The company secures its future by passing on its wealth of knowledge to the next generations.
Sustainable development is a continuous, never-ending process. But as a company, our decisions and actions can and should make contributions to a sustainable development which meets current requirements and at the same time makes it possible for future generations to meet theirs. We see sustainability as an option- and action-oriented concept for assessing a development process.
What we understand by sustainability.
Our capacity to act is made more secure by consistently including non-business aspects in the management processes. But in our opinion this capacity can only be increased on the basis of business success. Aspects of sustainable development must be considered in each decision situation at differing levels and given differentiated but appropriate weighting.
The standard description of sustainable development relies on the classic triangle of “environment - business - social responsibility”. Although this provides a clear picture, it does not adequately represent everyday business life with its diverse interactions and dependencies both inside and outside the company. Recognizing this, we developed a new understanding of sustainable development which clearly addresses the various interdependencies, sets priorities, defines and integrates the central aspects. Practical experience shows that an honest, comprehensive and integrative understanding of sustainability as a central basis requires the reinterpretation and reorientation of our success factors.
Which success factors do we consider?
If we are to be successful on our strategic development path, we must consider six success factors: Effectiveness, Efficiency, Resources, Solidarity, Impact and Fairness. In an environment shaped by global competition, these factors must be reviewed daily in collaboration with our customers, suppliers, investors, employees and other key stakeholder groups. Mutual respect and fairness, discussion and understanding, assessment and balancing are essential prerequisites for this. Maximizing one success factor at the expense of others would pose just as much of a long-term threat to our success as neglecting one of them.
EFFECTIVENESS: “Doing the right things.”
Effectiveness describes how well an objective is accomplished, how effective actions and measures really are. “Doing the right things” initially means meeting our customers’ requirements in terms of performance, quality, service and price. Doing the right things means constantly questioning whether we are active in the right markets with the right products and services. But effectiveness also means constantly developing and harnessing technology potential.
EFFICIENCY: “Doing things right.”
Efficiency is the classic indicator of economy, describing the input (resources) required to achieve an objective. From the point of view of investors, an adequate return on capital is a measure of efficiency. Their requirements can only be met if decisions are based on the principle of profitability. Value-based thinking and continuous improvement processes are essential factors in this. But our long-term efficiency also depends to a large extent on the general conditions and associated decisions on investments and locations.
In a global, competitive world, high levels of efficiency and effectiveness are key to securing the continued existence of the company. The degree of efficiency and effectiveness required for success is determined by competitors, customers and investors. These are exogenous factors which we cannot ignore. Alongside this, the characteristics of the other four success factors are of major importance in achieving the efficiency and effectiveness to compete on the markets.
RESOURCES: “Make careful use of everything we have.”
All economic activity is based on the premise that resources are available in the required quantities and qualities. We define four categories of resources: financial capital, human resources, intellectual capital and natural resources.
Resources have to be procured and maintained. In this dynamic process we face constant rivalry from other companies and substitution competition from other materials. Skilful management of resources lays the foundations for our business success, and only by achieving business success can we secure resources in the required quantities and qualities.
Financial capital
ThyssenKrupp Steel is allocated financial funds from ThyssenKrupp AG and is therefore not directly involved in the capital market. The Group’s shareholders must receive a return on their investment commensurate with their risk (dividend and value enhancement), as must capital lenders (interest). Commensurateness depends on the solidity of the consolidated accounts (creditworthiness in the narrower sense) and the risk of future income (volatility). In turn, these factors are closely linked to our corporate strategy, and here in particular to our portfolio. An important element in this is that our capital costs are determined by the capital markets/investors by evaluating the risk involved and thus the level of return.
Value-based management at ThyssenKrupp Steel places the interests of our investors at the center of our business actions. But this does not mean that we neglect the justified interests of our employees, suppliers and customers. Anchoring value management at operating level is necessary to secure our production sites in the global marketplace and allow the company to offer viable jobs.
Ensuring we achieve an appropriate return on capital generally requires value-based planning and decision-making, rigorous controlling and benchmarking of results, and employee incentives as part of the compensation system to encourage value-based actions.
Value management system
Human resources
One central resource - if not the central aspect - are our employees. They place their manpower, their motivation, their knowledge and their know-how at our disposal. But as a company, our right to utilize these resources is limited to the duration of the contract of employment. To ensure we retain these valuable resources, we have to strike the right balance of give and take. And our part involves more than just monetary compensation; of equal importance are aspects such as occupational health and safety, training opportunities, personnel development measures and the future viability of jobs.
ThyssenKrupp Steel’s management philosophy incorporates open and continuous communication between board, management and employees at all levels. This exchange of information creates the basis for a high level of motivation in the workforce and guarantees trusting collaboration in working toward our common corporate goals. As a result, our day-to-day business is guided by valuebased principles. We support this by providing development programs for senior and junior executives, who as multipliers also communicate our strategic principles to their employees.
Intellectual capital
The company acquires intellectual capital through the work of its employees (or suppliers). It is not owned by the company. Despite this, only a very small share of the intellectual capital appears on the assets side of the balance sheet.
Intellectual capital includes our values, convictions and conduct, the knowledge and experience of present and former employees insofar as it is recorded in databases, systems and processes, as well as intangible rights such as patents, licenses, brands and copyrights.
To secure and expand our intellectual property, we attach major importance to both the technical qualifications (knowledge and skills) and the social competencies (communication, networking, team-working ability) of our employees. It also requires investment in cooperation with educational institutions and networking with innovators both inside and outside our sector.
Natural resources
As a company in the steel industry, we require substantial amounts of renewable and non-renewable natural resources. We handle these resources responsibly and economically, as in many cases their use - especially for energy generation - is irreversible from an economic and technical perspective. As we are reliant on access to natural resources, the extent and ways in which we use them influences our capacity to act in the long term. If we wish to preserve this capacity, we must successfully meet the economic and technical challenges involved in the conservation of resources.
IMPACT: “Minimize impact in everything we do.”
Both material and immaterial influences must be considered when protecting our society from the impact of economic activities. Basically, any form of output causes an impact. Impacts always occur at the interface between stakeholder groups and systems. Mankind itself, flora and fauna, but also political, social and cultural systems can be impacted by economic activities. The degree of impact essentially determines the harmfulness of these activities and thus their justifiability. The more we succeed in protecting the environment from impacts, the greater the acceptance of our activities, and the more we can expect a tolerant, understanding and supportive response in extraordinary situations.
SOLIDARITY: “Look at the bigger picture in everything we do.”
Solidarity means recognizing human dignity as the greatest good and calls for overall commitment and responsibility, both for the social system in which our company operates and for the ecological system which surrounds it. Solidarity means pooling individual interests to serve the common good. That requires mutual consideration and balance, but it also means that those in positions of corporate responsibility should never use their own strength to the detriment of those who are weaker.
JUSTICE: “Remain decent and fair in everything we do.”
Justice for our company means acting within the law in all our decisions, granting everyone their rights and treating everyone as equals. We must promote justice, and if necessary actively enforce it. Justice calls for fairness and honesty, treating equal things equally and unequal things unequally. Justice also means restraint in enforcing the interests of our company and its management, in the knowledge that too much or too little can damage our relationships with our stakeholder groups.
Maintaining capacity to act as the prime objective or the interaction of the six success factors
We regard maintaining our ability to act as the prime objective of our business activities. Only if we have sufficient latitude to act will we be in a position to review strategic options and select the optimum solution. The greater this latitude, the greater our independence from external constraints.
Efficiency and effectiveness are both essential to and at the same place restrictions on achieving success in the other four factors. Our quest for the capacity to act inevitably leads to conflicts. Long-term, sustainable success is only possible if we succeed in resolving these conflicts by finding the right balance of all six success factors.
The sustainability compass below illustrates our understanding of sustainability and the interaction of all six success factors.
The sustainability compass
In this concept, effectiveness and efficiency are central to all decisions and actions. Effectiveness means offering our customers the products and services they need in the required quality and at competitive prices. To remain successful in the market long term, we must achieve this through excellent productivity with an optimal balance of expense and income. Efficiency is represented symbolically as the opening angle of the equal-sided compass. The opening angle and the length of the legs determine the area circumscribed by the compass. The larger this area, the greater the latitude for a sustainable corporate policy. The degree of efficiency and effectiveness is the dominant factor.
However, it would be wrong to assume that this capacity for action should be extended and utilized to its limits in all areas. Within the area circumscribed by the compass, there are numerous forces acting on the other four success factors. In a large variety of different ways, the interactions and interdependencies among these factors influence the extent to which our economic objectives are met.
In implementing this sustainability concept, we are not striving to maximize an objective, but rather to achieve an optimum balance among the success factors which will secure the company’s capacity to act. We must work every day with our customers, employees, authorities and other stakeholder groups to achieve this balance. It can be seen as optimum when our capacity to act is maintained and expanded in the short, medium and long terms.
To secure and expand our capacity to act, we need to be innovative. Only by being innovative will we be able to identify new technologies, recognize the changing requirements of our existing and potential customers and ultimately sell marketable products at adequate margins. Expressed in terms of the sustainability compass, we must continuously check whether the compass is still positioned in the right place, or whether we need to adapt our product portfolio and position the compass at a different point which will enhance our capacity to act. This is a dynamic process which calls for constant adaptation and innovation. Only through innovation will we be able to develop the company sustainably and successfully.
continue with: How we assess developments in our field