Environmental Leadership
01 IMPROVE SELL
Respect and protect the environment
Our objectives
- Drive divisional management teams to improve their operational, resource and energy efficiency to minimise the impact of their businesses’ operations on the environment, including Greenhouse gas emissions, waste disposal, and water usage.
UN SDG
Environmental performance in 2021
Melrose’s sustainability objectives in this area are to respect and protect the environment, and to continue to invest in and support our businesses as they develop products and services aligned with a net zero future.
We are believers in industry and its potential to help solve society’s most pressing needs. We buy high-quality but underperforming industrial businesses, with established positions in markets that are often among the most difficult to decarbonise.
Melrose approaches its environmental strategy from two perspectives. Firstly, addressing its own emissions, both at a Group level and within each of the businesses that it owns, through the introduction of targets and providing support and targeted investment to the businesses. Secondly, by helping our businesses’ customers to address their emissions and to contribute to the decarbonisation of their respective industries.
We recognise the serious threat posed by climate change and the urgent need for meaningful action. The manufacturing businesses that we acquire often operate in the industries that are some of the most difficult to decarbonise. We invest in and encourage our businesses to improve their operations and market offerings to minimise their impact on climate change and make them less vulnerable to climate-related risks, while safeguarding their long-term commercial success. We aim to effect meaningful change and improvement within our businesses during our ownership period. By setting a strong focus on sustainability improvement within each business we acquire, we want our businesses to continue their trajectory even after our ownership period.
Improving the sustainability performance of our businesses whilst helping their customers and key stakeholders tackle pressing climate challenges is at the core of Melrose’s “Improve” strategy. Through a combination of investment in our own operations, strategic UN Goal oversight and ground-breaking research and development, we and our businesses are directly addressing society’s most complex longer-term sustainability challenges. By developing and delivering innovative product solutions and processes, we are supporting the transition towards a net zero economy before 2050.
While under our ownership, we enable and support fast and sustainable operational improvement through targeted investment, helping to shape the long-term profitability and sustainability of our businesses. Our ambition is to achieve net zero Greenhouse gas (“GHG”) emissions in our Group’s operations before 2050 in line with the UK Government’s target, and in order to achieve the goals of the Paris Agreement. To meet this goal, each of our businesses have agreed and implemented sustainability targets and commitments aligned with our Group sustainability targets, which are aligned to the UN Sustainability Development Goals (“UN SDGs”) and the sustainability issues that are most material to our key stakeholders.
In 2021, the Group achieved reductions in total absolute Scope 1 and Scope 2 GHG emissions (-14%), energy and consumption (-6%) and water withdrawal (-8%). The Group also reported some Scope 3 emissions for the first time. Despite these absolute reductions, there were increases in the Company’s chosen intensity ratios, as shown on pages 52 to 53 of our Sustainability Report Annex. This is reflective of the fact that Nortek Air Management, Brush and Nortek Control, which were disposed of during the period (and therefore are not included from both an emissions and a revenue perspective for 2021), had less resource-intense operations than the Group’s remaining businesses, as well as Nortek Air Management’s revenues being less impacted in 2021 than the GKN businesses in particular.
Melrose sets a positive example and enables and empowers its businesses to follow its lead. Although the central Melrose carbon footprint is relatively limited, we offset the emissions that we generate. The Melrose corporate offices have attained the CarbonNeutral® company certification for 2019, 2020 and 2021 through a combination of internal energy efficiency initiatives and financing high-quality, high-impact emissions reduction projects in accordance with The CarbonNeutral Protocol(4). The Melrose corporate office in the US also has the HinesGo (Green Office) designation in recognition of its sustainability practices and energy efficiency performance, among other environmental and wellbeing criteria.
In 2021, we developed our Group Environmental policy to demonstrate our commitment towards driving sustainable production methods and infrastructure, and minimising the potential negative impact that our businesses may have on the environment over the longer term. The policy, which applies to all individuals working across our businesses and has been approved by the Board, can be found on our policies page. Our Conflict Minerals policy, which sets out the expectations of Melrose and its business units towards their suppliers with regards to conflict minerals can also be found on our policies page.
-14%
Scope 1 and Scope 2 GHG emissions in 2021
Employee engagement
Melrose Skills Fund
Melrose Skills Fund
The Melrose Skills Fund was launched in 2019 to provide the financing to develop the capabilities required to build the UK’s industrial base, and is utilised by our GKN Aerospace, GKN Automotive and Brush.
With a commitment to invest £10 million over five years through the creation of STEM programmes, apprenticeships and degrees to invest in manufacturing hubs, digital skills, and employee development, Melrose is helping to equip the UK with the future skills it needs to grow its industrial skillset.
Simon Peckham, Chief Executive
Helping customers address climate change
Product responsibility is central to the Melrose model of acquiring and improving underperforming manufacturing businesses. This is grounded in investing in safe and sustainable production practices, and demonstrated by sustainable product performance and effective product life cycle management. Furthermore, we recognise the risks and opportunities that the transition to a net zero economy presents for our businesses and their customers. Despite our business often operating in some of the hardest industries to decarbonise, we work closely with them to ensure that they are well positioned to meet emerging regulatory requirements and wider environmental expectations.
Climate-related issues have a direct impact on product strategy, development and financial planning across all our businesses. Our businesses work closely with their customers and world-class research institutions to develop market-leading and cost-effective innovations, delivering solutions that address environmental challenges.
In 2021, our businesses invested over £153 million in developing products that help their customers improve their energy efficiency and to reduce their GHG emissions, water consumption and waste generation compared with conventional technologies.
£153m
Invested in developing products that help their customers improve their energy efficiency
Environmental reporting
For more information about our sustainability performance, please explore our Data Centre.
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Product life cycle management
Our businesses assess the impact of their products on the environment in terms of material usage, waste, energy usage and CO2 emissions throughout each product life cycle. By incorporating circular economy principles into their design and manufacturing processes, our businesses can reduce their environmental impact and deliver products to their end-markets with increased durability and longevity, and reduced waste. Across the Group, life cycle assessments have been completed for 14% (by revenue) of total products sold in 2021.
To limit the end-of-life product impact on the environment, a number of our businesses are actively involved in product take-back programmes.
GKN Automotive is involved in an initiative whereby old driveshafts are collected from designated garages and transformed into “as good as new” products with savings on energy, water, CO2 and steel production. In addition, 100% of GKN Automotive’s driveline products can be remanufactured for reuse.
GKN Powder Metallurgy performs life cycle product assessments certified with applicable standards (ISO 14040 and/or ISO 14044). The process is reviewed during third party external audits. Hazardous substances, GHG emissions and raw materials are included in the review. Risks and opportunities are considered across all processes: design, development, procurement, production, transport, packaging, use, end-of-life treatment and end-of-life cycle. Several improvement actions have been identified following the completion of these assessments, including:
- recycling of metals and other materials to reduce landfill;
- conducting surveys on compressed air systems to reduce energy consumption from air leaks;
- eliminating or reducing the use of petroleum products; and
- improving manufacturing operations to improve energy efficiency and GHG emissions.
In addition, the products from GKN Powder Metallurgy’s Powders (Hoeganaes) division are 100% recyclable, and their powder is made from scrap. It also takes back green (not yet sintered) scrap and unused powder from internal and external customers, re-mills it and mixes it back into new products.
Ergotron performs life cycle product assessments in accordance with the ANSI/ BIFMA e3:2014 standard to reduce energy use, water use and hazardous materials in production processes and in end products. Life cycle assessments are performed on 100% of new office products. In addition, in 2021, Ergotron implemented a “no foam” policy for all new products in development, with the goal of removing all EPS (“polystyrene foam plastic”) and EPE (“polyethylene foam plastic”) from packaging over time as part of its long-term sustainability plan. Early successes in this effort include the elimination of EPS in the five highest volume products and voluntarily reduced customer-specified EPE in the private label arms. Reduction or elimination of foam will reduce its carbon footprint significantly over time.
TCFD
Taskforce on Climate-related Financial Disclosures (“TCFD”)
In complying with the requirements of the new Listing Rule on climate-related disclosures, we have included disclosures against all the key areas recommended by the TCFD. This is our first report following the recommendations of the TCFD and covers our approach as at 31 December 2021. We recognise that we will need to build on the efforts started in 2021 and are committed to continuously improving our approach.
In the table in the Annex to the 2021 Sustainability Report on pages 54 to 55, we summarise our disclosures against each of the TCFD recommendations and we cross-refer to
where the disclosures are in our 2021 Annual Report.
Climate Change
Environmental stewardship
Notable examples of climate-related initiatives and activities in 2020 include:
GKN Aerospace’s decision to move to full ‘green’ electricity use generated through renewable energy in the Netherlands, with an estimated saving of 12,200 metric tonnes of CO2 annually from 2021. In addition, the Trollhättan site in Sweden, which consumes over 50 gigawatt hours (GWh) of electricity annually and is GKN Aerospace’s largest site in Europe, began purchasing renewable energy from its local hydropower plant. • Approximately 45,000 square metres of efficient LED lighting being installed at certain GKN Aerospace facilities in the US and Mexico, saving approximately 800,000 kWh per year in 2020. • Continued promotion by GKN Aerospace (since 2017) of electric vehicle transportation for its employees. It has installed 26 dual point and 17 single point electric vehicle charging stations across eight of its facilities and shares five stations at a multi-tenant location for a total vehicle charging capacity of 74 vehicles per hour. Sustainability Report Continued • GKN Automotive’s European sites continue to drive energy efficiencies and cost savings with ongoing projects relating to LED lighting installation, improved building insulation, and investment in energy-efficient equipment including air conditioning and heating systems. Notable examples in 2020 include the installation of a roof top solar system at the Pune, India site with anticipated annual energy savings of 1,000,000 kWh, and at the Köping, Sweden site, where 100% of heating is now provided by district heating which is generated from industrial waste heat, waste incineration and biofuels. • Investment in energy-efficient equipment by GKN Powder Metallurgy, with a strong focus given to replacing old and less efficient equipment with LED lighting, compressed air generators, motors and motor convertors. • Nortek Global HVAC provides a bus system for employees to use to and from work at their sites in Mexico. This has eliminated more than 700 vehicle trips per day and their associated emissions. In addition to the business-specific examples, the Group as a whole spent £304,579(1) on LED lighting retrofits in 2020.
SASB
Sustainability Accounting Standards Board (“SASB”) reporting for 2021
This is our first year reporting against the SASB reporting standards. By reporting in line with the SASB standards we are providing our investors and other stakeholders with comparable, consistent, and reliable data on financially material sustainability factors, which directly impact our long-term enterprise value.
Key operational improvements to reduce energy consumption and emissions in 2021
The businesses take an appropriately tailored approach to implementing climate-related initiatives that are most relevant and impactful to improving their business activities and requirements, and their operational and market environments. Each business is at a different stage in their climate strategy depending on their maturity in this area, but all have implemented or are in the process of implementing a wide range of positive actions as outlined in the table available to download below.
Climate Change
Environmental stewardship
Notable examples of climate-related initiatives and activities in 2020 include:
GKN Aerospace’s decision to move to full ‘green’ electricity use generated through renewable energy in the Netherlands, with an estimated saving of 12,200 metric tonnes of CO2 annually from 2021. In addition, the Trollhättan site in Sweden, which consumes over 50 gigawatt hours (GWh) of electricity annually and is GKN Aerospace’s largest site in Europe, began purchasing renewable energy from its local hydropower plant. • Approximately 45,000 square metres of efficient LED lighting being installed at certain GKN Aerospace facilities in the US and Mexico, saving approximately 800,000 kWh per year in 2020. • Continued promotion by GKN Aerospace (since 2017) of electric vehicle transportation for its employees. It has installed 26 dual point and 17 single point electric vehicle charging stations across eight of its facilities and shares five stations at a multi-tenant location for a total vehicle charging capacity of 74 vehicles per hour. Sustainability Report Continued • GKN Automotive’s European sites continue to drive energy efficiencies and cost savings with ongoing projects relating to LED lighting installation, improved building insulation, and investment in energy-efficient equipment including air conditioning and heating systems. Notable examples in 2020 include the installation of a roof top solar system at the Pune, India site with anticipated annual energy savings of 1,000,000 kWh, and at the Köping, Sweden site, where 100% of heating is now provided by district heating which is generated from industrial waste heat, waste incineration and biofuels. • Investment in energy-efficient equipment by GKN Powder Metallurgy, with a strong focus given to replacing old and less efficient equipment with LED lighting, compressed air generators, motors and motor convertors. • Nortek Global HVAC provides a bus system for employees to use to and from work at their sites in Mexico. This has eliminated more than 700 vehicle trips per day and their associated emissions. In addition to the business-specific examples, the Group as a whole spent £304,579(1) on LED lighting retrofits in 2020.