A focus on sustainability
Melrose was founded in 2003 to empower businesses to unlock their full potential for the collective benefit of stakeholders, whilst providing shareholders with a superior return on their investment. This has been delivered through Melrose’s “Buy, Improve, Sell” strategy, which means we buy good quality manufacturing businesses that are underperforming their potential and then invest heavily to improve performance and productivity as they become stronger, better businesses under our stewardship. At the appropriate time, we then find them good owners for the next stage of their development and return the proceeds to shareholders.
We firmly believe that a focus on sustainability is the right thing to do, integral to our “Buy, Improve, Sell” model, and a central enabler of industrial success.
This year, I am pleased to report that we have set and implemented our inaugural Group sustainability targets and commitments, aligned to the UN Sustainability Development Goals and the sustainability issues that are most material to our businesses and key stakeholders.
Our Group targets are aligned to our materiality analysis, including short, medium and long-term objectives for the reduction of Greenhouse gas emissions, transition to renewable electricity, and reduction in waste that will help drive a transformation in the sustainability of their own production.
The Melrose centre is small with a tiny carbon footprint, which we nonetheless offset. Under our decentralised model, the primary focus is on our businesses, many of which operate in industries where achieving meaningful progress towards decarbonisation remains a tough global challenge. Through our active investment in operational excellence and innovative research and development we continue to drive our businesses to directly address society’s most complex longer-term sustainability challenges as we transition to a net zero economy before 2050. We provide our businesses with the strategic focus and investment to enable them to mitigate the Group’s impact on the environment, and to develop and deliver innovative product solutions and processes to help their customers and key stakeholders decarbonise some of the hardest to abate sectors of the global economy. Notable examples of this during 2021 include GKN Automotive’s position at the heart of the electric vehicle transition, and Melrose’s investment in the establishment of the hydrogen economy through the UK hydrogen production start-up HiiROC and the hydrogen storage business GKN Hydrogen. Further, GKN Aerospace is at the forefront of the development of technologies to achieve zero emissions aviation with projects like the hydrogen propulsion system H2GEAR, or electric aircraft currently in testing phases like Eviation Alice, Joby and Vertical.
Investment in people is a key driver of commercial success throughout the Group, underpinned by employee engagement and a firmly integrated culture of employee development, diversity and inclusion. By providing a safe working environment, encouraging diversity and inclusion at all levels, and ensuring all our employees have access to training and career development opportunities, we will continue to attract and retain the best talent. However, we do not shy away from making the difficult decisions that are necessary to build better, stronger businesses to unlock their full potential, which we recognise can impact certain stakeholders and their wider business communities. To be well placed to navigate those tough decisions when they arise and ensure strong engagement with our businesses and their key stakeholders, our Workforce Advisory Panel provides an important, ongoing forum for direct engagement and consultation between the workforce and our businesses’ executive teams.
Our efforts to improve our businesses are supported by a foundation of robust governance, risk management and compliance. We instil the highest standards of integrity, honesty, and transparency within the businesses we acquire, and we require them to demand the same of their supply chains. Responsibility for Group sustainability matters, including the setting of our Group sustainability targets, ultimate oversight of Group sustainability risk, and the setting of all our Group policies, sits with the Board with support from the Melrose senior management team, and in the case of risk management, the Audit Committee. The Board is regularly updated, at least quarterly, on key climate and sustainabilityrelated risks and opportunities.
We see environmental, social and governance priorities as an important part of our “Buy, Improve, Sell” strategy. We see no reason why these improvements cannot be implemented whilst improving returns for our shareholders. It is a journey and there remains plenty of improvement for us to deliver, but it has been nonetheless pleasing to see our improvement to date being recognised by several of the key benchmarking agencies, including MSCI who have given us an “A” rating, and Sustainalytics who have placed us in the top quartile of our peers.
Our inaugural standalone Sustainability Report is published alongside our 2021 Annual Report, which I refer you to for further details.
3 April 2022