Case study: How Grundfos combats corruption

What are the material issues the company has identified?          

In its 2019 Sustainability Report Grundfos identified a range of material issues, such as business performance, human rights, diversity and inclusion, environmental and water-related issues, climate change initiatives. Among these, combatting corruption stands out as a key material issue for Grundfos.

Stakeholder engagement in accordance with the GRI Standards              

The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:

“The reporting organization shall identify its stakeholders, and explain how it has responded to their reasonable expectations and interests.”

Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.

Key stakeholder groups Grundfos engages with: 

To identify and prioritise material topics Grundfos engaged with its stakeholders through the following channels:

What actions were taken by Grundfos to combat corruption?

In its 2019 Sustainability Report Grundfos reports that it took the following actions for combatting corruption:

• Implementing internal controls and audits
• To minimise the risk of corruption, Grundfos implements a number of rules regarding day-to-day processes. These include a mandatory ‘foureye’ principle stipulating that all transactions require approval from two people, and contract templates containing strict anti-corruption clauses stipulating Grundfos’ right to terminate in case of a breach. Monthly performance reports provide detailed information about the functioning of various business units. Grundfos’ Group Internal Audit Services (GIAS) issued a handbook that outlines the controls Grundfos expects to have in place within Grundfos companies. Since 2018, GIAS has worked together with central- and local finance organisations to roll out a list of key controls that make the Grundfos control environment stronger and more efficient. Process owners can assess the effectiveness of these controls through a central monitoring system. In 2019, GIAS introduced a fraud response plan, which is accessible on Insite (Grundfos’ internal communication platform). This initiative was undertaken to increase awareness of different types of fraud, and to provide a step-by-step guide for reporting and resolving incidents of fraud. Experience from audit visits and the use of the Fraud Response Plan allow GIAS to revise and update processes, procedures, and controls throughout Grundfos.

• Conducting compliance screening
• To minimise risk, Grundfos makes sure that all parties with whom it is affiliated, are screened against embargo- and sanctioned-party lists. Grundfos conducts full risk assessments prior to any acquisition and when performing business activities within a new business area or location. The legal department or other relevant functions (such as tax or treasure) prepare a report, and preapproval may only be obtained if the required due diligence process has been completed. Final approval by the Grundfos Group Board of Directors is required.

• Carrying out risk assessments
• Each year, Grundfos identifies its risk on an enterprise level, with local managers and top leaders carrying out the assessments. Group management then consolidates principal risks and sponsors mitigation activities. A Response and Activity Plan was formulated in 2018 by the legal department (amended in 2019) to cover and coordinate company activities designed to mitigate the identified risks. Relevant stakeholders approved the plan to ensure commitment and implementation throughout the organisation. In keeping with this plan, bi-yearly risk assessments are carried out in accordance with the United Nations Global Compact “Risk Assessment Guide.”

Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?

The GRI Standard addressed in this case is: Disclosure 205-1 Operations assessed for risks related to corruption

Disclosure 205-1 Operations assessed for risks related to corruption corresponds to:

• Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
• Targets: 16.5

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References:

1) This case study is based on published information by Grundfos, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original, please revert to the original on the Global Reporting Initiative’s Sustainability Disclosure Database at the link:

http://database.globalreporting.org/

2) https://www.globalreporting.org/standards/gri-standards-download-center/

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