2022 SUSTAINABILITY REPORT
CONTENTS OVERVIEW About the Report 01 Assurance & Verification 02 List of Abbreviations 03 Sustainability Dashboard 04 Board Statement on Sustainability 05 Message from the Group President & CEO 06 OUR SUSTAINABILITY APPROACH Sustainability Framework 08 Measuring Performance 12 Material Stakeholders & Engagement 13 Materiality Assessment 14 Climate Change 18 ECONOMIC Economic Performance & Productivity 24 Technology & Innovation 28 Responsible & Resilient Supply Chain 32 ENVIRONMENTAL Environmental Protection 36 Sustainable Quality Products & Solutions 42 SOCIAL People Excellence 48 Total Workplace Safety & Health 58 Corporate Community Contributions 62 GOVERNANCE Ethical Business & Regulatory Compliance 68 Cybersecurity & Data Protection 72 INDEX Global Reporting Initiative (GRI) 74 United Nations Global Compact (UNGC) 78 Sustainability Accounting Standards Board (SASB) 78
ABOUT THE REPORT • This Sustainability Report focuses on the sustainability strategy, practices, priorities, targets and performance of ST Engineering’s operations across key markets during the financial year between 1 January 2022 to 31 December 2022 • This Report is approved by the Board and prepared in accordance with Global Reporting Initiative (GRI) Standards, Singapore Exchange Limited (SGX) Listing Rules 711A, 711B and Practice Note 7.6, Sustainability Accounting Standards Board (SASB) Aerospace and Defence standards, and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) • ST Engineering is a participant of the United Nations Global Compact (UNGC) and is committed to its Ten Principles. This Report supplements our second Communication on Progress to UNGC • Stakeholders are advised to read the ST Engineering Annual Report 2022 for more information on the Group’s business and financial performance • Feedback regarding the sustainability report can be sent to [email protected] OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 01
ASSURANCE & VERIFICATION ST Engineering is committed to providing a balanced and accurate sustainability report. The information disclosed in this report was a consolidation of data compiled from our material subsidiaries globally. Our Internal Audit team performed an internal review on the sustainability report for 2022 as mandated by SGX. All recommendations highlighted during the internal review were taken into consideration during the development of the report. The Greenhouse Gas (GHG) emissions data reported by our Singapore entities are verified under ISO 14064-1:2018 Greenhouse Gases by LRQA Limited. We are progressively extending external verification for GHG emissions to our material entities worldwide over the next few years. Our intention is for the external assurance of our Sustainability Report to be done progressively in stages. View our External Assurance Statements OVERVIEW In 2022, ST Engineering was included in the Dow Jones Sustainability Asia Pacific Index as identified by S&P Global through the Corporate Sustainability Assessment. This represents the top 20% out of the 600 largest companies in the Asia Pacific developed region based on long-term Environmental, Social and Governance (ESG) criteria. ST Engineering is also a component stock of the iEdge SG ESG Transparency Index and the iEdge SG ESG Leaders Index. 02 ST ENGINEERING SUSTAINABILITY REPORT 2022
LIST OF ABBREVIATIONS ABBREVIATION DEFINITION AC Audit Committee CCWC Climate Change Working Committee CEO Chief Executive Officer CI Continuous Improvement CoSec Company Secretary CSA Control Self-Assessment ECRs Export Control Regimes ERM Enterprise Risk Management ESG Environmental, Social and Governance EXCO Group Executive Committee GEC Group Engineering Centre GHG Greenhouse Gas GISO Group Information Security Office GRI Global Reporting Initiative GSBC Group Senior Business Council GSSO Group Strategy and Sustainability Office GTO Group Technology Office GTT Green Technology Taskforce HQ Headquarters HR Human Resources IA Internal Audit IEA International Energy Agency IoT Internet-of-Things IPCC Intergovernmental Panel on Climate Change IT Information Technology ITC Innovation and Technology Committee KPI Key Performance Indicator MOU Memorandum of Understanding MRO Maintenance, Repair and Overhaul ABBREVIATION DEFINITION NDC Nationally Determined Contributions OEM Original Equipment Manufacturer OESC Operational Excellence Steering Committee OEST Operational Excellence Specialist Team PwD Persons with Disabilities PV Photovoltaic RAS Risk Appetite Statement RD&T Research, Development and Technology Committee RFR Recordable Frequency Rate RSC Risk and Sustainability Committee RSR Recordable Severity Rate P2F Passenger-to-Freighter R&A Group Risk and Assurance R&D Research and Development SASB Sustainability Accounting Standards Board SAF Sustainable Aviation Fuel SDGs Sustainable Development Goals SFC Strategy and Finance Committee SGX Singapore Exchange Limited SME Small and Medium Enterprise STEM Science, Technology, Engineering and Mathematics STESU ST Engineering Staff Union TCFD Task Force on Climate-related Financial Disclosures T&Cs Terms and Conditions UN United Nations UNGC United Nations Global Compact WSH Workplace Safety and Health OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 03
SUSTAINABILITY DASHBOARD OVERVIEW reduction over 2010 base year GHG Emissions 37% People Managers 15% of male employees are people managers 14% of female employees are people managers 13% Green Energy of electricity consumption from Singapore operations derived from renewable energy $350m Value of purchases from SMEs in Singapore Supply Chain $327m spent on R&D in 2022 Research and Development Accident Rate 0.4 RFR* 23.9 RSR* 1 Fatality 22.5 average training hours per employee Learning and Development Zero bribery and corruption cases in 2022 Bribery and Corruption Top 20% of 600 largest companies in the region, based on long-term ESG criteria Recognition Included in Dow Jones Sustainability Asia Pacific Index as Corporate Community Contributions $2.9m worth of community contributions by the Group and its employees About * Recordable Frequency Rate Recordable Severity Rate
BOARD STATEMENT ON SUSTAINABILITY BOARD STATEMENT The Board of Directors oversees the management, including the review of material environmental, social and governance factors for ST Engineering and takes them into consideration when setting the Group’s strategic direction. We remain steadfast in positively impacting people’s lives and the health of our planet by operating responsibly in our communities and in the wider global ecosystem. We create value by addressing real-world problems, including those related to climate change, urbanisation, pandemics, public safety and evolving security challenges. We harness technology and innovation to enable a more secure and sustainable world. In the medium term, we will focus on our decarbonisation pathways, and the opportunities and risks from climate change. We link a range of operational, financial and non-financial key performance indicators to our material ESG factors to encourage the adoption of strategies and practices that are aligned to the sustainable and long-term success of the Group. OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 05
Dear shareholders, A PURPOSE-DRIVEN GROUP ST Engineering continues to harness technology and innovation to enable a more secure and sustainable world. We maintain our focus on long-term resilience and sustainable value creation for all our stakeholders, which includes our customers, employees, communities, shareholders, governments and suppliers. We now face many challenges from factors such as geopolitical tensions, extreme weather patterns, the pandemic and disruptions across industries. In our encounter with these difficulties, we have continued to step up efforts to integrate sustainability into our strategy and operations. DOING OUR PART 2022 was notable for several key milestones in our sustainability journey: Climate: We published our first TCFD analysis as part of this report. It highlights the risks and opportunities for the Group due to climate change and is aligned with the TCFD framework. The scenarios we worked through led us to the following conclusions: • The physical risk to our productive assets and our people is low. We have put in place a process to regularly review our facilities against extreme climate and weather events • We expect minimal impact on our business in the transition to a low carbon economy. We will continue to monitor emerging issues including the evolving regulatory and carbon tax environment • We updated our Enterprise Risk Management (ERM) framework to incorporate climate-related considerations and launched an initiative to enhance the monitoring of emerging risks and recommend actions on a proactive basis Emissions: We are on target to halve our absolute GHG emissions by 2030 compared to 2010, as we continue our journey alongside global efforts towards net zero. In our Singapore operations, we increased our renewable energy share from 8% to 13% of the total electricity used. Safety & Health: As part of our Total Workplace Safety & Health efforts, we launched a 24-hour mental support helpline for our employees in Singapore and raised awareness among our employees on the importance of their mental health. We are sad to report that a fatal accident occurred in December 2022. We implemented a groupwide Safety Time-Out across all MESSAGE FROM THE GROUP PRESIDENT & CEO OVERVIEW 06 ST ENGINEERING SUSTAINABILITY REPORT 2022
Singapore entities following the accident, reviewed our material handling operations and intensified safety assessments. We continued to emphasise the importance of workplace safety across our businesses and our commitment to “Safety Before Profits”. People: We promote the professional and personal development of our employees. For example, we launched a series of employee-centric learning campaigns on topics such as leadership, digitalisation and cybersecurity. This promotes a culture of continuous learning among our people as workplace needs and challenges, as well as industry expectations continue to evolve. Community: We serve our communities through a combination of volunteer work, skills-based contributions as well as in-kind and monetary support. In 2022, we contributed close to $2.9m to community causes. Materiality and Disclosures: In 2022, we reviewed and refreshed our material ESG factors to include Technology & Innovation and Cybersecurity & Data Protection. We continue to deepen and broaden our disclosures in line with the evolving international and local frameworks, including GRI, SASB, SGX and TCFD. Data: We launched a group-wide sustainability reporting platform to improve the accuracy, traceability and transparency of our data. UNGC: We submitted our inaugural Communication on Progress to UNGC. It demonstrated our commitment to adhering to the UNGC’s Ten Principles in the areas of Human Rights, Labour, Environment and Anti-Corruption. ENABLING OUR CUSTOMERS Our commitment to supporting our customers’ sustainability efforts is underpinned by our target to increase our sustainability-linked revenue to more than $3 billion by 2026. This was announced at our Investor Day in November 2021. We continue to grow our current businesses to support the: • Reduction of GHG emissions • Solving of urban and city challenges • Growth of the circular economy New Solutions: Our businesses continue to create new solutions including an Airbitat Data Centre Cooling System and a Carbon Prospecting Dashboard. This is augmented by a pipeline of new business ventures which we are building through our In.Vent innovation platform. In.Vent enables us to support good business ideas with strong growth potential while being aligned to sustainability considerations and impact. Opportunities: As part of our TCFD journey, we identified several new climate-related opportunities. These include areas relating to energy management, new materials, the carbon services value chain and other emerging green technology applications. Suppliers: We initiated a review of our supply chain risks and opportunities to take into account the ongoing geopolitical, pandemic and climate change impact. Our Supplier Code of Conduct was also strengthened, including in the areas of conflict minerals, human rights and export control. COMMITMENT TO THE JOURNEY ST Engineering continues to be committed to sustainability, whether in our own operations or through enabling our customers and communities. We will continue to leverage our diverse capabilities and partner with other innovative firms and institutions. This will help us to build the depth of expertise and breadth of technologies, which will enable us to move towards greater sustainability in our businesses and operations globally. Sincerely, VINCENT CHONG SY FENG Group President & CEO 28 February 2023 OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 07
ENVIRONMENTAL ECONOMIC SOCIAL GOVERNANCE SUSTAINABILITY FRAMEWORK SUSTAINABILITY FRAMEWORK We believe that creating value for our stakeholders in a sustainable manner is essential to the Group’s success. Our business processes reflect long-term and multi-stakeholder considerations, balancing our customers’ needs of today with the worlds’ needs of tomorrow. We believe in doing well while doing good, and adopt a two-pronged approach of “Doing Our Part” and “Enabling Our Customers”. This includes offering products and solutions that help our customers operate sustainably. We do our part by conducting our business in a responsible and ethical manner, complying with all legal and regulatory requirements, using resources efficiently, contributing to the communities that we operate in, broadening our diversity initiatives and developing our people. This nurtures an ecosystem that promotes the continuous growth of our businesses and supports inclusive development. We enable our customers on their sustainability journeys by harnessing technology and innovation to address real-world problems. Our sustainability-linked products and services incorporate green technologies and climaterelated design considerations. Integrating sustainability into our strategy and operations ensures that our business remains resilient amid an uncertain and volatile world. OUR GOVERNANCE STRUCTURE We believe that success is built on a culture of sustainability in the organisation and is dependent on strong, committed and accountable leadership. Our Board of Directors holds ultimate accountability, provides strategic direction and considers sustainability issues, including the management of material ESG factors, in the formulation of the Group’s strategies and policies. The Board’s Risk and Sustainability Committee (RSC) provides oversight on the Group’s sustainability issues on behalf of the Board. The RSC sets direction and provides oversight on risk, internal controls and sustainability matters. It also reviews and approves the annual risk and sustainability workplans. The Group P&CEO, supported by the Group Executive Committee (EXCO), leads the implementation of sustainability as an integral part of the Group’s business strategy, including business plans, product and technology development and operational processes. ENABLER OF A SUSTAINABLE WORLD Enabling Our Customers Growing with Partners & Seizing Opportunities RESPONSIBLE GLOBAL CITIZEN Doing Our Part Building Trust & Managing Risks OUR SUSTAINABILITY APPROACH
The Group Chief Strategy and Sustainability Officer works with the EXCO and senior business leadership in the Group Senior Business Council (GSBC) to ensure that sustainability is at the core of the Group’s business strategy, and that ESG considerations are integrated into both our immediate and long-term business plans. Reporting to the EXCO, our business area management teams and Group Functions play critical roles in shaping and supporting our strategy. In addition, they work across the Group in key areas such as Technology and Innovation, Operational Excellence and Sustainability. They are enabled by an annual planning process which is underpinned by our strategic planning and financial planning processes, as well as our governance and ERM systems. Sustainability is the responsibility of every ST Engineering employee. We enable this by mobilising teams across the Group at every level. This includes the Group Sustainability team at Corporate, Operational Excellence Steering Committee (OESC), Operational Excellence Specialist Teams (OEST), business area sustainability-focused teams, Climate Change Working Committee (CCWC) and various operations-level teams and individuals across our global sites. Every employee’s effort is important to ST Engineering’s sustainability journey. Technology & Innovation Operational Excellence Sustainability Ultimate Accountability Board of Directors Oversight on Behalf of the Board Risk and Sustainability Committee Leadership Group Executive Committee & Group Senior Business Council Business Areas Group Functions Direction & Execution OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 09
OUR COMMITMENT We are committed to conducting our business in a responsible manner. We adhere to labour laws and regulations where we operate and have zero tolerance for unethical labour practices such as child labour, forced labour, slavery and human trafficking in any of our operations. We prohibit discrimination and harassment at our workplaces and are committed to safe and healthy working conditions and the dignity of the individual. We support the right to freedom of association and encourage effective communication and consultation. Our commitments are guided by international human rights principles encompassed in the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, UNGC and the United Nations (UN) Guiding Principles on Business and Human Rights. These principles of respecting peoples’ dignity and their inherent rights are reflected in our policies, operations and relationships with our stakeholders. We do not design, produce or sell anti-personnel mines, cluster munitions, white phosphorus munitions and their related key components. We are committed to complying with all applicable laws, regulations, trade sanctions and embargoes (collectively referred to as “Export Control Regimes (ECRs)”) governing the export of goods, services, software, technology and information (“Controlled Items”) in all of the jurisdictions we operate in. We source responsibly and invest in the people and the communities where we operate. In support of our Code of Business Conduct and Ethics, and good corporate governance practices, we established ERM and compliance policies and processes. We have zero tolerance for fraud and corrupt practices, and our Code of Business Conduct and Ethics forms the backbone of our commitment to ethical business conduct and regulatory compliance. We continue to commit to meeting all relevant regulatory and customers’ contractual requirements, including those relating to cybersecurity, data governance and protection, and business continuity. Beyond full compliance with legal and regulatory requirements, we align our management systems to international and industry standards. Our ERM policy provides directions for managing and reporting enterprise risks across the Group. The objective of this policy is to build a robust risk management process where enterprise risks are evaluated, monitored and treated in a holistic and integrated manner. Accordingly, our processes adopt a precautionary approach, with risk identification being carried out at the initial stage as well as continuously as the business or project progresses. Risk analysis comprises material internal and external evaluation to ensure that all aspects are considered. Suppliers We expect our supply chain partners to adhere to business principles consistent with our own, outlined in our Supplier Code of Conduct. This includes the fair and ethical treatment of labour within their own companies, as well as that of their suppliers. Customers We offer products and services that generate a positive impact for our customers as well as the communities where they serve. This includes improvements in quality of life, health, safety and security. Employees All our employees are required to adhere to honest and ethical conduct and act in accordance with our Code of Business Conduct and Ethics. This includes treating each other with respect, and abiding by our core values of Integrity, Value Creation, Courage, Commitment and Compassion. HOW WE PRACTICE OUR COMMITMENT TO HUMAN RIGHTS OUR SUSTAINABILITY APPROACH 10 ST ENGINEERING SUSTAINABILITY REPORT 2022
OUR CONTRIBUTION TO GLOBAL GOALS ST Engineering is a participant of the UNGC, supports its Ten Principles and is committed to advancing the broader goals of the UN Sustainable Development Goals (UN SDGs). References on the practical actions taken to implement the UNGC principles, in each of the four issue areas (human rights, labour, environment and anti-corruption) can be found in the UNGC index pages. We affirm our support of all 17 UN SDGs and identified six goals where the Group has more contributions in terms of our internal practices, and in the products and services that we offer to our customers. Why is it more relevant How we contribute UN SDGs We provide meaningful and sustainable jobs, and contribute to the economic growth of the communities where we operate. • Creation of gainful employment wherever we operate • Generation of business opportunities for local institutions and Small and Medium Enterprises (SMEs) • Payment of government taxes and levies • Enhancement of local communities’ well-being through corporate community contributions We enable our customers and support industry ecosystems in building resilience and fostering innovation. • Provision of products and services that help build and maintain the resilience of infrastructure, including critical infrastructure at the city and national levels • Partner with local and global companies to create value and strengthen the industries that we participate in • Incorporation of sustainability as part of our strong innovation culture We harness technology and innovation to enable cities and communities to be more secure and sustainable. • Smart mobility to reduce congestion and increase productivity • Smart environment solutions to reduce GHG emissions • Robust digital platforms enabling secure and time-sensitive communication, and enhancing city and building management • Cybersecurity and physical security solutions We stay lean and minimise the environmental impact of our operations, and are committed to enabling the circular economy. • Offer a wide range of conversion solutions, including for aircraft, ships and vehicles, that can extend the life of valuable assets • Responsible production through upfront sustainable design considerations, and strict adherence to industrial standards and regulatory requirements • Responsible consumption through responsible procurement and lean operations backed by a strong continuous improvement and innovation culture We play our part to help address the global challenges of climate change. • Development of greener products and services • Reduction of GHG emissions • Reduction of water consumption • Reduction of waste through Reduce, Reuse and Recycle initiatives We have a strong heritage in public security and have zero tolerance for unethical behaviour. • Development of products and services to help maintain peace, public security and safety • Maintenance of a strong Code of Business Conduct and Ethics • Engagement with suppliers on our Supplier Code of Conduct OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 11
We measure a range of financial, non-financial and operational Key Performance Indicators (KPIs). These have a significant impact on the resilience and sustained performance of our Group’s businesses globally, whether in the short, medium or long-term. Our KPI areas include those indicated in the table below. MEASURING PERFORMANCE We design the remuneration of our senior management to motivate them to strive for sustained growth and adopt strategies aligned to the long-term performance of the Group. The remuneration package comprises components linked to the achievement of annual performance targets, including material risks and sustainability performance. Read more about our Executive Renumeration Structure in page 89 of our 2022 Annual Report FINANCIAL PERFORMANCE • Revenue, Profit, Working Capital PEOPLE DEVELOPMENT • Learning & Development • Performance Management OPERATIONAL EXCELLENCE • Continuous Improvement • Health & Safety • Quality TECHNOLOGY & INNOVATION • R&D Investments • New Products & Services • Venture Building ENVIRONMENT • GHG Emissions • Water & Waste OUR SUSTAINABILITY APPROACH 12 ST ENGINEERING SUSTAINABILITY REPORT 2022
MATERIAL STAKEHOLDERS & ENGAGEMENT We believe that creating sustainable value for all our stakeholders is essential to the Group’s long-term success. Engaging our stakeholders regularly enables us to understand and address their concerns, while strengthening crucial relationships which our business relies on. Material stakeholders are identified as part of the Group’s ERM process, based on the magnitude that these parties can impact or be impacted by the Group’s activities. Stakeholder Our Responsibility Engagement Efforts Customers We forge enduring relationships with our customers and ensure that our products and services stay relevant, are safe and reliable, and meet their expectations. We do what it takes to understand our customers, their needs and their challenges. We work closely with them to co-create solutions that enable them to be more effective in their operations. • Regular customer surveys • Company visits • Customer service training for all relevant employees • Regular project review meetings • Technology seminars • Dialogue sessions Employees & Other Workers People are our most valuable asset. We focus our efforts in growing and enhancing their capability and capacity, strengthening a passionate and engaged workforce, and being at the forefront of people practices. • Regular town halls • Annual business conventions • Continuous performance discussions • Team activities, including celebrations, team building and wellness initiatives • News updates via our Corporate Intranet Local Communities We contribute to the development of our host communities. We act responsibly, protect the environment and contribute to our communities’ well-being through our corporate community contributions. We also work closely with local government agencies to support their economic development imperatives that are in line with our growth plans. Where possible, we ensure that our health and safety policies, including pandemic precautions, protect our community beyond our workplaces. • Corporate community contributions • Collaborations with educational institutions to develop Science, Technology, Engineering and Mathematics (STEM) talent • Partnerships with SMEs • Support our workforce by implementing health and safety policies to protect them Suppliers & Collaborators We cultivate strong, ethical and mutually beneficial relationships with suppliers and collaborators. Our worldwide partners are the cornerstones of our global businesses. • Engagements with partners including strategic programmes with SMEs • Surveys and feedback sessions with suppliers on procurement policies Shareholders & Investors In line with our strong emphasis on corporate governance, we continue to build investor trust and confidence through open dialogue and two-way communication with shareholders and the investment community. • Quarterly market update • Half-yearly financial results briefings • Investor conferences and roadshows • Investor Day • Annual General Meeting & Extraordinary Meeting • Facility visits • Group and one-on-one meetings Regulators & Government We disclose pertinent information in a clear and concise manner, and on a timely basis. We comply with legal and regulatory requirements in the jurisdictions where we operate in. • Providing feedback to the public • Regulatory consultation exercises • Incorporate trends and learning points in our business through regular engagements with regulators and governments OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 13
MATERIALITY ASSESSMENT In assessing materiality, ST Engineering considers factors that impact our businesses and our stakeholders, from both financial and non-financial perspectives. Our six material stakeholders include customers, employees and other workers, local communities, suppliers and collaborators, shareholders and investors, and regulators and governments. We conducted our first materiality assessment according to GRI G4 guidelines in 2013 and identified our initial material ESG factors. These were mapped onto the key business risks of the Group to ensure completeness and a clear understanding of the risks each material factor posed. We reviewed and updated our key business risks and material factors in 2015 and 2019. In 2019, the Group’s material ESG factors were reorganised into 10 areas for greater focus and clarity. They were mapped into Environmental, Social and Governance categories and aligned with the UN SDGs. We conducted a review of our material ESG factors in 2022 according to GRI 3: Material Topics 2021 guidelines. Identify and Assess Impacts on an Ongoing Basis Through internal assessment and guidance from disclosure standards By considering our business environment, stakeholders and our operational control Identify actual and potential impacts Assess the significance of the impacts Understand the organisation’s context 2 1 3 Determine Material Topics for Reporting Through surveys and interviews with employees, managers, senior management and customers Prioritise the most significant impacts for reporting 4 Material topics • • • • • • OUR SUSTAINABILITY APPROACH MATERIALITY REVIEW PROCESS 14 ST ENGINEERING SUSTAINABILITY REPORT 2022
2022 MATERIALITY REVIEW PROCESS It is important to first understand the context of our businesses and our ecosystem. We do this by considering the industry domains that the Group operates in, which includes but are not restricted to, Aerospace and Defence, Maritime, Information and Communication Technologies, Transportation and Smart Cities. Additionally, we consider our six material stakeholders as well as the sustainability context of our entities, focusing on those in which we have operational control. Based on our organisation’s business and sustainability context, we set about identifying actual and potential impacts. We made reference to GRI standards, and identified these impacts through our internal assessment and by referencing disclosure standards such as SASB – Defence and Aerospace standards, SGX Core ESG Metrics and TCFD recommendations. The requirements from these standards give us an idea of the typical impact that an organisation like ours can expect to have. The initial process led us to identify a preliminary list of 42 topics over four broad areas (Economic, Environmental, Social and Governance) that impact or may impact others based on our business activities. We do this by considering their significance (likelihood and severity). Through a combination of surveys and interviews, we prioritised each topic by engaging with relevant stakeholders such as our employees, managers, senior management and our customers. A topic was considered significant if more than 75% of our stakeholders agreed that it was important to the Group. This threshold resulted in a shortlist of 23 topics, that were further grouped and distilled into 10 material factors. Through the review, we identified synergies between four of our previous material factors: Economic Performance, Productivity, Green Products and Solutions, and Quality. These have been regrouped into: 1. Economic Performance & Productivity 2. Sustainable Quality Products & Solutions Additionally, two new material factors were identified: 1. Technology & Innovation 2. Cybersecurity & Data Protection We will continue to monitor topics that are not defined as material but might become more important moving forward. MATERIALITY MATRIX The responses from our survey also enabled us to quantify the relative importance of each material factor to the Group and our stakeholders. The result was the Group’s Materiality Matrix. HIGH • Cybersecurity & Data Protection • Ethical Business & Regulatory Compliance • Environmental Protection • Responsible & Resilient Supply Chain • Technology & Innovation • Total Workplace Safety & Health • Economic Performance & Productivity • People Excellence • Sustainable Quality Products & Solutions • Corporate Community Contributions LOW HIGH Importance to the Group Importance to Stakeholders X-axis: Importance to the Group: Includes current operations, business strategy Y-axis: Importance to Stakeholders: Includes our six stakeholder groups GROUP'S MATERIALITY MATRIX OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 15
ECONOMIC ENVIRONMENTAL Why it is Material Economic Performance & Productivity We are committed to delivering a sustainable and balanced triple bottom line of “People, Planet, Profit”. Inclusive growth and productive value creation for our stakeholders are key to our long-term viability. Technology & Innovation We improve lives and make the world more secure and sustainable through technology and innovation. Our ability to harness disruptive technology and to direct our engineering expertise towards building innovative products and solutions allows new business growth and differentiates us from our competitors. Responsible & Resilient Supply Chain We depend on a resilient and sustainable supply of goods and services to meet our business needs. We are committed to managing our suppliers ethically and working with them to ensure a responsible and resilient supply chain. Environmental Protection Climate change is an issue of urgency and importance. A low carbon business strategy is not only good for the environment, but also enables us to better respond to climate change related regulations and price volatilities of hydrocarbon resources. Sustainable Quality Products & Solutions Customers rely on us to meet their operational needs. Our products must be compliant with all relevant regulations and be safe to produce, operate and maintain. It must also be reliable over the product’s lifecycle. In addition, our services must meet our customers’ requirements and be delivered at the promised quality and within the committed turnaround time. Cities and organisations around the world are looking to minimise their carbon footprint while reducing operating costs. How we Manage It Our strategic planning community reviews the Group’s strategy in the context of global trends and developments. We focus on operational excellence to ensure that we continue to add value to our stakeholders and have a positive impact on our communities. Productivity efforts are coordinated by the Group Continuous Improvement Office. We manage technology and innovation at the highest levels, drive and coordinate efforts across our businesses, and embed it into our culture. The Group Technology Office (GTO) and Group Engineering Centre (GEC) identifies, develops, and leverages common competencies to increase our development strategy, speed and quality. The Innovation and Technology Committee (ITC) provides guidance and support to leaders of each business area. Our procurement community champions the effective management of our suppliers to align business behaviours, drive greater efficiencies, streamline processes and build greater resilience. We work with our suppliers to embed responsible procurement principles into our processes. Environmental efforts are coordinated by OEST - Environment. All our material business units in Singapore are certified to ISO 14001 Environmental Management Systems. Our global operations abide by relevant environmental regulations and requirements. Our quality efforts are coordinated by OEST - Quality. The majority of our operations are certified to ISO 9001 Quality Management Systems or the equivalent. We design, manufacture and service our products in accordance with industry standards and meet all regulatory requirements. Sustainability and green considerations are incorporated into our products as well as in production processes and lifecycle support. We actively work with our suppliers and collaborators and regularly seek feedback from our customers. UN SDGs OUR MATERIAL FACTORS OUR SUSTAINABILITY APPROACH 16 ST ENGINEERING SUSTAINABILITY REPORT 2022
SOCIAL GOVERNANCE Why it is Material People Excellence We are only as strong as our people. With a capable, motivated and agile workforce, we are able to strengthen our talent pipeline to pursue sustainable growth. Total Workplace Safety & Health We are committed to “Safety Before Profits”. A safe and healthy workplace protects workers from injury, stress and illness, and reduces absenteeism and turnover. It also increases productivity and raises employee well-being. This duty of care extends to our visitors and contractors working within our premises. Corporate Community Contributions We are committed to being a good corporate citizen in the places where we operate. Making a positive impact in our host communities is aligned with our core value of compassion. Ethical Business & Regulatory Compliance We comply with applicable laws and regulations in the jurisdictions where we operate. We have zero tolerance for fraud and corrupt practices. In addition, we actively protect our data and those entrusted to us by our stakeholders. Cybersecurity & Data Protection Digital technology and highly connected economies and businesses bring new vulnerabilities from a proliferation of cyber threats. We protect our data and systems including those entrusted to us. We also comply with all applicable data protection laws and regulations in the various countries we operate in. Cybersecurity is an enabler for our businesses. How we Manage It Our people and culture strategy seeks to enhance our capability and capacity for growth, build a passionate and engaged workforce, and position us at the forefront of people practices. This proposition is realised through talent attraction and management, career development, diversity and inclusion, a fair reward system, work-life integration and harmonious union relations. Workplace safety and health efforts are coordinated by OEST - Workplace Safety and Health (WSH). All our material business units in Singapore are certified to ISO 45001 Occupational Health and Safety Management Systems. Our global operations abide by relevant workplace safety regulations and requirements. Corporate community contributions are coordinated by the Corporate Social Responsibility Committee. We measure, report and communicate our corporate community investments and philanthropy efforts. The Group Risk and Assurance (R&A) function works with Group Legal to oversee matters relating to governance, risk and compliance. It has put in place a regulatory compliance framework to continually train our global workforce on our Code of Business Conduct and Ethics. The department also works with relevant functions and operations to strengthen compliance. We focus on “People, Process and Technology” in managing cybersecurity risks. Cybersecurity in the Group is overseen by the Group Cybersecurity Committee and supported by the Group Information Security Office (GISO). The Group Data Governance Committee focuses on data governance and protection and comprises representatives from our business areas and Group Headquarters (HQ) functions. UN SDGs OUR MATERIAL FACTORS OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 17
A WHOLE OF ST ENGINEERING EFFORT ST Engineering recognises the impact of climate change. We support the efforts to address it both globally and locally where we operate. In our journey towards net zero, we do our part to reduce GHG emissions and adopt environmental-friendly practices in our business, while encouraging our employees to inculcate sustainable habits in their daily lives. We develop products and solutions that will help our customers reduce their carbon footprint, in their journey towards net zero. We agree that the recommendations of TCFD are useful for our stakeholders. Hence, we have aligned our disclosures with the TCFD framework. In 2021, we started our journey on TCFD by ensuring that the impact of climate change is taken into consideration in the strategies of each of our business areas. We also conducted a preliminary physical climate risk assessment for our major operating sites across the world. In 2022, with the support of consultants, we assessed key areas in our existing practices against TCFD disclosure requirements and their implications. A climate scenario analysis was then carried out for a material portion of our business. This was crucial in providing insights on the potential extent of climate-related risks to our business as well as the potential opportunities. We incorporated these considerations into our strategy, decision-making and ERM approach. Our future steps include continuous assessment of the physical and transition risks and opportunities for the rest of our global portfolio, developing mitigation plans, and defining strategic opportunities. This inaugural report addresses the disclosure recommendations of the four core elements of the TCFD framework. OUR GOVERNANCE: LEADERSHIP FROM THE TOP Strategies and actions to address climate change are directed at the highest levels in ST Engineering. Our sustainability governance structure includes the Board and its relevant committees, EXCO, GSBC, CCWC, and various working groups across our businesses and geographies. This ensures that climate-related risks and opportunities are effectively managed. The Board provides oversight on all sustainability matters, including climate-related risks and opportunities. Briefings and discussions on climate-related topics are conducted regularly at Board meetings, including those supported by external subject matter experts. CLIMATE CHANGE Legend: AC Audit Committee RSC Risk and Sustainability Committee SFC Strategy and Finance Committee EXCO Executive Committee GSBC Group Senior Business Council Business Area Technology and Innovation Communities Business Area Sustainability Focus Teams Board AC/RSC/SFC Group EXCO and GSBC Group Green Technology Task Force Group Climate Change Working Committee Group Strategy Community OUR SUSTAINABILITY APPROACH 18 ST ENGINEERING SUSTAINABILITY REPORT 2022
The RSC exercises oversight on ST Engineering’s sustainability strategy, material ESG issues, workplans, performance targets, sustainability reporting and climate-related initiatives. In 2022, the RSC’s scope and responsibilities were updated to cover climate change. The RSC has oversight of climate-related risks, opportunities as well as initiatives that drive climate mitigation and adaptation strategies. Climate-related plans and progress are regularly reviewed by the RSC. The EXCO reviews and approves ST Engineering’s climate strategy and ESG decisions for the Group’s global operations. The EXCO is accountable to the Board for the implementation of the climaterelated strategy and direction. The Group Chief Strategy and Sustainability Officer assists the EXCO in ensuring that the impact of climate change is taken into consideration in all business strategies and operational plans. Various committees, working groups and focus teams across the Group and its business areas support the execution of these plans. Given the increased focus on climate change, the CCWC was established in 2022 as a key platform for integrating and executing climate-related efforts. The CCWC comprises global operations leaders across all our business areas and is chaired by the Group Chief Strategy and Sustainability Officer and sponsored by the Group Chief Financial Officer. Business leaders, regional heads and function heads are responsible for addressing the risks and opportunities in their respective areas of responsibility. Plans and actions needed are discussed at various management fora and incorporated into the strategic planning and annual budgeting processes. OUR STRATEGY: MINIMISING RISKS AND MAXIMISING OPPORTUNITIES ST Engineering recognises the risks and opportunities presented by climate change to our business. We are committed to communicating our approach and strategies for climate mitigation, adaptation and resilience to our stakeholders. In assessing the impact of climate change on our business over the short, medium, MULTIMODAL TRANSPORTATION REMOTE SUPPLY CHAIN MONITORING DIGITAL SOLUTIONS FOR OPERATIONS EFFICIENCY NAVIGATION SOLUTIONS CLIMATE ADAPTATION CLIMATE MONITORING & RESPONSE ZERO-WASTE AND CIRCULAR ECONOMY New Long-term Immediate Horizon MOONSHOTS STEP OUTS LONG-TERM OPPORTUNITIES Existing Capabilities CLIMATE OPPORTUNITIES MAPPING OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 19
and long-term, it is clear that the world’s focus on leveraging technology and innovation to address climate change presents opportunities for the Group. Maximising Opportunities Amongst our diverse sustainability-linked offerings is a range of climate-focused products and solutions. The three focus areas of our sustainabilitylinked businesses include: • Reducing GHG emissions – Our products and solutions reduce emissions by saving fuel, reducing waste, minimising road congestion and boosting energy efficiency • Solving urban and city challenges – Our Smart City deployments and Internet-ofThings (IoT) -based connected solutions optimise operational efficiency and improve energy savings. We also develop and deploy sustainable hybrid and electric transportation solutions • The circular economy – We design, build, operate and maintain sustainable waste management and waste-toenergy facilities that support eco-friendly waste disposal, management and wastewater recycling. Additionally, our aircraft and ship conversions provide a new lease of life through repurposing and reuse, thus saving significant resources We reviewed our climate change opportunities in both our existing business areas as well as emerging ones in 2022. We identified opportunities in energy management and efficiency, recycling and reuse, and are also exploring technology-enabled carbon verification solutions. A major focus in our 2022 climate risk and opportunity study is in commercial aerospace. The risk of the rising cost of carbon, the opportunities in resource and operational efficiency, as well as the shift towards greater adoption of Sustainable Aviation Fuel (SAF) are strong drivers for the commercial aerospace industry to decarbonise. For that reason, we began our TCFD journey with a focus on commercial aerospace. The opportunities identified build on existing capabilities in our commercial aerospace business. We continue to refine our suite of solutions to meet our customers’ decarbonisation goals and rising demands to transition to a lowcarbon economy. This includes growing the scope of circular economy-friendly businesses such as our Passenger-toFreighter (P2F) conversions, as well as advancing opportunities for materials recycling and reuse. This enables us to continue to partner with our customers on their decarbonisation journeys. One of the key functions identifying and coordinating climate-related opportunities is our GTO. Its roles include technology scanning and trend identification, Research and Development (R&D) data gathering and analysis, and the formulating of group-wide initiatives. This leads to the development of new products, technologies and solutions for our global markets. GTO works in close partnership with GEC, business area leaders, the Group Strategy and Sustainability OUR SUSTAINABILITY APPROACH Carbon Prospecting Dashboard At the 2022 World Economic Forum – Champions for Nature event in New York, ST Engineering Geo-Insights (our satellite data and geospatial analytics business) and the Centre for Nature-based Climate Solutions of the National University of Singapore, jointly launched the Carbon Prospecting Dashboard. This dashboard is an interactive, open platform software that supports the prospecting, development and management of nature-based carbon credit projects worldwide. It enables policymakers and investors to identify high potential areas that can be developed for high-quality carbon credits by taking into account factors such as the estimated yield of carbon credits. 20 ST ENGINEERING SUSTAINABILITY REPORT 2022
Office (GSSO) and ST Engineering Ventures. Externally, the GTO is plugged into the R&D ecosystem, particularly in the geographies we operate in. A Green Technology Task Force (GTT) was established in 2022 to synergise and dovetail the Group’s efforts in technology development for sustainability, including the objectives of CCWC. The GTT will develop a green technology roadmap for the near, medium and long-term to identify technology areas relevant for the Group based on the projected climate scenarios, potential risk and growth opportunities. It will also develop strategies for the deep technology areas identified for the Group in the five to ten-year horizon, contributing to business growth and new sustainability-linked revenue. Minimising Risks In assessing our physical and transition risks, the scenarios help us to quantify the potential direct damages and operational risks to the Group's assets and key suppliers. Consistent with the scope of our study, we selected scenarios relevant to our business, with a specific focus on commercial aerospace. We modelled the climate impact on assets utilising the Representative Concentration Pathway 8.5 scenario taken from the Intergovernmental Panel on Climate Change (IPCC), with a timeline of up to 2100. We also referred to Nationally Determined Contributions (NDC) scenarios and utilised sector specific decarbonisation scenarios including International Air Transport Association Fly Net Zero for aviation for transition risks up to 2050. For our other businesses, we conducted an initial highlevel analysis based on general decarbonisation scenarios such as the International Energy Agency (IEA) Net Zero Emissions by 2050 scenario and the IEA Sustainable Development scenario. Going through the scenarios and outcomes, we concluded that the business impact of climate change to the Group is low. However, in assessing the business impact of the energy transition, we identified three watchpoints: 1) We are cognisant that carbon tax and costs are likely to be passed to the Group through suppliers, for goods and services with embodied carbon. Accordingly, the carbon price and sector specific regulations is a crucial space to monitor. 2) Shifts in demand and innovation calls within our industries will need increased attention and action. These include tracking sectoral structural shifts such as competitors’ efforts to launch greener products, and investing into climate-related business and technology opportunities. 3) The impact on our supply chain from climate change needs to be examined in more detail. This is an addition to the challenges caused by other macro trends, such as China-U.S. trade relations, the Russian-Ukraine conflict and the rising inflation and energy costs. We have started the process of looking at our key suppliers and remain committed to strengthening our supply chain resilience. Note: Temperature rise compared to pre-industrial levels; International Air Transport Association, International Energy Agency, consultant analysis OVERVIEW OF SCENARIOS Scenario Description “Status Quo” 2ºc rise by 2050, 2.6ºc by 2100 Status Quo: • Emissions continue to grow at business-as-usual rates • Carbon price increases by committed rates • SAF adoption remains at today’s rate “Nationally Determined Contributions” 1.8ºc rise by 2050, 2.1ºc by 2100 Nationally Determined Contributions Aligned: • Some decarbonisation action taken • Based on published climate action plans “Net Zero” 1.5ºc rise by 2050, 1.4ºc by 2100 Net-zero Aligned: • Emissions, carbon price, sustainable aviation fuel adoption changes in line with International Air Transport Association Fly Net Zero scenario OVERVIEW OUR SUSTAINABILITY APPROACH ECONOMIC ENVIRONMENTAL SOCIAL GOVERNANCE INDEX 21
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