Regulatory frameworks and assurance

Assurance

In addition to Essity being reviewed by external auditors, its operations are subject to external reviews and monitoring by, among others, the Swedish Financial Supervisory Authority and Nasdaq Stockholm. Third-party assurance is conducted in conjunction with, for example, life cycle assessments. Essity’s own control systems include segregation of duties in critical processes and defined management responsibilities with regard to internal control. In addition to this, Essity has a separate internal audit function that continuously works to evaluate and improve the effectiveness of governance processes, risk management and internal reporting. The unit contributes to the maintenance of high standards of business ethics and is involved in the monitoring of Code of Conduct compliance, including through audits. To support its work, the internal audit unit has a number of steering documents and policies.

External regulations and internal steering documents

The regulations most relevant to Essity’s sustainability governance concern emission rights trading, energy efficiency, waste management, the Industry Emission Directive (IED), general product safety, medical devices, materials for food contact, chemical substances, cosmetics, biocide products and electronics. Essity monitors the development of all relevant regulations and ensures the environmental and human safety of all its products.

Essity’s Code of Conduct is the Group’s steering document for responsible business operations. All of the Group’s employees are subject to the Code of Conduct, which is based on international standards, including the UN Declaration of Human Rights, the ILO Core Conventions, the OECD Guidelines for Multinational Enterprises, the UN Global Compact Principles and related legislation. Systematic activities, such as risk analyses, regular training, audits and other monitoring processes are in place to ensure compliance with the Code. Essity also uses the Supplier Ethical Data Exchange (Sedex) tool to make risk assessments of its production units. Sedex is a global database, in which companies share information about their production units with their customers. The information applies to the areas of labor standards, health and safety, the environment and business ethics.

All employees are regularly trained in the Code of Conduct, including human rights. In addition to this, the Code of Conduct is included in all onboarding programs across the company. Essity offers its employees a number of internal channels to report violations of legislation or the Code of Conduct. Employees also have the opportunity to use a whistleblower system managed by an external party. There is also, wherever the law permits, a possibility to report breaches anonymously. The external whistleblower system is currently available for use in some 30 countries. Essity expects its joint-venture companies to implement a Code of Conduct and guidelines equivalent to those stipulated in Essity’s Code of Conduct.

The company’s Code of Conduct and anticorruption policy represent the most important steering documents in the area of anticorruption. An evaluation and risk analysis of the company’s anticorruption program is conducted each year. Employees in particularly vulnerable positions, as buyers and sellers, must undergo special anticorruption training, both online and through classroom instruction.

Essity’s approach for ensuring respect for human rights in conjunction with the company’s operations is based on the UN’s Guiding Principles on Business and Human Rights (UNGP). In accordance with this framework, due diligence audits are conducted regarding the management of the company’s impact on human rights. Essity has assessed the risks and impact regarding human rights using a Group-wide risk assessment that identified three main risk areas:

• Labor-related risks, including occupational health and safety, discrimination, forced labor and right to equal pay for equal work in Essity’s direct and indirect operation (supply chain).
• Land and water-related risks attributable to the sourcing of timber, fiber and pulp – indigenous communities’ rights should be given particular consideration where appropriate.
• Risks attributable to the waste generated in conjunction with the use of Essity’s products and how that affect people and their environment.

Essity has a program for compliance with competition rules. The training program is mandatory for employees who encounter these issues during the course of their work. The program includes risk analysis, e-learning, guidelines and recurring training sessions.

Essity has established a position paper, in which the company explains its view on the following areas: animal testing, flushable products, genetically modified organisms (GMO), palm oil, tissue fiber and triclosan (biocide). The position papers are available at www.essity.com/sustainability.

Compliance and monitoring

Essity’s Compliance & Ethics unit is responsible for ensuring that applicable steering documents, training and systems are in place to ensure that the company meets internal and external Code of Conduct requirements. The function also manages the company’s whistleblower service.

Essity’s internal audit unit monitors compliance with the Code of Conduct through audits. The operations to be audited are determined by such factors as the social and environmental risks in the country of operation or whether there are any indications of non-compliance with Essity’s policies. The content of the audits emanates from Essity’s Code of Conduct, while the approach and methods are based on the SA8000 standard. The audits are conducted by cross-disciplinary teams from Essity, and include representatives from the Internal Audit, Human Resources and Sourcing functions. The audits involve a review of documentation, inspection of the facility with a focus on health and safety, and interviews with managers, employees and union representatives. Every audit results in a report and action plan for the audited unit, which are followed up. The results of the audits are reported to Essity’s Board via the Audit Committee.

Essity’s business practice audits are conducted by the Internal Audit unit. The audits focus on business ethics and Essity’s relationships with customers, suppliers and authorities. A large number of interviews are performed with managers and employees to ensure the effectiveness of the control environment and challenges in the local environment.