ESG

Intro Content
The Melrose “Buy, Improve, Sell” model necessarily means that we inherit businesses that are underperforming in a number of different areas, including their environmental, social and governance performance.

We implement stronger operational and financial foundations to build better businesses, for the collective benefit of stakeholders. In doing this, we encourage them to improve on historic ESG underperformance, and make sustained, positive contributions to the environment and communities in which they operate.

Implementing Melrose ESG values – our decentralised approach

We encourage, support and invest in our businesses to implement the following Melrose ESG principles and contribute to a sustainable future, as further detailed in our ESG report:

  • Respect and protect the environment.
  • Purposefully engage with key stakeholders to better understand and deliver on their expectations.
  • Prioritise and nurture the wellbeing and skills development of employees and the communities that they are part of.
  • Exercise robust governance, risk management, and compliance.

We implement secure pension scheme funding, operational and financial best practice, and lead in promoting diversity and neutralising our carbon footprint. We invest in our businesses to bolster their research and development capabilities, to enable them to help their customers meet their environmental objectives, and help ensure the safety of their end-users. We encourage our businesses to champion the interests, safety and skills development of their employees. We instil our values through best practice policies, training, and internal controls, supported by renewed management and governance structures. Our businesses’ executive management teams are empowered to implement the necessary measures to improve ESG performance, by leveraging their understanding of what their respective stakeholders require.

Sustained, positive ESG performance

The success of our “Buy, Improve, Sell” model relies on building better businesses that are positioned to prosper over the longer term. The ESG improvements that we promote and encourage among our businesses benefit from our long-term view, and are underpinned by our focus on conducting business with the highest standards of integrity, honesty, and transparency.

By implementing a stronger culture of operational and financial improvement, we rebuild our businesses’ resources and capabilities, and enable them to pursue commercially attuned ESG improvement initiatives.

You will see that we have produced our first standalone ESG report as part of our Annual Report. This ESG report draws together the key actions, programmes and performance on ESG matters for us and our businesses, to aid the understanding of our investors and other stakeholders.

Consistent with our “Buy, Improve, Sell” strategy, some of the businesses we acquire may be underdeveloped in one or more areas of ESG focus. While we set a good example centrally through strong governance practices and responsible stewardship, a key part of our improvement strategy is providing the investment, support and encouragement that our businesses need to make meaningful, continuous ESG improvements. This delivers material production efficiencies, such as the 30% reduction in emissions achieved by GKN facilities over the past two years, and sustainability breakthroughs on product developments such as the composite Wing of Tomorrow and electric aircraft initiatives of GKN Aerospace, GKN Automotive’s P4 eDrive system which enables reductions in CO2 emissions by up to 100%, and HVAC’s cutting-edge StatePoint Technology®, which enables savings of up to 30% for energy consumption and up to 90% for water usage on cooling systems in the fast-growing hyperscale data centre market.

These are all long-term programmes requiring significant investment that will continue to deliver sustainable benefits long after our ownership, and demonstrate the strength of our commitment. We welcome the evolving focus and clarity on ESG matters as yet another opportunity to demonstrate how we build better, stronger businesses for the benefit of all stakeholders whilst producing excellent returns for shareholders. We see these as entirely compatible and we refer you to the ESG report for full details.

Melrose is a meritocracy and individual performance is the key determinant in any appointment, irrespective of ethnicity, gender or other characteristic, trait or orientation.  The Board places great emphasis on ensuring that its membership reflects diversity. In particular, Melrose will have achieved ahead of schedule the 2020 target set out in the Hampton-Alexander Review of having 33% female representation on its Board and the 2021 target set out in the Parker Review of having one director of colour on its Board.

The Committee currently takes into account a variety of factors before recommending any new appointments to the Board, including relevant skills to perform the role, experience and knowledge needed to ensure a rounded Board and the diversity benefits each candidate can bring to the overall Board composition. The most important priority of the Committee, however, has been, and will continue to be, to ensure that the best candidate is selected to join the Board, and this approach will remain in place going forward.

While recognising that the Melrose “Buy, Improve, Sell” model means the Company inherits the shape of the workforce of the businesses it acquires, the Board nonetheless understands the importance of diversity throughout the workforce including at a senior management level, be it geographical, cultural or market aligned and encompassing gender, race, sexual orientation and disability. Although not appropriate to set specific diversity targets throughout the Group’s workforce due to Melrose’s decentralised business model and frequent turnover of businesses, Melrose is actively engaged in supporting initiatives to increase the Group’s diversity and seeks further opportunities to do so.

The charts below shows diversity working within the Group as at 31 December 2019.

(1) In accordance with the Parker Review, BAME individuals are those who identify as or have evident heritage from African, Asian, Middle Eastern, Central and South American regions.

Total Group gender diversity Total Male Female
Total Group 55,621 44,799 (81%) 10,822 (19%)

Gender diversity within the Group as at 31 December 2019