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

Rolls-Royce Holdings plc – Annual report – 31 December 2020

Industry: aerospace

ETHICS AND COMPLIANCE

Maintaining high standards of ethics and compliance is fundamental to our continued success. We work hard to create a working environment where everyone at Rolls-Royce and those we work with can be at their best.

We are committed to maintaining the highest ethical standards and have a suite of Group policies and processes in place to help us avoid any potential complicity in misconduct. Our Code of Conduct (Our Code) and associated policies set out the values and behaviours we expect everyone to demonstrate. They also provide guidance on how to apply these principles in our daily decisions.

In 2020, our mandatory ethics training focused on making decisions. This comprised of team discussions on real-life cases where people had their decision influenced by an authority figure, the group, time pressure or optimistic bias. 92% of in-scope employees completed the training (2019: 97%) by the year-end deadline. An extension to early 2021 was agreed with the European Works Council for employees based in Germany. 99% of managers certified their commitment to adhere to the principles set out in Our Code (2019: 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 colleagues may do so. During the year, as working patterns changed due to COVID-19, we continued to highlight the channels available to everyone if they had a concern. In addition, the ELG were prompted to be vigilant in ensuring business be conducted in line with our values and behaviours, Our Code and Group policies.

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 2020, 63 employees (2019: 85) left the business for reasons related to breaches of Our Code.

Anti-bribery and corruption

Our Code and associated policies clearly set out our commitment not to tolerate bribery or corruption in any form. In 2020, we strengthened our anti-bribery and corruption due diligence, including introducing revised procedures and a new supporting system. This also involved introducing further targeted training for key users of these procedures. In addition, for occasional users we made available a series of podcasts to explain the revised procedures. We conduct extensive due diligence into potential joint venture partners as well as supporting existing joint ventures in their ethics and compliance programmes.

Human rights and anti-slavery

Our human rights policy sets out our commitment to protecting 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 in the countries where we operate, particularly in the sale of products with dual use or defence application. Our due diligence activities to identify, assess, mitigate and prevent human rights related risks are embedded within our enterprise risk management system (see page 46) and global governance framework. Compliance is devolved to the relevant business functions and expertise, including export control, procurement and human resources.

During 2020, we initiated a review of our human rights policy and associated due diligence procedures, including a comprehensive benchmarking of industry practice, potential emerging legal requirements and voluntary guiding frameworks. Through this, we have identified four focus areas for future activity: rights of employees; communities local to operations; business relationships in the supply chain; and the sale and use of products and services. We expect to publish an updated human rights policy during 2021.

SAFETY, ETHICS & SUSTAINABILITY COMMIT EE REPORT (extract)

SAFETY, ETHICS & SUSTAINABILITY (extract)

Ethics and compliance

  • we discussed regulatory and prosecutorial matters;
  • the Committee monitored and reported to the Board on concerns raised through the Ethics Line and reviewed detailed reports of significant issues;
  • we reviewed the anti-bullying and harassment programme; and
  • we monitored progress of the Group’s ethics and complianceprogramme.

Sustainability

  • we completed a strategic review of our sustainability approach, which is reported in the sustainability report (see pages 34 to 45);
  • the Committee monitored progress against the sustainability strategy and its acceleration through COVID-19; and
  • we reviewed sustainability reporting and communication expectations and supported sustainability engagement during 2020. We considered improvement plans for 2021.

Principal risks

  • we undertook a review of the Product Safety, People Safety and
  • Compliance principal risks and supported the development of
  • more accurate risk indicators while scrutinising improvement plans;
  • and
  • we undertook a review of the People Safety Group risk appetite.

Role of the Committee

The Committee monitors the operation of the Group’s product safety governance frameworks, scrutinising the development and implementation of changes. We review the Group’s HSE performance, support improvement programmes, monitor incidents and investigate remedial actions. The Committee monitors the Group’s compliance with legislative, regulatory and ethical standards while supporting management to embed ethics and compliance culture and behaviours. We endorse 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. No changes were made in 2020.