Chairman’s Statement

A focus on sustainability

Improving the sustainability performance of our businesses is central to our “Buy, Improve, Sell” strategy. We acquire good manufacturing businesses that are underperforming their potential from a financial, operational, and sustainability perspective. We then invest heavily to improve their longer-term financial and operational performance in a sustainable manner, before identifying suitable new owners who will take them to the next stage of their development, generating significant value for our shareholders.

Inherent in the nature of the manufacturing businesses we acquire is that they often operate in the industries that are some of the most difficult to decarbonise. We provide the focus and investment that these businesses need to deliver significant financial returns and sustainability improvements for the benefit of our stakeholders. We work with our businesses to set meaningful sustainability targets, alongside financial metrics, and we provide the investment to achieve them. We set a positive example for our businesses and provide them with a platform to share Group best practices and accelerate the pace of change within their organisations.

By the very nature of our ”Buy, Improve, Sell” strategy, our Group sustainability performance and ratings will fluctuate during our investment cycle as we acquire new businesses in need of improvement, and sell businesses that we have improved. Following their improvement under our ownership, we aim to have added value to our businesses for the benefit of our stakeholders

We redirect and refocus our businesses on helping their customers and key stakeholders tackle pressing climate change challenges in pursuit of transitioning to a zero emissions economy by 2050. With our investment and oversight, we drive our businesses to work closely with their customers to develop and deliver innovative product solutions that directly address society’s most complex longer-term sustainability challenges.

Our improvement efforts are supported by a foundation of robust governance, risk management and compliance. We implement these foundational principles within every business that we acquire, to ensure they act with the highest standards of integrity, honesty, and transparency in all areas, and we require our businesses to demand the same of their supply chain. We also spend time listening to our key stakeholders so we can make more informed strategic decisions and deliver on their needs.

We and our businesses prioritise and nurture the wellbeing and skills development of employees and the communities that they are part of. We prioritise our role as a responsible corporate citizen by driving innovation and implementing measures to reduce the future negative impact of our businesses’ operations on society and the planet, to meet the global goal of net zero emissions by 2050.

Progress in 2020

In 2020 we delivered significant progress against our four overarching sustainability principles. Despite the disruption caused by the COVID-19 pandemic, during 2020 our businesses continued to excel in cultivating the technical and innovation capabilities required to provide effective solutions to the emerging sustainability challenges that we and our businesses’ customers face. We are already taking active steps to anticipate how climate change will affect our businesses, and our businesses are investing in sustainable product development that will help their customers achieve their sustainability goals. Highlights in 2020 include the launch of a ground-breaking hydrogen propulsion project led by GKN Aerospace, which aims to deliver zero CO2 emissions hydrogen-powered aircraft in the skies as early as 2026; and GKN Automotive’s continued market leadership in developing highly efficient All-Wheel-Drive (AWD) and eDrive systems that enable customers to improve fuel efficiency and reduce their carbon emissions. Across the Group, we took further steps to implement a more comprehensive sustainability framework to support the execution of our ”Buy, Improve, Sell” strategy. We refined our Group sustainability objectives and strengthened our controls across the Group to enhance the implementation of our four overarching sustainability principles within each of our businesses. This included the development of a formal sustainability framework, which covered:

  • Completion of a materiality assessment;
  • Alignment to the UN Sustainable Development Goals (UN SDGs);
  • Establishment of a Group internal sustainability reporting and performance function to support our businesses;
  • Implementation of a refreshed Melrose Code of Ethics, applicable to all of our businesses;
  • Refreshing our Group compliance policies to reflect the legal, policy and regulatory frameworks within which our businesses operate, and the introduction of additional policies where required, to continually strengthen our businesses’ compliance protocols, which this year included the introduction of a Groupwide Conflict Minerals Policy.

Actions for 2021

In executing our ”Buy, Improve, Sell” strategy and effecting continuous, long-term improvement within our businesses, we recognise that our work is far from complete. We are committed to continuing to improve the contribution that our businesses make to sustainable development, and to develop our sustainability framework further. Our plans for 2021 include:

  • Developing a multi-year sustainability action plan to embed sustainable performance targets within the Group which reflect our ‘Buy, Improve and Sell’ strategy and our three to five year investment cycle. We will disclose these performance targets in due course;
  • Further developing our sustainability management and governance structure, including our internal sustainability reporting capabilities and information capture across our businesses;
  • Commencing the process of reporting our sustainability performance under SASB standards;
  • Making our inaugural CDP submission;
  • Publishing an assessment of how we are mitigating climate change risks in line with the recommendations of the Taskforce on Climate related Financial Disclosures (TCFD); and
  • Setting targets in line with the selected UN SDGs that measure the contribution of our businesses to those goals.

Much of this work is already underway and we look forward to continuing to accelerate our progress during 2021.

Further reading

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Sustainable improvement

We have continued to embed our four Melrose sustainability principles within our businesses.

UN Goals 370X405 V2 (3)

UN SDGs

Commitment to playing our part