Sustainability

We turnaround high-quality but underperforming industrial businesses by creating stronger operational and financial foundations, to enable them to build and sustain the resources required to deliver positive contributions to the environment and the communities in which they operate over the long-term.

2019 ESG Report

Melrose welcomes the evolving focus and clarity on ESG matters as another opportunity to demonstrate how we build better, stronger businesses for the collective benefit of stakeholders whilst producing excellent returns for shareholders.

The Melrose ESG improvement model is founded upon the following key objectives and principles: 

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

You will see that we have produced our first standalone ESG report as part of our 2019 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.

Download the Section 172 Statement

Respect and protect the environment

We are believers in the potential of industry to help solve society’s most pressing needs.

We buy high-quality but underperforming industrial businesses, with established positions in their markets. By investing heavily in research and development, we enable our businesses to develop and provide the innovative and cost-effective solutions that their customers need to help tackle underlying causes of climate change.

(1) See Table 2 on page 60 of the 2019 Annual Report
(2) See Table 1 on page 60 of the 2019 Annual Report

 

GKN WINTERTEST2020 157V2

Reducing fuel combustion

30% reduction in combustion of fuel & operation of facilities (scope 1)(1) across GKN compared to 2017, on a like-for-like basis

Reducing emissions

23% reduction in emissions reported normalised to tonnes per £1,000 turnover(2)  across the non-GKN divisions compared to 2018

25% reduction

in total purchased electricity (scope 2) across the nonGKN divisions compared to 2018, on a like-for-like basis

We recognise that climate change may have significant implications on the long-term successes of our businesses. We seek to set a positive example for our businesses to follow and we invest in and encourage them to improve their operations and market offerings in a direction that minimises their impact on climate change, and makes them less vulnerable to climate-related risks.

We are true believers in industry, and in the potential of industry, to help solve society’s most pressing needs. We buy high-quality but underperforming industrial businesses, with established positions in their markets. By investing heavily in research and development, we enable our businesses to develop and provide the innovative and cost-effective solutions that their customers need to help tackle underlying causes of climate change.

Efficiency in this area is a material concern for nearly all manufacturing industries, and our businesses are no exception. We therefore support and invest in them to accelerate their efforts to reduce their carbon footprint by, where economically appropriate, taking measures to improve their energy, water and material efficiency by seeking viable, lower-impact, and increasingly lower-cost, renewable energy sources. These actions not only make good long-term business sense, but also respond directly to the expectations set by governments, and the emerging realities of the markets in which our businesses operate.

We are already taking active steps to anticipate how climate change will affect our businesses, and to encourage firm progress from our businesses in respect of positive climate action. We will continue to strengthen our understanding of the specific climate-related risks our businesses face as we work to mitigate these risks.

Melrose sets a positive example, and enables and empowers its businesses to follow. Whilst the central Melrose carbon footprint is relatively limited, we nevertheless offset the emissions that we do generate. The Melrose corporate offices have attained the CarbonNeutral® company certification for 2019 and 2020 through a combination of internal energy efficiency initiatives and financing high-quality, high-impact emission reduction projects in accordance with The CarbonNeutral Protocol(1). The Melrose corporate office in the US has also achieved the HinesGo (Green Office) designation in recognition of its sustainability practices and energy efficiency performance, among other environmental and wellbeing criteria.

We believe that improving operational efficiency is one of two key factors that shape the long-term profitability and sustainability of our businesses, and enables their compliance with increasing environmental standards and regulation. The other key factor is cultivating the technical and innovation capabilities and foresight to provide effective solutions to the emerging ESG challenges that their customers face, including combatting climate change.

See page 59 of our ESG report for further details

(1) Source: https://carbonneutral.com/the-carbonneutral-protocol

Reducing Operational Environmental Impacts Of Our Businesses

Our businesses are charged with identifying, monitoring and managing the environmental risks that affect their operating and market environments. With Melrose support, each Group business invests in and implements appropriate systems and processes to manage their impact on the environment, and continually reviews these in line with evolving expected practices. For example, at the end of 2019, over three quarters of the manufacturing facilities across our businesses had chosen to be certified or compliant with the ISO 14001:2015 Environment Management Standard.

Business units also monitor their environmental progress and plan for continuous improvements in ways that are suitably tailored to their activities, in areas such as energy consumption, GHG emissions, water consumption, water disposal quality, waste generation, recycling and disposal, and volatile organic compound emissions. 

In 2019, our businesses continued to invest in operational improvements with direct environmental benefits such as improved energy and/or water efficiency, reduced waste or pollution prevention.

Please see pages 60-62 of the 2019 ESG Report for reporting on the Group’s energy and GHG emissions, energy efficiency initiatives in production and manufacturing, water and waste consumption and water and waste prevention initiatives in 2019.

We recognise the opportunities that the transition to a net-zero emissions economy present, and our businesses are well positioned to help their customers tackle pressing environmental challenges such as climate change, and to meet emerging regulatory requirements and wider environmental expectations. Our businesses work closely with their customers and world-class research institutions to develop market-leading, cost-effective innovations, that deliver the solutions their markets need. In 2019, our businesses actively invested in developing products that help their customers improve energy efficiency and reduce GHG emissions, water consumption and waste generation, in their operations or during the use of their products.

See page 62 of our ESG report for further details

Aerospace Wing Of Tomorrow

Through its Global Technology Centre in Bristol, UK, GKN Aerospace manufactured the first composite components for the Airbus Wing of Tomorrow research programme, representing a step change in the aerospace industry. The new Fixed Trailing Edge for the Airbus A350 XWB, is lighter and stronger than its metallic equivalent and can achieve up to 20% fuel efficiency per passenger kilometre.

See page 62 of our ESG report for further details

Automotive Edrive Systems

GKN Automotive continues to actively contribute towards low-carbon green transportation solutions. Its P4 e-Drive systems can lead to 100% CO2 reduction for battery electric vehicles, and up to 50% reduction for hybrid vehicles (tank-to-wheel consideration based on WLTP(1)). In addition, the division’s proprietary Active Connect Technology can generate CO2 savings of more than 5% compared to traditional all-wheel-drivetrain technologies.

See page 62 of our ESG report for further details

(1) Worldwide harmonized light weight vehicles test procedure is a global, harmonized standard for determining the levels of pollutants, CO2 emissions and fuel consumption of traditional and hybrid cars, as well as the range of fully electric vehicles.

Nortek Global HVAC Statepoint Technology

Nortek Global HVAC’s StatePoint Technology© reduces the carbon and water footprint associated with cooling and maintenance of data centres, which are power and water intensive processes. This is saving clients, including a global technology company, up to 20% in energy consumption and up to 90% in water usage.

See page 62 of our ESG report for further details

Purposefully engage with key stakeholders to better understand and deliver on their expectations

At each stage of our "Buy, Improve, Sell" strategy we seek to engage in constructive dialogue with stakeholders as appropriate to gather a holistic understanding of their key expectations and concerns.

Our key stakeholder groups include shareholders, governments and regulators, employees, customers, suppliers, corporate governance agencies, and the communities in which we operate. Our open and transparent approach is crucial in supporting our acquisition strategy, directing our improvement plans, and supporting our businesses' implementation of those plans, to deliver better collecting outcomes for stakeholders.

Zumaia Plant 5

£1bn to the pension funds

£150 million initially contributed by Melrose to fund the two inherited underfunded GKN pension schemes within the first year of ownership

Doubling pension contributions

£60 million continuous annual funding commitment after year one, doubling existing annual contributions

More secure funding targets

enhancing the long-term viability of the GKN pension schemes meeting their obligations, by setting funding targets of Gilts +75bps for the 2012 scheme and Gilts +25bps for the 2016 scheme

Independent stewardship

appointment of the schemes’ first independent Chairman, to ensure robust oversight and accountability

For our businesses to outperform their potential they require a strong and capable workforce. Employees within the Group are therefore key strategic stakeholders and the Board firmly believes that their wellbeing is central to the long-term sustainability and prosperity of our businesses. The Board seeks to ensure that it is informed of employee interests when making strategic decisions, whilst recognising that each business pursues bespoke talent management and development objectives that are appropriate to their respective workforce dynamics.

The Group operates a workforce advisory panel comprising the Chief Human Resources Officer (or equivalent) from each business unit, and a member of the Melrose senior management team.

See page 63 of our ESG report for further details

Melrose encourages and supports its businesses to engage with customers and suppliers on an ongoing basis, with a view to:

  • realise technological breakthroughs and innovative collaborations to enhance market and product leadership, and safety excellence;
  • enable them to deliver products in line with customer expectations and help customers achieve their environmental and safety objectives; and
  • ensure efficient sourcing of key goods and services to safeguard stability for the collective benefit of stakeholders within our businesses’ value chains.

See page 63 of our ESG report for further details

In addition to our annual programme of key information publications and engagement initiatives including the annual general meeting, extraordinary general meetings on specific material items, publication of full and half year results, and this Annual Report, the Board and the Melrose senior management team meet and communicate with shareholders on a frequent and proactive basis throughout the year.

These efforts include face-to-face investor roadshows in the UK and the US at least once a year, trading updates, capital markets presentation days as appropriate to provide key shareholders, analysts and their representatives with direct access to the Directors and the opportunity to engage directly with the executive management teams of our largest businesses during key points in their improvement cycle, and, where requested, open agenda meetings for key shareholders attended by the Chairman.

In 2019 the Board hosted a capital markets day for institutional investors and financial analysts in London. The event included presentations from the CEOs of the Group’s two largest divisions, GKN Aerospace and GKN Automotive, containing updates on key financial information. This also allowed shareholders to hear directly from the businesses on their progress with the Company’s investment strategy.

The Melrose investor relations function schedules further bespoke interactions between investors, analysts and members of management on a regular basis. Similarly, throughout the year the Group company secretariat engages with the responsible stewardship and sustainability representatives of key investors and corporate governance agencies, including direct discussions with members of the Board.

See page 63 of our ESG report and our section 172 statement for further details

We are very proud of our track record in improving the funding of pension schemes under our stewardship. We were proactive, transparent and constructive in agreeing commitments with pension trustees during the acquisition of GKN to provide comfort that the improvements we had planned for the businesses included greater security for their members. We continue to deliver on our promises, increasing the prudence of their funding targets, while over £240 million of cash contributions so far have helped to significantly improve the funding position.

This improvement in funding has been matched by structural enhancements. In line with plans agreed with the trustees, we have rebalanced the pension liabilities more evenly across the supporting businesses. Stronger, better funded and more secure GKN pension schemes are the latest example in our good track record for responsible stewardship.

See page 7 of our Annual Report and page 64 of our ESG report for further details.

Prioritise and nurture the wellbeing and skills development of employees and the communities that they are part of

The Group recognises the increasing importance of taking a holistic approach to employee wellness, to protect their physical health and social wellbeing, and to foster a positive workplace culture that attracts and retains a highly-skilled workforce.

Our businesses also promote the social wellbeing of employees by encouraging them to actively contribute to a range of charitable and community projects.

GKN-Aerospace_Winglet-Inspection.jpg

£593m pension contributions

to our businesses’ pension schemes since 2003

£1m raised for charity

in cash donations and raised funds for charitable causes across the Group

Promoting gender diversity

30% and 33% of the Board and Melrose Executive Committee respectively are women

Providing 200+ apprenticeships

across our GKN Aerospace, GKN Automotive and GKN Powder Metallurgy divisions in 2019

In total, our businesses made cash donations and raised funds for charitable causes in 2019 of over £1 million:

  • GKN Aerospace continued to support the Aerospace Bristol museum and learning centre with an annual donation of £100,000. The charity seeks to inspire current and future generations through stories and achievements of the local aerospace industry and to advance learning, skills and training, particularly in science, technology, engineering and design.
  • GKN Automotive continued to support a village school in India that is home to underprivileged children, and this year constructed new bathrooms for the children.
  • GKN Powder Metallurgy contributed over £321,000 to charitable causes. In the US, employees are actively involved in the Hearts of Gold community programme, volunteering their time and expertise, participating in sponsored runs and relays and raising funds for much needed causes.

See page 65 of our ESG report for further details

Melrose recognises the importance of diversity in delivering better business performance and building a high-calibre workforce, as well as good labour relations, employee engagement and people development. Melrose champions diversity in the broadest sense, be that along geographical, cultural, personal or market lines, encompassing gender, race, sexual orientation and disability. Whilst remaining a meritocracy, Melrose is actively engaged in finding ways to increase the diversity across the Group, and the sectors in which it operates.

Gender Diversity within the Group

See page 66 of our ESG report for further details

Through the Melrose Skills Fund, Melrose is working on a diversity project to help improve diversity within the engineering sector as a whole. This project is being led by Enginuity (formerly known as Semta), a not-for-profit organisation that leads on several initiatives to support the engineering and manufacturing sectors, and also involves Unite. The aim of this project is to conduct research into identifying barriers that are hindering socio-economic and ethnic diversity within the engineering sector, with a view to supporting projects and potentially providing bursaries to help increase diversity based on these findings. A meeting of the project steering committee, which consists of Melrose, Enginuity and Unite, was held in January 2020 to discuss the findings of the initial report, which will inform the development of short, medium and long-term actions that can be undertaken to increase diversity in the sector.

See page 66 of our ESG report for further details

At a business unit level, GKN Aerospace has launched the inaugural ‘Inspired Women’s Leadership Development Programme’ with the professional training and coaching company Forward Ladies, designed to help women in the organisation succeed and to encourage women to mentor other female colleagues in the business.  The programme saw 35 female leaders globally from across the division come together to hear industry-leading speakers and to share their own learning, resources and insights relevant to their roles and careers. GKN Aerospace was also pleased to strengthen its executive committee with two new female appointments in 2019.

See page 66 of our ESG report for further details

The GKN acquisition demonstrated Melrose’s long-standing belief in building industrial excellence, and investing in underperforming businesses to unlock and promote their long-term prosperity for the collective benefit of stakeholders, including the next generation of engineers. We identified a strong need to develop the human capital required to transform GKN into a stronger engineering and manufacturing powerhouse and responded with a pledge to invest £10 million over five years to further this cause. From the creation of STEM programmes, apprenticeships and degrees, to investment in manufacturing hubs, digital skills, and employee development, Melrose is equipping the UK with the future skills it needs.

The GKN Aerospace, GKN Automotive and Brush businesses have implemented initiatives with the financial support of the Melrose Skills Fund. In 2019, GKN Aerospace deployed funding to develop a comprehensive programme of training materials and digital learning modules to upskill its teams. So far workers across different disciplines have benefited from training relating to all manner of topics, from root cause corrective actions, through geometric design to robotic language programming. GKN Automotive has capitalised on funding to further the aims of its Innovation Centre’s Engineering Skills Development Programme which seeks to develop high-calibre engineering talent and engage and develop existing staff in the UK. In 2019, 442 people took part in GKN Automotive-led STEM activities and the business recruited apprentices and sponsored a PhD position.

Melrose is also working on a diversity project which is supported by the Melrose Skills Fund with the aim of increasing socio-economic and ethnic diversity within the engineering sector. This project is being led by Enginuity and also involves Unite.

Exercise robust governance, risk management, and compliance

Sound business ethics and integrity are core to the Group's values and are fundamental for the success of our strategy.

This robust framework is supported by an independent internal audit function, regular public disclosure and financial reporting, external audits, and public accountability and conference with leading benchmarks set by the UK Corporate Governance Code, investor requests, corporate governance advisors' recommendations, and extensive engagement with the Group's wider stakeholder base to ensure best market practice.

brush_2.jpg

Section 172 statement

We are committed to ensuring that our businesses achieve the highest standards of product quality, reliability and safety, in recognition of their importance in protecting the wellbeing of ultimate end-users, and futureproofing each business and its ability to deliver profitable long-term performance. Each division follows strict product design and development procedures to ensure precise delivery to customer specification, and to seek opportunities to enhance quality and safety performance. This is especially critical in the highly regulated aerospace and automotive sectors, demonstrating the high standards that the Group is held to.

See page 68 of our ESG report for further details

We recognise the potential risks of human rights abuses and modern slavery, as well as the environmental impacts inherent to global, complex, multi-tier supply chains. We are committed to acting in an ethical manner with integrity and transparency in all business dealings, and to creating effective systems and controls across the Group to safeguard against adverse human rights and environmental impacts. The Group has also taken steps to encourage business divisions to implement effective and proportionate measures to ensure that there are no forms of modern slavery in their operations or supply chain.

See page 69 of our ESG report for further details

Melrose welcomes the evolving focus and clarity on ESG matters as another opportunity to demonstrate how we build better, stronger businesses for the collective benefit of stakeholders whilst producing excellent returns for shareholders.

The Melrose ESG improvement model is founded upon the following key objectives and principles: 

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

You will see that we have produced our first standalone ESG report as part of our 2019 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.

Download the Section 172 Statement

Respect and protect the environment

We are believers in the potential of industry to help solve society’s most pressing needs.

We buy high-quality but underperforming industrial businesses, with established positions in their markets. By investing heavily in research and development, we enable our businesses to develop and provide the innovative and cost-effective solutions that their customers need to help tackle underlying causes of climate change.

(1) See Table 2 on page 60 of the 2019 Annual Report
(2) See Table 1 on page 60 of the 2019 Annual Report

 

GKN WINTERTEST2020 157V2

Reducing fuel combustion

30% reduction in combustion of fuel & operation of facilities (scope 1)(1) across GKN compared to 2017, on a like-for-like basis

Reducing emissions

23% reduction in emissions reported normalised to tonnes per £1,000 turnover(2)  across the non-GKN divisions compared to 2018

25% reduction

in total purchased electricity (scope 2) across the nonGKN divisions compared to 2018, on a like-for-like basis

We recognise that climate change may have significant implications on the long-term successes of our businesses. We seek to set a positive example for our businesses to follow and we invest in and encourage them to improve their operations and market offerings in a direction that minimises their impact on climate change, and makes them less vulnerable to climate-related risks.

We are true believers in industry, and in the potential of industry, to help solve society’s most pressing needs. We buy high-quality but underperforming industrial businesses, with established positions in their markets. By investing heavily in research and development, we enable our businesses to develop and provide the innovative and cost-effective solutions that their customers need to help tackle underlying causes of climate change.

Efficiency in this area is a material concern for nearly all manufacturing industries, and our businesses are no exception. We therefore support and invest in them to accelerate their efforts to reduce their carbon footprint by, where economically appropriate, taking measures to improve their energy, water and material efficiency by seeking viable, lower-impact, and increasingly lower-cost, renewable energy sources. These actions not only make good long-term business sense, but also respond directly to the expectations set by governments, and the emerging realities of the markets in which our businesses operate.

We are already taking active steps to anticipate how climate change will affect our businesses, and to encourage firm progress from our businesses in respect of positive climate action. We will continue to strengthen our understanding of the specific climate-related risks our businesses face as we work to mitigate these risks.

Melrose sets a positive example, and enables and empowers its businesses to follow. Whilst the central Melrose carbon footprint is relatively limited, we nevertheless offset the emissions that we do generate. The Melrose corporate offices have attained the CarbonNeutral® company certification for 2019 and 2020 through a combination of internal energy efficiency initiatives and financing high-quality, high-impact emission reduction projects in accordance with The CarbonNeutral Protocol(1). The Melrose corporate office in the US has also achieved the HinesGo (Green Office) designation in recognition of its sustainability practices and energy efficiency performance, among other environmental and wellbeing criteria.

We believe that improving operational efficiency is one of two key factors that shape the long-term profitability and sustainability of our businesses, and enables their compliance with increasing environmental standards and regulation. The other key factor is cultivating the technical and innovation capabilities and foresight to provide effective solutions to the emerging ESG challenges that their customers face, including combatting climate change.

See page 59 of our ESG report for further details

(1) Source: https://carbonneutral.com/the-carbonneutral-protocol

Reducing Operational Environmental Impacts Of Our Businesses

Our businesses are charged with identifying, monitoring and managing the environmental risks that affect their operating and market environments. With Melrose support, each Group business invests in and implements appropriate systems and processes to manage their impact on the environment, and continually reviews these in line with evolving expected practices. For example, at the end of 2019, over three quarters of the manufacturing facilities across our businesses had chosen to be certified or compliant with the ISO 14001:2015 Environment Management Standard.

Business units also monitor their environmental progress and plan for continuous improvements in ways that are suitably tailored to their activities, in areas such as energy consumption, GHG emissions, water consumption, water disposal quality, waste generation, recycling and disposal, and volatile organic compound emissions. 

In 2019, our businesses continued to invest in operational improvements with direct environmental benefits such as improved energy and/or water efficiency, reduced waste or pollution prevention.

Please see pages 60-62 of the 2019 ESG Report for reporting on the Group’s energy and GHG emissions, energy efficiency initiatives in production and manufacturing, water and waste consumption and water and waste prevention initiatives in 2019.

We recognise the opportunities that the transition to a net-zero emissions economy present, and our businesses are well positioned to help their customers tackle pressing environmental challenges such as climate change, and to meet emerging regulatory requirements and wider environmental expectations. Our businesses work closely with their customers and world-class research institutions to develop market-leading, cost-effective innovations, that deliver the solutions their markets need. In 2019, our businesses actively invested in developing products that help their customers improve energy efficiency and reduce GHG emissions, water consumption and waste generation, in their operations or during the use of their products.

See page 62 of our ESG report for further details

Aerospace Wing Of Tomorrow

Through its Global Technology Centre in Bristol, UK, GKN Aerospace manufactured the first composite components for the Airbus Wing of Tomorrow research programme, representing a step change in the aerospace industry. The new Fixed Trailing Edge for the Airbus A350 XWB, is lighter and stronger than its metallic equivalent and can achieve up to 20% fuel efficiency per passenger kilometre.

See page 62 of our ESG report for further details

Automotive Edrive Systems

GKN Automotive continues to actively contribute towards low-carbon green transportation solutions. Its P4 e-Drive systems can lead to 100% CO2 reduction for battery electric vehicles, and up to 50% reduction for hybrid vehicles (tank-to-wheel consideration based on WLTP(1)). In addition, the division’s proprietary Active Connect Technology can generate CO2 savings of more than 5% compared to traditional all-wheel-drivetrain technologies.

See page 62 of our ESG report for further details

(1) Worldwide harmonized light weight vehicles test procedure is a global, harmonized standard for determining the levels of pollutants, CO2 emissions and fuel consumption of traditional and hybrid cars, as well as the range of fully electric vehicles.

Nortek Global HVAC Statepoint Technology

Nortek Global HVAC’s StatePoint Technology© reduces the carbon and water footprint associated with cooling and maintenance of data centres, which are power and water intensive processes. This is saving clients, including a global technology company, up to 20% in energy consumption and up to 90% in water usage.

See page 62 of our ESG report for further details

Purposefully engage with key stakeholders to better understand and deliver on their expectations

At each stage of our "Buy, Improve, Sell" strategy we seek to engage in constructive dialogue with stakeholders as appropriate to gather a holistic understanding of their key expectations and concerns.

Our key stakeholder groups include shareholders, governments and regulators, employees, customers, suppliers, corporate governance agencies, and the communities in which we operate. Our open and transparent approach is crucial in supporting our acquisition strategy, directing our improvement plans, and supporting our businesses' implementation of those plans, to deliver better collecting outcomes for stakeholders.

Zumaia Plant 5

£1bn to the pension funds

£150 million initially contributed by Melrose to fund the two inherited underfunded GKN pension schemes within the first year of ownership

Doubling pension contributions

£60 million continuous annual funding commitment after year one, doubling existing annual contributions

More secure funding targets

enhancing the long-term viability of the GKN pension schemes meeting their obligations, by setting funding targets of Gilts +75bps for the 2012 scheme and Gilts +25bps for the 2016 scheme

Independent stewardship

appointment of the schemes’ first independent Chairman, to ensure robust oversight and accountability

For our businesses to outperform their potential they require a strong and capable workforce. Employees within the Group are therefore key strategic stakeholders and the Board firmly believes that their wellbeing is central to the long-term sustainability and prosperity of our businesses. The Board seeks to ensure that it is informed of employee interests when making strategic decisions, whilst recognising that each business pursues bespoke talent management and development objectives that are appropriate to their respective workforce dynamics.

The Group operates a workforce advisory panel comprising the Chief Human Resources Officer (or equivalent) from each business unit, and a member of the Melrose senior management team.

See page 63 of our ESG report for further details

Melrose encourages and supports its businesses to engage with customers and suppliers on an ongoing basis, with a view to:

  • realise technological breakthroughs and innovative collaborations to enhance market and product leadership, and safety excellence;
  • enable them to deliver products in line with customer expectations and help customers achieve their environmental and safety objectives; and
  • ensure efficient sourcing of key goods and services to safeguard stability for the collective benefit of stakeholders within our businesses’ value chains.

See page 63 of our ESG report for further details

In addition to our annual programme of key information publications and engagement initiatives including the annual general meeting, extraordinary general meetings on specific material items, publication of full and half year results, and this Annual Report, the Board and the Melrose senior management team meet and communicate with shareholders on a frequent and proactive basis throughout the year.

These efforts include face-to-face investor roadshows in the UK and the US at least once a year, trading updates, capital markets presentation days as appropriate to provide key shareholders, analysts and their representatives with direct access to the Directors and the opportunity to engage directly with the executive management teams of our largest businesses during key points in their improvement cycle, and, where requested, open agenda meetings for key shareholders attended by the Chairman.

In 2019 the Board hosted a capital markets day for institutional investors and financial analysts in London. The event included presentations from the CEOs of the Group’s two largest divisions, GKN Aerospace and GKN Automotive, containing updates on key financial information. This also allowed shareholders to hear directly from the businesses on their progress with the Company’s investment strategy.

The Melrose investor relations function schedules further bespoke interactions between investors, analysts and members of management on a regular basis. Similarly, throughout the year the Group company secretariat engages with the responsible stewardship and sustainability representatives of key investors and corporate governance agencies, including direct discussions with members of the Board.

See page 63 of our ESG report and our section 172 statement for further details

We are very proud of our track record in improving the funding of pension schemes under our stewardship. We were proactive, transparent and constructive in agreeing commitments with pension trustees during the acquisition of GKN to provide comfort that the improvements we had planned for the businesses included greater security for their members. We continue to deliver on our promises, increasing the prudence of their funding targets, while over £240 million of cash contributions so far have helped to significantly improve the funding position.

This improvement in funding has been matched by structural enhancements. In line with plans agreed with the trustees, we have rebalanced the pension liabilities more evenly across the supporting businesses. Stronger, better funded and more secure GKN pension schemes are the latest example in our good track record for responsible stewardship.

See page 7 of our Annual Report and page 64 of our ESG report for further details.

Prioritise and nurture the wellbeing and skills development of employees and the communities that they are part of

The Group recognises the increasing importance of taking a holistic approach to employee wellness, to protect their physical health and social wellbeing, and to foster a positive workplace culture that attracts and retains a highly-skilled workforce.

Our businesses also promote the social wellbeing of employees by encouraging them to actively contribute to a range of charitable and community projects.

GKN-Aerospace_Winglet-Inspection.jpg

£593m pension contributions

to our businesses’ pension schemes since 2003

£1m raised for charity

in cash donations and raised funds for charitable causes across the Group

Promoting gender diversity

30% and 33% of the Board and Melrose Executive Committee respectively are women

Providing 200+ apprenticeships

across our GKN Aerospace, GKN Automotive and GKN Powder Metallurgy divisions in 2019

In total, our businesses made cash donations and raised funds for charitable causes in 2019 of over £1 million:

  • GKN Aerospace continued to support the Aerospace Bristol museum and learning centre with an annual donation of £100,000. The charity seeks to inspire current and future generations through stories and achievements of the local aerospace industry and to advance learning, skills and training, particularly in science, technology, engineering and design.
  • GKN Automotive continued to support a village school in India that is home to underprivileged children, and this year constructed new bathrooms for the children.
  • GKN Powder Metallurgy contributed over £321,000 to charitable causes. In the US, employees are actively involved in the Hearts of Gold community programme, volunteering their time and expertise, participating in sponsored runs and relays and raising funds for much needed causes.

See page 65 of our ESG report for further details

Melrose recognises the importance of diversity in delivering better business performance and building a high-calibre workforce, as well as good labour relations, employee engagement and people development. Melrose champions diversity in the broadest sense, be that along geographical, cultural, personal or market lines, encompassing gender, race, sexual orientation and disability. Whilst remaining a meritocracy, Melrose is actively engaged in finding ways to increase the diversity across the Group, and the sectors in which it operates.

Gender Diversity within the Group

See page 66 of our ESG report for further details

Through the Melrose Skills Fund, Melrose is working on a diversity project to help improve diversity within the engineering sector as a whole. This project is being led by Enginuity (formerly known as Semta), a not-for-profit organisation that leads on several initiatives to support the engineering and manufacturing sectors, and also involves Unite. The aim of this project is to conduct research into identifying barriers that are hindering socio-economic and ethnic diversity within the engineering sector, with a view to supporting projects and potentially providing bursaries to help increase diversity based on these findings. A meeting of the project steering committee, which consists of Melrose, Enginuity and Unite, was held in January 2020 to discuss the findings of the initial report, which will inform the development of short, medium and long-term actions that can be undertaken to increase diversity in the sector.

See page 66 of our ESG report for further details

At a business unit level, GKN Aerospace has launched the inaugural ‘Inspired Women’s Leadership Development Programme’ with the professional training and coaching company Forward Ladies, designed to help women in the organisation succeed and to encourage women to mentor other female colleagues in the business.  The programme saw 35 female leaders globally from across the division come together to hear industry-leading speakers and to share their own learning, resources and insights relevant to their roles and careers. GKN Aerospace was also pleased to strengthen its executive committee with two new female appointments in 2019.

See page 66 of our ESG report for further details

The GKN acquisition demonstrated Melrose’s long-standing belief in building industrial excellence, and investing in underperforming businesses to unlock and promote their long-term prosperity for the collective benefit of stakeholders, including the next generation of engineers. We identified a strong need to develop the human capital required to transform GKN into a stronger engineering and manufacturing powerhouse and responded with a pledge to invest £10 million over five years to further this cause. From the creation of STEM programmes, apprenticeships and degrees, to investment in manufacturing hubs, digital skills, and employee development, Melrose is equipping the UK with the future skills it needs.

The GKN Aerospace, GKN Automotive and Brush businesses have implemented initiatives with the financial support of the Melrose Skills Fund. In 2019, GKN Aerospace deployed funding to develop a comprehensive programme of training materials and digital learning modules to upskill its teams. So far workers across different disciplines have benefited from training relating to all manner of topics, from root cause corrective actions, through geometric design to robotic language programming. GKN Automotive has capitalised on funding to further the aims of its Innovation Centre’s Engineering Skills Development Programme which seeks to develop high-calibre engineering talent and engage and develop existing staff in the UK. In 2019, 442 people took part in GKN Automotive-led STEM activities and the business recruited apprentices and sponsored a PhD position.

Melrose is also working on a diversity project which is supported by the Melrose Skills Fund with the aim of increasing socio-economic and ethnic diversity within the engineering sector. This project is being led by Enginuity and also involves Unite.

Exercise robust governance, risk management, and compliance

Sound business ethics and integrity are core to the Group's values and are fundamental for the success of our strategy.

This robust framework is supported by an independent internal audit function, regular public disclosure and financial reporting, external audits, and public accountability and conference with leading benchmarks set by the UK Corporate Governance Code, investor requests, corporate governance advisors' recommendations, and extensive engagement with the Group's wider stakeholder base to ensure best market practice.

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Section 172 statement

We are committed to ensuring that our businesses achieve the highest standards of product quality, reliability and safety, in recognition of their importance in protecting the wellbeing of ultimate end-users, and futureproofing each business and its ability to deliver profitable long-term performance. Each division follows strict product design and development procedures to ensure precise delivery to customer specification, and to seek opportunities to enhance quality and safety performance. This is especially critical in the highly regulated aerospace and automotive sectors, demonstrating the high standards that the Group is held to.

See page 68 of our ESG report for further details

We recognise the potential risks of human rights abuses and modern slavery, as well as the environmental impacts inherent to global, complex, multi-tier supply chains. We are committed to acting in an ethical manner with integrity and transparency in all business dealings, and to creating effective systems and controls across the Group to safeguard against adverse human rights and environmental impacts. The Group has also taken steps to encourage business divisions to implement effective and proportionate measures to ensure that there are no forms of modern slavery in their operations or supply chain.

See page 69 of our ESG report for further details