Anti-corruption and anti-bribery matters, human rights, disclosures

Rolls-Royce Holdings plc – Annual report – 31 December 2021

Industry: aerospace

ETHICS AND COMPLIANCE

We are committed to maintaining high standards of ethics and compliance to ensure we do business in a sustainable way. We work hard to create a working environment where everyone at Rolls-Royce and those we work with can be at their best.

We aim to be proud of the way we behave, the way we do business and the way we pioneer the power that matters for our stakeholders. This means upholding high ethical standards underpinned by our values and behaviours to enable a working environment where everyone can be at their best and avoid any potential complicity in misconduct. Our Code of Conduct (Our Code) and associated Group policies and processes provide guidance on how to live up to our values in our daily decisions.

In 2021, our mandatory ethics training focused on diversity and inclusion. This comprised of team discussions on real-life cases where people had been excluded, and everyone was asked to consider how they can ensure they are being inclusive. 97% of in-scope employees completed the training (2020: 92%) by the year-end deadline. 99% of managers certified their commitment to adhere to the principles set out in Our Code (2020: 99%). We flow these principles to our suppliers through our Supplier Code of Conduct. All suppliers are contractually required to adhere to this or a mutually agreed alternative.

We actively encourage speaking up in the event of a question or concern and provide a variety of channels through which our employees and our stakeholders may do so, including the Rolls-Royce Ethics Line. Every year we issue an annual report to everyone to highlight key statistics and remind them of the importance to speak up. In 2021, we took the report fully digital and it was made available as a video report for everyone to watch.

We have a zero tolerance approach to misconduct of any kind and will take disciplinary action, up to and including dismissal, in the event of a breach of Our Code. In 2021, 45 employees (2020: 63) left the business for reasons related to breaches of Our Code.

In 2021, we continued to cooperate with the Serious Fraud Office under the terms of our UK Deferred Prosecution Agreement (DPA). The DPA expired on 17 January 2022.

Anti-bribery and corruption

Our Code and associated policies clearly set out our commitment not to tolerate bribery or corruption in any form. In 2021, all employees who have a high risk of being exposed to potential bribery and corruption were asked to complete virtual training based around four stories to help them identify and manage bribery and corruption risks. We also asked a respected external organisation to conduct an independent review of our ethics and compliance programme. They found that we have continued to evolve the programme and it is operating appropriately. There are a series of recommendations that will help us continuously improve our programme and we will implement these throughout 2022.

Human rights and anti-slavery

With reference to international standards, our human rights policy sets out our commitment to respect the human rights of our employees, and those who may be impacted by the operations, products and services in our value chain.

We operate in accordance with human rights and humanitarian law through strict compliance to strategic export laws and other sanctions regulations in the countries where we operate, particularly in the sale of products with dual use or defence application. Our activities to identify, assess, mitigate and prevent human rights related risks are embedded within our operating and decision making practices and global governance framework. We are committed to investigating cases where our activities may have a potential or actual adverse impact on human rights. This topic has oversight from the board level Safety, Ethics & Sustainability Committee (see page 105).

During 2021, we focused on strengthening our processes to protect the rights of employees in our supply chain. This included completing a comprehensive review of our sustainable procurement strategy and onboarding a third-party platform to conduct more in-depth sustainability assessments, including human rights criteria, with our supply chain partners.

SAFETY, ETHICS & SUSTAINABILITY COMMITTEE REPORT (extract)

SAFETY, ETHICS & SUSTAINABILITY (extract)

Ethics and compliance

  • we discussed regulatory and prosecutorial matters;
  • the Committee assessed and reported to the Board on concerns raised through the Ethics Line and reviewed detailed reports of significant issues;
  • we assessed the Group’s export control risk; and
  • we monitored progress of the Group’s ethics and compliance programme.

Sustainability

  • the Committee reviewed the decarbonisation strategy and net zero road map ahead of the publication of the net zero report in June 2021;
  • we discussed progress against 2030 sustainability targets;
  • we monitored the preparation and impact of our participation at COP26; and
  • we assessed climate change risks and the Group’s approach to TCFD requirements.

Principal risks

  • we undertook a review of the product safety, people safety, compliance and climate change principal risks.

Role of the Committee

The Committee monitors the operation of the Group’s product safety governance frameworks, scrutinising the development and implementation of changes in process and practice, as well as supporting performance delivery. We review the Group’s HSE performance and culture, support improvement programmes, monitor incidents and investigate remedial actions. The Committee monitors the Group’s compliance with legislative, regulatory and ethical standards whilst supporting management to embed a strong ethics and compliance culture and behaviours. We review, challenge, and support the Group’s sustainability strategy, track progress towards sustainability targets and review the environmental impacts of products and operations. We continuously review the product safety, people safety, compliance and climate change principal risks.

The Committee’s responsibilities are outlined in its terms of reference, available at rolls-royce.com. We review these annually and refer them to the Board for approval. During 2021, we updated our terms of reference to include the responsibility to review progress and delivery against agreed climate change metrics, targets and objectives whilst managing climate change as a principal risk in the delivery of the Group’s strategy.

During the year, given the increased focus on sustainability, we increased the membership requirement from a minimum of two to three independent Non-Executive Directors. We also increased the number of meetings from three to four to ensure we had sufficient time to address our climate-related agenda.