategies.
Impact on business, strategy
and financial planning
Identifying and quantifying impacts
Climatic risks and opportunities are identified
through various channels:
• Climatic scenario analysis: through climatic
analysis models, market trends, upcoming
regulations and megatrends
• Our operations: they are up to date with
market changes that can result in risks
and/or opportunities
• Business continuity team: they analyze,
anticipate and prepare the organization
for potential business disruption, which
includes extreme weather events
Identified climatic risks include upstream
and downstream activities across the
supply chains for all our stakeholders,
which are input into our risk intelligence
tool for evaluation.
Managing impact
In addition to identifying and evaluating
potential risks, for all our operations and
functions at local, regional and global levels
are required to explain the associated
mitigation programs, in order to define the
residual risks. These residual risks are then
evaluated against SGS risk appetite and risk
tolerance level.
In addition to the process described in
section 2.2, executive vice presidents of
each of our divisions take climatic risks into
consideration when defining the strategy of
the division and in their financial planning.
In most cases, this includes diversifying
into other services or geographies where a
portion of the business could be disrupted
due to market or regulatory changes, and
investing where new opportunities are likely
to appear or where there may be an increase
in demand for an existing service.
These risks and opportunities are prioritized
depending on this assessment. An example
of how we are investing to capture these
opportunities is our sustainability solutions.
Our Sustainability Solutions Framework has
been designed to support our customers
as they respond and adapt to societal and
environmental challenges by implementing
sustainable, safer and more efficient
processes across their value chains.
As well as enhancing service visibility for
customers, the new framework also enables
us to quantify and track revenue from
sustainability activities and helps with our
process of measuring the value to society
that these services provide.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 220
Appendix:
TCFD Report
Strategy
continued
Main risks and opportunities
Below are the main risks and opportunities that could have a financial impact on the organization:
Main climate-related risks
Risk category
& risk
Impact
description
of carbon
y Increasing price
r
o
t
a
l
u
g
e
R
Due to an increase in the price of carbon off-sets
(to maintain our carbon neutrality) and to an
increase in carbon taxes from governments.
Time
horizon Geography
Medium
term
Global
Mitigation
Reducing our carbon emissions
and energy consumption through
our climate change mitigation
strategy. Implementing a
strategy to mitigate the increase
in carbon offsets and increasing
self-generation of renewables.
Increased
compliance
costs
Higher operational costs to comply with climate
related legislation (e.g. EU Taxonomy, adoption
of TCFD recommendations, etc.).
We take a proactive approach
and adopt best- in-class practices
towards climate change
mitigation and adaptation.
Short
term
Global
l
new low carbon
technologies
y Failing to adapt to
g
o
o
n
h
c
e
T
t Shifts in service
e
k
r
a
M
demand
reputation
n Climate
o
i
t
a
t
u
p
e
R
Not adopting low carbon technologies (such as
low carbon vehicles, energy efficiency measures
for our buildings or renewable energy generation)
would reduce our competitiveness and affect
our reputation.
Our climate change mitigation
strategy ensures that we
continuously innovate, for
example through our energy
efficiency in buildings program
or our vehicle emissions policy.
Medium
term
Global
Market changes due to climate change can have
a significant impact on client demand for SGS
services, either directly or indirectly. Some of
the specific potential shifts we have identified
by division are:
• Natural Resources: risks associated with
coal phaseout and different types of crops
in several regions, and with climate change
regulation and market demands
• Connectivity & Products: two potential risks
associated with carbon pricing and changes
in customer behavior
• Industries & Environment and Knowledge:
risks associated with transition-related
new markets
Failing to address appropriately our impact
on climate change or to comply with climate
regulation would impact the value of our brand
and imply the loss of clients.
We are diversifying our market
segment, to increase revenues
from markets that will be
developing as a result of climate
change. Cornerstone to this
are our sustainability solutions,
a wide range of services
that help organizations to
implement better and more
efficient processes, address
stakeholder concerns, address
risks and accomplish their
sustainability goals. The impact
of this mitigation measure is
displayed as an opportunity
below, under “main climate-
related opportunities.”
Our sustainability team ensures
that our approach to addressing
climate change is best-in-class
and credible. Our sustainability
and legal teams ensure that we
stay up to date with legislation
and comply with all regulations.
Medium
term
Global
Long
term
Global
SGS | 2022 Integrated Report Risk category
& risk
weather
l Extreme
a
c
i
s
y
h
p
e
t
u
c
A
l Increase
a
c
in mean
i
s
temperatures
y
h
p
c
i
n
o
r
h
C
221
Time
horizon Geography
Global
Short,
medium,
and long
term
Impact
description
Extreme weather conditions, such as cyclones,
hurricanes or floods, can affect our business
performance and continuity, by forcing us to
close sites disrupting our logistics, etc.
Mitigation
We have business continuity
guidelines and a global
emergency management
standard which our affiliates
must implement at local level.
This ensures that 100% of our
revenues, as well as any new
operations, are protected against
extreme weather-conditions.
Business continuity programs
across SGS define roles and
responsibilities in case of crisis
and provide guidelines and
group procedures to organize a
coordinated response in case
of emergencies.
Higher mean temperatures result in higher
energy consumption and usage of refrigerant
gases, which translate into CO2 emissions.
Through our energy efficiency in
buildings program we implement
measures to optimize energy
consumption in our facilities.
Short,
medium,
and long
term
Global
Our energy efficiency in
buildings program covers our
entire operations, ensuring that
100% of our revenues, as well
as any new operations, are
protected against the increase
in mean temperatures.
We are also working on reducing
the fugitive emissions of
refrigerant gases.
Given that rising sea levels
is a slow phenomenon, we
continually assess when it
will be necessary to move
affected facilities.
Long
term
Global
Rising
sea levels
Our coastal facilities could be impacted,
requiring relocation.
* The financial impact related to shifts in service demand covers SGS’s services related to renewable energies, electric vehicles and minerals required for clean energy transition.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix
222
Appendix:
TCFD Report
Strategy
continued
Main climate-related opportunities
Opportunity category
& opportunity
Impact
description
Strategy to maximize
opportunity
Time
horizon Geography
l
y New and
g
o
o
n
h
c
e
T
more affordable
low carbon
technologies
An increased demand for low carbon
technologies is resulting in new technologies
appearing, being developed faster and being
made more affordable, in most cases.
Adopting these technologies will
help us implement our climate
change mitigation strategy, also
reducing costs associated with
energy and carbon.
Medium
term
Global
Reducing our carbon emissions
and energy consumption through
our climate change mitigation
strategy (including amongst
others our energy efficiency
in buildings program and our
vehicle emissions policy).
Global
Short,
medium,
and long
term
Through our sustainability
solutions we will be proactive
about maximizing the
opportunities presented by
climate change, enhancing
existing services and creating
new ones.
Short and
medium
term
Cost savings
associated to
climate strategy
implementation
Reducing the energy that we consume in our
buildings, as well as the amount of employee
travel, will not only reduce our carbon emissions
but also the associated costs (such as the cost
of energy, the trip and carbon offsets).
t Shifts in service
e
k
r
a
M
demand
Market changes due to climate change can have
a significant impact on client demand for SGS
services, either directly or indirectly.
Some of the specific potential shifts we have
identified, by division, are:
• Natural Resources: opportunities associated
with energy and water efficiency, and several
opportunities associated with different types
of crops in Eastern Europe, the Mediterranean
region and North East Asia
• Connectivity & Products: several opportunities
associated with electric mobility, supply
chain certification and higher demand for
product testing
• Industries & Environment and Knowledge:
opportunities to increase our energy efficiency,
carbon pricing, green building and climate-
related reporting services clients
SGS | 2022 Integrated Report Quantification of financial impact
As transition risks and opportunities are
those expected to have the largest impact
on the Group operations, we have quantified
the estimated financial impact of :
• Increasing price of carbon (risk)
• Cost savings associated to climate
strategy (opportunity)
• Shifts in service demand (risk
and opportunity)
Two climatic scenarios (2°C and 1.7°C)
(explained in details in the following section)
as well as a 2050 time horizon were used,
while two distinct operational scenarios have
been assessed:
• Business as usual, through which SGS
remains on its current level of climate
strategy (“gross financial impact”)
• Climate strategy, through which SGS
fully reaches its climate targets (“net
financial impact”)
223
The estimated amounts presented in the
table below represent the total discounted
value of future revenues and costs driven
by transition risks and opportunities, for the
period from 2023 to 2050, using a weighted
average discount rate of 7.4%.
The calculated financial impact on
SGS is denominated in Swiss francs.
Where financial projections were
denominated in another currency,
these were converted to Swiss francs
by using forward exchange rates from
Oxford Economics.
Where projections were made in real
terms, inflation expectations for
Switzerland were considered, taken
from Oxford Economics.
IEA STEPS 2050
IEA APS 2050
Risk category
& risk
Gross
financial impact
(CHF million)
Net
financial impact
(CHF million)
Gross
financial impact
(CHF million)
Net
financial impact
(CHF million)
Regulatory
Increasing price
of carbon
Market
Shifts in service demand
Opportunity
category &
opportunity
Technology
Cost savings associated
to climate strategy
implementation
Market
Shifts in service demand
(31)
(24)
(60)
(25)
(6)*
(6)*
(140)*
(140)*
IEA STEPS 2050
IEA APS 2050
Gross
financial impact
(CHF million)
Net
financial impact
(CHF million)
Gross
financial impact
(CHF million)
Net
financial impact
(CHF million)
0
515
0
510
419*
577*
656*
944*
* The financial impact related to shifts in service demand covers SGS’s services related to renewable energies, electric vehicles and minerals required for clean energy transition.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 224
Appendix:
TCFD Report
Strategy
continued
Scenario analysis and resilience strategy
Scenario analysis
As part of our climatic risk and opportunity
management process, we conduct scenario
analysis to improve our strategic resilience
and explore climate vulnerabilities that
might impact our business.
We conducted a first climate scenario
analysis in 2021, using 4ºC and 2ºC
scenarios, which helped us identify
some of our most significant risks
and opportunities.
In 2022, a second scenario analysis was
conducted, using 2.5ºC and 1.7ºC scenarios,
that were more suitable for the purpose of
quantifying the financial impact of some of
these significant risks and opportunities.
The scenario analysis takes into
consideration existing and emerging
regulatory requirements related to climate
change as well as other relevant factors,
such as market trends.
Analyses are done following TCFD
recommendations, which indicate that
at least two scenarios should be used,
including one scenario aligned with the Paris
Agreement, while the other is based on
business as usual.
Regarding time horizons, our 2021 scenario
analysis used 2030 since the models we
used were defined for that specific year and
this horizon was aligned with the timings of
our Sustainability Ambitions 2030. Our 2022
scenario used 2050 as longer-term models
were available and this timing is aligned with
our Net Zero commitment.
Scenarios used during 2022 scenario analysis
IEA Announced Pledges Scenario
(RCP 2.6/SSP 1-2.6)
IEA Stated Policies Scenario
(RCP 4.5/SSP 1-2.6)
This scenario assumes that all climate commitments made
by governments (as of September 2022) for 2030 targets
and longer term net zero and other pledges will be met,
leading to a global warming of 1.7ºC.
This scenario provides a more conservative benchmark
for the future, because it does not take for granted that
governments will reach all announced goals, leading to
a global warming of 2.5ºC.
Carbon prices to
significantly rise
Strong
government policy
Value chain disruption on
an unprecedented scale
Technology
advancements in low
carbon processes
Increased investor
and customer
climate expectations
and behaviors
Significant impacts on
productivity via worker
health and safety
Asset impairments
increase as value of
sites decrease
Insurance premiums
rise exponentially
(or coverage cannot
be provided)
Fossil fuels become
uncompetitive due to
high price backlash
Strong buy-in for low
carbon products from
customers and suppliers
Asset resilience
requirements
increase exponentially
Changes to
operating and/or
distribution seasons
SGS | 2022 Integrated Report 225
Scenarios used during 2021 scenario analysis
Physical impacts
of climate change
~4°C world
Emissions continue to rise at current rates
~2°C world
Emissions decline by 45% by 2030
Catastrophic climate-related impacts
Managed climate-related impact
Based on scenario: FAO SSS (IPCC RCP8.5)
Based on scenario: FAO TSS (IPCC RCP4.5)
Carbon price
CO2 prices stagnate to USD 30/ton
CO2 prices in OECD markets reach USD 340/ton
in 2030
Based on scenarios: IPCC SR1.5 and
RCP1.9-SSP5
Energy mix
Regulation,
Certifications
Mtoe
20 000
15 000
10 000
5 000
0
Mtoe
20 000
15 000
10 000
5 000
0
2018
2030
2040
2018
2030
2040
Coal
Oil
Gas
Nuclear
Renewables
Biomass
Coal
Oil
Gas
Nuclear
Renewables
Biomass
Development of emissions trading systems
(ETS) around the world
Mandatory standards become stronger
in all sectors
More stringent standards and performance
certifications are required in different sectors
(power, transport, industry)
White certificate scheme and voluntary energy
efficiency agreements are generalized in the EU
Renewable purchase obligations are implemented
Accelerated retrofit in order to achieve
energy efficiency
Strong regulatory constraints in transport sector
Wider hosting of international projects to offset
CO2 emissions
Resilience strategy
In order to enhance our resilience, SGS’s
framework aims to minimize climatic risks
and maximize climatic opportunities.
To minimize risks, for each identified risk in
which the gross risk level is unacceptable
(i.e. the risk can have a significant impact on
business revenues, profit margin, business
continuity, reputation or operations),
mitigation programs are defined in order
to manage them and bring the residual
risk level to an acceptable level.
In addition, our global business continuity
strategy aims to enable us to respond to any
disruption efficiently and effectively, while
minimizing the impact on our operations in
terms of our sites, processes and service
delivery. See the risk intelligence section
page 43 of this report for more information.
Finally, each division takes into consideration
identified risks and the results of our scenario
analysis to define our business strategies
and ensure that we anticipate any market or
regulatory changes, and that we also exploit
any new opportunities. An example of this is
our Sustainability Solutions Framework.
Our resilience strategy also includes the
programs that we have in place to reduce
our CO2 emissions and our dependency
on energy. Some examples are our energy
efficiency in buildings program and our
vehicle emissions policy.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 226
Appendix:
TCFD Report
Risk management
We manage climatic risks in our operations through
our risk management framework. The objectives
of which to ensure that risks faced by SGS are
managed properly, to reduce the impact of negative
risks while increasing the impact of opportunities,
and to provide a tool for reporting risk to key
stakeholders, senior management, the Board of
Directors and our external community.
To ensure that the system is more efficient and effective, we have improved the organizational structure and related roles and
responsibilities, and we have optimized the risk model and management process. As a result, a clear focus will be placed on key risks.
Climate change risks are included in this risk-management process.
The Company’s risk management process is conducted as follows:
1
All divisions and functions at local,
regional and global levels identify
potential short-, medium- and long-
term risks, including those related
to climate change, and covering
our entire value chain: supply chain,
own operations and services.
This is done via detailed workshops
and our new risk intelligence tool.
The assessment takes place
every six months.
4
For each identified risk in which
the gross risk level is unacceptable
(i.e. the risk can have a significant
impact on the business revenues,
profit margin, business continuity,
reputation or operations), mitigation
programs are defined, in order
to manage climatic risks and
bring the residual risk level to an
acceptable level. Risk assessment
and measurement is formally
performed twice a year while the
monitoring process is ongoing.
2
The risks are then evaluated
in terms of their impact and
likelihood, based on their financial,
reputational and strategic impact, to
determine their gross risk levels.
5
Twice a year, the Group Risk
Steering Committee and the
Operations Council, chaired by
the CEO, validates the results and
shares them with the Board of
Directors and the Audit Committee
review, who review and approve
the risks.
3
Additionally, we have defined
global risk category owners who
specialize in each type of risk and
review the evaluation provided
at local level. Each global risk
category owner is accountable for
the assessment, validation and
evaluation of the risk. The global
risk category owner must use
a bottom-up approach for this
strategic risk assessment and
has the ability to override the
local assessment.
6
The Board of Directors and
the Audit Committee review
and discuss with management
the outcome of the above risk
assessment process. Special focus
is placed on ensuring that the risk
profile covers all areas of concern
identified by the Board and that
the Operations Council has put
in place mitigation measures to
monitor the evolution of such risks
and mitigate their likely impact at
an early stage. This includes those
related to climate change, which
are also reviewed and discussed in
the Sustainability Committee of the
Board of Directors.
SGS | 2022 Integrated Report 227
Metrics and targets
The following information can be found
in the “Non-financial statements”
section of this Integrated Annual Report:
In 2020, we linked the long-term incentive
to ESG performance targets. These targets
include CO2 emissions per unit of revenue.
• The key metrics used to measure
and manage climate-related risks
and opportunities
• Scope 1, Scope 2 and Scope 3 GHG
emissions and the related risks provided
for historical periods to allow for
trend analysis
• Key climate-related targets
While we are working to reduce CO2
emissions from our operations as much as
possible, we compensate for any residual
emissions with our carbon off-setting
strategy. This enables us to bridge the gap
between our current emissions levels and
the more sustainable future which we are
working hard to achieve.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 228
Appendix:
Human rights report
We are
fully committed to
supporting human
rights and preventing
violations across our
global network.
Human rights report
228
Governance
Embedding human rights in
our policies, principles and due
diligence processes
Delivering on our human
rights commitments
Fair labor practices
Supply chain
Data privacy
Additional progress reports
229
230
231
231
232
234
235
At SGS, we are led by our
purpose to enable a better,
safer and more interconnected
world. As a fundamental
part of this, we commit to
respecting human rights – not
just an ethical obligation, but
as an important part of our
role in society. This report
consolidates the principles,
policies and initiatives that
demonstrate our commitment
to human rights. We aim to
improve transparency to our
stakeholders in everything
we do, and to report on our
progress around these efforts.
SGS | 2022 Integrated Report
Governance
229
At SGS, human rights permeate the highest levels
of management. The SGS Human Rights Executive
Committee, formed in early 2017 and chaired by
the CEO, is ultimately responsible for and oversees
the application of our human rights commitments
across the group.
The chief compliance officer is responsible
for managing compliance with the SGS code
of integrity, while the SGS supplier code
of conduct is jointly managed by our global
procurement and corporate sustainability
teams. Senior managers are expected to
demonstrate visible and explicit support for
human rights as defined in the SGS code
of integrity, the SGS business principles,
the SGS human rights policy and the
SGS supplier code of conduct.
Our human rights task force is in charge
of strengthening SGS’s human rights due
diligence program and ensuring it remains
suitable to the company’s nature and
operations. This taskforce is integrated
by high-ranking representatives and
steered by corporate sustainability.
Lastly, a dedicated sustainability
committee of the board has been
appointed to reflect the growing importance
of sustainability, including human rights,
to all our stakeholders and build on the
substantial work already achieved.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 230
Appendix:
Human rights report
Embedding human
rights in our policies,
principles and due
diligence processes
Our unwavering commitment to respecting human
rights is grounded in our SGS code of integrity
and our SGS business principles, and reflected in
our human rights policy, supplier code of conduct
and other relevant policies.
Additionally, we utilize a wide range of
controls to assess, prevent and mitigate risks
related to human rights and broader labor
rights violations across our operations.
To further mitigate any adverse human
rights impact, SGS applies the four-
eyes principle in a rigorous manner to
all employment-related decisions.
Relevant human rights risks are embedded
in our enterprise risk management
framework, which places the responsibility
and accountability for managing risk close
to our operations.
In addition, we have integrated controls,
specifically targeting human rights related
risks in our group-wide internal control
framework. These controls include, but
are not limited to, compliance with minimum
wage requirements, overtime rules, changes
to pay, collective agreements, etc.
All employment contracts and any changes
in an employee’s general conditions require
at least two levels of approval and the
validation of a human resources professional.
We continue our efforts to integrate
human rights into our group-wide policies
and control systems.
See www.sgs.com/en/our-company/
corporate-sustainability/our-
approach#C11 for more information
SGS | 2022 Integrated Report Delivering on
our human rights
commitments
To bring our human rights commitment to life,
we embrace and follow the principles of the United
Nations Global Compact and United Nations Guiding
Principles (UNGPs) on business and human rights.
231
The UNGPs incorporate by reference
the rights and principles expressed in the
International Bill of Human Rights and in the
International Labor Organization Declaration
on Fundamental Principles and Rights at
Work with its eight core conventions, all
of which we respect.
Furthermore, SGS designed a gender
bias toolkit to help us prevent using gender-
biased wording in job adverts. Gender-biased
words can be viewed as discrimination
toward male or female candidates and
could discourage people from applying
to work for SGS.
As part of our continuous effort to respect
human rights, SGS has implemented
numerous policies, programs and plans
to prevent and mitigate the risk of causing
adverse impacts to human rights.
Unless specified otherwise, all policies,
programs and plans aimed at preventing
and mitigating human rights risks, as
described in this report, apply to all SGS
employees and over 2 650 offices and
laboratories operated by SGS.
Fair labor practices
As an employer, we impact the lives of
over 97 000 employees and their families.
We want our employees to be well and
thrive during their time with SGS. We embed
human rights in our policies, principles
and due diligence processes and invest in
programs and services to support human
rights throughout the entire employee
life cycle.
Embracing diversity in our
recruitment process
To ensure that we are increasing the
diversity of our hiring, we train our
recruiters on recruitment best practices
and talent acquisition, and our managers
in recruitment, interviewing and diversity
best practices. We are also measuring
the gender diversity of our applicants.
SGS has a standardized recruitment
process. The process includes the use of
interview scorecards to standardize the
evaluation of our candidates in the interview
process. The proper and consistent use of
interview scorecards helps us to remove
potential interview bias, create a quantitative
standard for candidate evaluation and to
make better hiring decisions.
Fair and competitive remuneration
SGS provides fair and competitive
remuneration packages in all the
markets in which we operate.
We ensure a fair and competitive
remuneration package by using a well-
known and broadly used global grading
methodology throughout the SGS Group.
This methodology helps us evaluate
each job’s contribution to our business
success and it allows us to benchmark our
remuneration packages against local market
practices. The benchmarking data we use is
collected through salary surveys performed
by reputable professional service providers.
The remuneration is defined according
to the grade of the job that employees
will perform, their knowledge, qualification,
skills and experience. Salary increases are
reflective of the employee’s contribution
and impact on our business success, as well
as external factors, such as local legislation
and collective bargaining agreements.
SGS applies these methodologies
throughout the SGS Group to promote
the principle of equal pay for work of
equal value and to support diversity.
In line with our anti-discrimination and
dignity at work policy, we are committed
to promoting a workplace that provides
equal opportunity for all employees.
All employment-related decisions, including
compensation, benefits, recognition
and promotions will be made solely on
the basis of an individual’s qualification,
performance and behavior or other
legitimate business considerations.
We respect minimum wages defined by
the local regulations and comply with all the
mandatory requirements defined by local
legislation or binding collective bargaining
agreements with regards to wages and
their evolution.
No cash policy
SGS recognizes that cash-based wage
payments are not only inefficient
for employers, but also risky and
disempowering for workers.
We therefore follow the recommendations
of the International Labor Organization and
the UN-based Better than Cash Alliance to
shift wage payments from cash to digital, in
order to promote respect of workers’ rights,
broaden financial inclusion and to make
payments safer and more transparent.
Our group policies require wages to be paid
digitally and not through cash or cheques.
Education and employability
SGS promotes the right to education by
offering continuous learning opportunities
to all our employees. Our employee online
learning portal offers a large portfolio
of learning opportunities, ranging from
technical knowledge to interpersonal and
management skills. It enables our employees
to fully customize their individual learning
path to their needs. We believe that helping
our employees embrace a lifelong learning
mindset, will empower them to increase
their employability and help them be more
resilient to life challenges.
Anti-discrimination and dignity at work
As a global company, we consider that it
is our responsibility to stand up for human
rights and practice tolerance, inclusion, and
respect to enable a better, safer and more
interconnected world.
We achieve this goal through the promotion
of greater debate and transparency, and the
exchange of different views, experiences
and perspectives.
The general obligation of every employee
to abide by the principles of anti-
discrimination is embedded in our SGS
code of integrity and our group policy on
anti-discrimination and dignity at work.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 232
Appendix:
Human rights report
Delivering on
our human rights
commitments
continued
The latter aims to raise awareness of our
zero tolerance of any form of discrimination
and provide guidance on how to deal
with it. It supports our commitment to
promoting an equal opportunity workplace
for all employees and an environment in
which we treat everyone with dignity,
consideration and respect.
We encourage our employees to act
immediately and speak up if they encounter
discrimination. At SGS, there is no place
for any form of discrimination.
Facilitating the freedom of expression
and opinion
At SGS, we value an open culture and are
committed to cultivating an environment
where everyone feels comfortable about
engaging in an open dialog, contributing
ideas, and expressing thoughts and opinions
without any fear of retaliation. As expressed
in our business principle on leadership, we
are committed to encouraging an honest
and transparent relationship with our
people to promote sharing, collaboration
and engagement.
To enable our employees to share their
honest feedback anonymously and to
help us understand how our employees
feel about working for SGS, we conduct
regular employee engagement surveys.
We use communication tools, such as
Yammer, as SGS’s private and social
collaboration network to foster open dialog.
All our employees can join the SGS private
network on Yammer, ask questions, share
ideas, express their opinion, and create and
join communities.
Bonded labor, child labor and
forced labor
SGS does not engage in bonded labor,
child labor or forced labor.
As an inspection, verification, testing and
certification company, it is in the nature
of our business to employ workers with a
certain level of occupational qualifications
(e.g., inspectors, auditors, office workers,
laboratory personnel, etc.). In our own
operations, a large part of our activities is
therefore considered inherently low-to-
medium risk for bonded labor, child labor
or forced labor.
We believe the policies and procedures in
place mitigate any risks related to bonded
labor, child labor or forced labor.
Health and safety
At SGS, we recognize that our operations
can impact the health of our workforce.
Some of the harmful health risks and
agents in our workplaces include exposure
to noise, dust, chemicals, thermal and
musculoskeletal stressors.
We monitor the health status of our
workforce through the conduct of
preemployment and subsequent periodic
health surveillance, to ensure early detection
of potential ill health, and assist in the
management and recovery from illness
resulting from these exposures through
appropriate case management.
In line with our culture of care, we promote
initiatives to enhance the physical and mental
well-being of our employees to ensure their
fitness for work. This includes the provision
of preventative health measures, such as
vaccinations, and mental and physical health
programs focused on awareness, support
and resilience.
SGS advocates for educating and raising
awareness among its entire workforce as
a means of ensuring the health and safety
of all its employees and delivers around
2.5 million training hours on health and safety
per annum to our employees.
In addition, SGS has identified roles
and responsibilities of the managers.
By establishing a clear mechanism for
clarifying responsibilities, managers are
encouraged to ensure the safest possible
working conditions for their employees.
Zero-recruitment-fee policy
Large recruitment fees can leave employees
in situations of debt bondage, a form of
forced labor in which a person’s labor is
demanded as means of repaying a loan,
trapping the individual into working for
little or no pay until the debt is repaid.
SGS applies a zero-recruitment-fee policy.
As part of this fair recruitment practice,
SGS never requires an administration fee
for processing job applications and never
requests money or financial information from
an applicant to secure a job as an employee,
intern, or to provide services as a contractor.
In recent years, it has come to our attention
that various individuals and organizations
have contacted people offering false
employment opportunities with SGS.
We have taken this matter seriously and
notified appropriate legal authorities in an
effort to stop such fraudulent schemes.
In addition, we have launched internal and
external communication campaigns to
prevent candidates from becoming victims.
We invite candidates to check the
legitimacy of a job offer or to report
potentially fraudulent job offers to our
corporate security department.
Home working
To mitigate the risks related to employees
working from home, a group policy is in
place outlining applicable rules, regulations
and norms governing home working.
The policy includes, but is not limited to,
guidance on health and workspace safety
at home, and rules to prevent potential
harassment or discrimination of employees
working from home. It also clarifies that the
requirements relating to absence, sickness
and recording of work time at home must be
observed in the same way by home workers
as by employees who work in the office.
To help our employees manage mental
health while working from home, we offer
employee assistance programs in different
locations. These include mindfulness
sessions, stress management training,
virtual yoga, mental health virtual talks,
and much more.
SGS | 2022 Integrated Report Vulnerable groups
Individuals from certain groups or
populations may be particularly vulnerable
to impacts on their human rights, such as
children, women and migrant workers.
SGS takes responsibility for paying
special attention to vulnerable groups
and recognizing the specific challenges
that they may face.
As an example of our efforts, in 2022,
SGS Switzerland obtained Equal Salary
Certification, a symbol of excellence in
terms of equal pay for all its employees
in Switzerland. After successfully passing
the statistical analysis of all salaries, SGS
Switzerland underwent an internal audit
entrusted to an external audit company
proving equal pay for women and men.
Children
SGS does not employ children under
the age of completion of compulsory
schooling and, in any case, under 16 years.
To ensure this, we closely monitor the age
of our employees and confirm a potential
candidate’s identity and right to work
through our global standards on pre-
employment screening.
Women
SGS strives to have proportional
representation of women in leadership
positions throughout the group.
We have included Women in Leadership
(CEO-1, CEO-2 and CEO-3 management
positions) as a non-financial KPI into the
long-term incentive plan of the SGS Group.
In addition, our gender-inclusive
recruitment process for leadership
positions requires that there is at least
one woman on every interview panel
and at least one female candidate on
every final shortlist for CEO-1, CEO-2
and CEO-3 positions.
In 2021, SGS became signatory of the
Women Empowerment Principles –
a United Nations private sector initiative
that offers guidance to businesses on
how to promote gender equality and
women’s empowerment in the workplace,
marketplace and community.
Migrant workers
We realize the importance and extent of
the migration phenomenon and recognize
the vulnerable situation in which migrant
workers frequently find themselves.
We mitigate the risk of employing workers
who are non-documented or in an irregular
situation through our global standards on
pre-employment screening. Our global
standards include, but are not limited to,
the confirmation that the identity of our
candidates is genuine and that they have a
valid visa and work permit for the country
of employment.
SGS has also conducted a global
compliance review of cross-border
employment relationships. Each identified
cross-border case was reviewed, tailor-
made guidance was provided, and
corrective actions were implemented
where required. Following the compliance
review and, to mitigate any risks related to
cross-border employment relationships,
SGS set global standards. Through the
avoidance of cross-border employment
relationships, SGS ensures that employees
working in the same location have access
to the same rights and working conditions.
233
Supply chain
With a CHF 2 billion annual supply chain
spend, we have a significant opportunity to
extend our sustainability principles to many
more businesses and employees beyond our
own. As a responsible major purchaser, we
ensure that goods and services are sourced
sustainably and that our suppliers respect
human rights.
Code of conduct for suppliers
Our supplier code of conduct sets out the
basis of our responsible sourcing approach.
It defines not only the nonnegotiable
minimum standards that we ask our
suppliers to respect when conducting
business with SGS, but also the values
which are shared throughout SGS, its various
businesses and affiliates. Every supplier that
wants to do business with SGS is required
to sign the SGS code of conduct to ensure
that they are aligned with our standards and
commitments, including those related to
human rights.
Supplier self-assessment questionnaire
We have started rolling out our new
Self-Assessment Questionnaire (SAQ)
for strategic suppliers. This includes the
definition of a new process that considers
supply chain risk management and mitigation
plans for high-risk vendors. The first phase,
in Q4 2022, covered our strategic global
suppliers and strategic local suppliers from
four countries. By the end of 2023, we plan
to extend the use of the SAQ to all countries
in scope.
Supplier diversity program
SGS knows that diverse supplier
networks bring uniquely rich insights and
experiences that are vital to our innovative
edge. Therefore, we are working to
promote diversity and inclusion across
our supply chain.
As a result of these efforts, SGS North
America is ensuring that minority-run
suppliers have fair opportunities in
procurement tenders. By doing so, SGS
is not only improving the well-being of
underrepresented groups, but also creating
a positive socioeconomic impact on society
as a whole, as it supports small firms.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 234
Appendix:
Human rights report
Delivering on
our human rights
commitments
continued
Data privacy
SGS is committed to treating the right of
any individual to control their own personal
information and to decide about it. Privacy is
a fundamental human right and SGS has
adopted an approach that protects the
personal data of our customers, employees
and third parties from the moment we
collect it to the time we destroy it.
Data privacy is a key principle of our code
of integrity. SGS respects the privacy
and confidential nature of the personal
information of any individual we interact
with to the extent required for the effective
operation of its business or for complying
with legal requirements.
Our data privacy policy governs how we
collect, use, and manage the personal
data of customers, employees and third
parties. Moreover, we have developed a
management framework to allow us to
manage personal data in a manner that is
consistent with the data privacy policy across
all affiliates.
Aside from the policies, our data protection
officers provide continuous advice, identify
privacy risks, develop policies on specific
issues, and train employees on data privacy.
We also take data privacy into consideration
from the outset when developing new
services or processes. By following the
privacy by design approach, we aim to
avoid a “collect first, ask questions later”
approach to personal data. For those
projects that entail data privacy concerns,
our data protection officers work closely
with the relevant business and IT security
teams to undertake a data protection
impact assessment, documenting both
the potential risks to individuals and the
measures being taken to minimize them.
Finally, any individual who wants to exercise
their privacy rights can do so by simply
visiting our online privacy request form at
www.sgs.com. We will not discriminate
against individuals who choose to exercise
any of their rights. Specifically, SGS will not
deny goods or services, charge different
prices or rates, or provide a different level
of quality of services.
Empowering human rights
At SGS, we believe that people are
empowered when they understand their
human rights, know how to raise concerns
and are provided with remediation
consistent with local laws and the United
Nations Guiding Principles (UNGPs) on
business and human rights.
Human rights related training
We strive to build a culture of respect for
human rights at SGS. We offer training
on human rights related topics, because
we believe that raising awareness and
sharing values through training is crucial
to ensuring that our employees act
responsibly. Some examples of courses
related to human rights, in addition to those
described above, include:
• Human rights
• SGS code of integrity
• The integrity minute
• Health and safety
• IT security and data privacy
Grievance mechanism
We communicate extensively throughout
the Group on the different channels
through which employees, external
rightsholders and stakeholders can bring
any violations or risks of human rights
violations to our attention.
Our SGS integrity helpline is available
24/7 in multiple languages online and
by phone and is one way to report
concerns confidentially and anonymously.
The SGS integrity helpline is operated
by an independent service provider
specialized in dealing with compliance and
ethics concerns. Communications made
to this helpline are treated confidentially
and are reported to the SGS compliance
team which protects the anonymity of the
informant, where required.
SGS ensures that nobody faces any form
of retaliation or adverse consequences
for having sought advice or reported
any violations or risks of human rights
violations. Retaliation against a rights-
holder who has reported a violation in
good faith will result in disciplinary action.
More information on our grievance
mechanism can be found in the SGS code
of integrity and human rights policy as well
as our group policy on anti-discrimination
and dignity at work.
Remediation
We recognize that even with the best
policies and practices, SGS may cause
or contribute to an adverse human rights
impact that we have not foreseen or been
able to prevent.
When this occurs, SGS applies remediation
actions to ensure that the people who
were negatively affected receive an
effective remedy.
In line with the UNGPs, when an adverse
human rights impact is detected in our own
operations, SGS is committed to taking
transparent action to remedy the situation
in a fair and equitable manner. Should the
adverse impact be found in the supply
chain, SGS will encourage its suppliers
to respect human rights, either through
the development and implementation of
corrective action plans or governance.
We do not tolerate violations of the code
of integrity. Violations of the SGS code
will result in disciplinary action, including
termination of employment and criminal
prosecution for serious violations.
In 2022, there were no human grievances
identified through the SGS integrity
helpline. Four cases of discrimination
were identified all of which resulted in
disciplinary actions and two terminations.
SGS | 2022 Integrated Report Additional progress
reports
235
SGS has set ambitious human rights targets as part of our Sustainability Ambitions 2030, which address our entire value chain.
These targets include 2023 targets and 2030 targets, as set out below:
2023
Human rights targets
2030
Human rights targets
• Achieve 30% of women at CEO-3
• Reduce our Total Recordable Incident Rate by 20% and
Lost Time Incident Rate by 10% and HSE certify the
main operational sites (integrated ISO 45001 and ISO
14001 certification)
• Continue performing annual risk assessments on human
rights across the group, keep developing our human
rights due diligence program to avoid violations across our
operations and train 100% of our employees on our human
rights principles annually
• Strive towards an equitable representation
of genders at CEO-3
• Reduce our Total Recordable Incident Rate by 30% and
Lost Time Incident Rate by 20% and HSE certify the
main operational sites (integrated ISO 45001 and ISO
14001 certification)
• Continue performing annual risk assessments on human
rights across the Group, keep developing our human
rights due diligence program to avoid violations across our
operations and train 100% of our employees on our human
rights principles annually
Progress against these targets is available in our 2022 Integrated Report.
SGS | 2022 Integrated ReportManagement reportFinancial statementsNon-financial statementsRemuneration reportCorporate governanceAppendix 236
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 +44 (0)7899 800575
Investor relations manager
Livia Baratta
SGS SA
1 place des Alpes
P.O. Box 2152
CH – 1211 Geneva 1
t +41 (0)22 739 95 49
Annual General Meeting
Tuesday, 28 March 2023
Geneva, Switzerland
2023 Half-Year results
Monday, 24 July 2023
Dividend payment date
Ex-date: Thursday, 30 March 2023
Record date: Friday, 31 March 2023
Payment date: Monday, 3 April 2023
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
Project management
John Coolican
Global Head of Communications
Beatriz Cebrián López
Global Sustainability Manager
SGS | 2022 Integrated Report SGS is a registered trademark of
SGS Société Générale de Surveillance SA
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