Focus Topics – Combating corruption

Compliance and fair business practices

Impacts, risks, and opportunities

Impacts

Corruption weakens governmental systems designed to protect human rights by undermining accountability. It allows individuals or entities to bypass laws and tax regulations that sustain public services such as education, healthcare, and infrastructure. By cultivating strong ethics within Zehnder and expecting the same from our suppliers, we not only uphold high standards within our operations but also contribute to greater transparency across the entire supply chain, positively influencing external stakeholders.

Risks and opportunities

Corruption poses a risk across many industries, but it is generally perceived to be particularly prevalent in the construction sector, which Zehnder serves. While our operations are based in countries with low levels of public sector corruption, such as Switzerland, the Netherlands, and Germany, which rank within the top ten on the Corruption Perceptions Index, we also operate in regions with elevated corruption risks, including China (ranked 76/180) and Türkiye (ranked 115/180). Corruption in these regions can lead to inefficient resource allocation, stifling innovation and disrupting market dynamics, which ultimately impacts long-term societal well-being.

The consequences of bribery or corruption can be severe, leading to legal challenges and significant reputational damage. Therefore, we place a strong emphasis on transparency and preventative measures as part of our compliance strategy. Our Code of Conduct reinforces that we win and retain customers through the quality of our products, not through unethical practices. Fighting corruption offers an important social opportunity, empowering competition, protecting vulnerable communities, and promoting fair business practices.

Management approach

At Zehnder, we are committed to maintaining the highest standards of ethical behaviour, transparency, and compliance across all operations. Our compliance system follows a three-lines-of-defence model. The first line involves business units implementing internal regulations. The second line consists of legal and compliance experts providing oversight, while the third line, led by the Head of Group Internal Audit and the Audit Committee, ensures independent and objective assurance, advice and oversight on compliance matters. The Board of Directors and Group Executive Committee oversee the entire process, ensuring transparency and accountability throughout the company.

Zehnder’s compliance efforts are built on a solid compliance culture. In 2024, Group Legal and Group Compliance joined forces and are now being led by the of Group General Counsel.

The Group’s compliance management system is being re-evaluated and updated on a regular basis. The key potential risks are mitigated by a variety of measures, such as directives, guidelines, in-person training, e-learning, onboarding programmes, newsletters, risk assessments, and integration into internal audits. Each Zehnder company has a designated contact person for reporting legal and compliance incidents, with quarterly reports compiled at the Group level. Regular training on anti-corruption measures helps ensure that employees remain vigilant and aligned with the company’s compliance goals. In 2024, no cases of corruption were reported, which may indicate the effectiveness of our policies and measures in preventing misconduct.

In the preceding year, Zehnder introduced a new Anti-Bribery and Anti-Corruption Directive to provide further guidance beyond the Code of Conduct. This directive, approved by the Group Executive Committee, sets clear standards on business conduct, including rules concerning gifts and benefits, aligned with local and international regulations such as the Swiss Criminal Code, the US Foreign Corrupt Practices Act, and the UK Bribery Act. The directive reinforces Zehnder’s commitment to prioritising the quality of products and services over any form of corrupt practice, rejecting bribery in all its forms.

This directive also defines acceptable practices around gifts and benefits, ensuring they remain lawful tokens of appreciation rather than attempts to influence decision-making. It prohibits facilitation payments and explicitly prevents engaging third parties for corrupt purposes. These guidelines ensure that our business records are accurate and transparent. As a result, we are witnessing heightened awareness of the topic and appropriate escalation procedures in accordance with the directive.

To further demonstrate our commitment to preventing corruption, Zehnder’s CEO has supported the UNGC’s Call-to-Action from businesses to governments. This initiative promotes collaboration to strengthen governance and anti-corruption efforts, urging governments to view these as vital components of a sustainable and inclusive global economy, as well as key principles of the 2030 Agenda for Sustainable Development.

Our Code of Conduct

The Zehnder Group Code of Conduct is integral to our corporate culture, serving as a guideline for ethical, legal, and socially responsible behaviour. It informs our daily interactions with colleagues, customers, suppliers, and partners, helping us navigate complex business environments while upholding the highest ethical standards. Available in ten languages, the Code of Conduct is accessible to all employees across Zehnder’s global operations, providing a solid foundation for our compliance efforts.

The Code of Conduct covers the following key topics:

• Integrity, ethics, and compliance
• Conflicts of interest and insider trading
• Safeguarding corporate assets
• Communication
• Environment, health, and safety
• Fairness, respect, and anti-discrimination
• Diversity, equity, and inclusion
• Confidentiality and data privacy
• Competition and global trade
• Corruption and gifts
• Quality

Updated in 2023, the Code of Conduct reflects international best practices, including the UN Guiding Principles for Business and Human Rights, Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, and the OECD Due Diligence Guidance for Responsible Business Conduct. Alongside the Code of Conduct, Zehnder’s Legal and Compliance Directive outlines roles and responsibilities, ensuring that processes are effectively monitored across the Group.

The Zehnder Group Integrity Line

To ensure transparency and accountability, Zehnder operates an Integrity Line, providing a secure and confidential platform for employees and business partners to report suspected misconduct or violations of the Code of Conduct. Accessible in every country where Zehnder operates, the Integrity Line allows anonymous submissions in local languages. It serves as an alternative reporting channel for those uncomfortable with internal reporting procedures, ensuring that concerns can be raised without fear of retaliation.

Every report submitted via the Integrity Line is taken seriously and investigated thoroughly and independently by Group Legal and Compliance. These investigations ensure impartiality, and the findings are regularly reported to the Group Executive Committee and the Audit Committee.

This process guarantees that compliance concerns, including those related to bribery and corruption, are addressed at the highest level. In 2024, a total of nine whistleblowing cases were recorded through the Integrity Line, compared to eight cases the previous year. All cases were thoroughly investigated, with four addressed locally and five handled at Group level. Following an assessment by our Group Legal and Compliance team, five cases were found to be substantiated. Three cases were external customer complaints (all not substantiated), two were external cases of work accidents at our partners (both substantiated) and one was a product quality and safety concern reported externally (substantiated). In addition, three cases were internal complaints of which one referred to harassment and inequality (substantiated), one to OHS (substantiated) and one to potential breaches of our Code of Conduct (not substantiated). Two cases occurred in North America, six in Europe and one in China. In one case a warning was issued while in four cases ongoing precautionary measures related to the safety are being implemented (including an external safety audit at one of our production sites). In four cases, the investigation was discontinued as no wrongdoing could be established.

Zehnder’s Whistleblowing Guidelines protect employees and stakeholders from retaliation, harassment, or discrimination when reporting in good faith. This system helps foster a culture of transparency and trust, encouraging employees and partners to speak up against unethical behaviour.

Implementation and outlook

To implement the above management approach and policies, we set an ambition that is underpinned by several targets and monitored via specific KPIs.

Targets

Ambition: Maintain a good compliance framework, upskill and achieve zero corruption or antitrust incidents, with compliance reviews forming an essential part of internal audits

Target: Upskill in compliance through compliance training

• Status: In compliance training, in-person sessions for selected employees remain crucial, as leadership’s tone is most effectively communicated in person. During the reporting year, in-person legal and compliance upskilling was conducted by the Group Legal and Compliance team together with the Head of Group Internal Audit, including at the annual top management summer meeting, with management of selected business units, in Türkiye, or with Group Procurement. In addition, the Group continued its compliance e-learning programme. The dedicated training for employees, including management, generally comprises two e-learning modules per year, one in-depth module for specific groups (see the target “Focus on raising awareness for antitrust” further below) and one broader one on the Code of Conduct for all employees (see next paragraph in this section). These modules are mandatory.
  
  By the end of Q1 2025, all employees need to complete this mandatory Code of Conduct training. White-collar employees participate via e-learning, while blue-collar employees engage in classroom-based sessions, ensuring accessible and relevant learning experiences for all.
  
  As a follow-up measure to the revision of the Code of Conduct in 2023, we updated the “Dos and Don’ts” related to the Code of Conduct in 2024. In addition, various other compliance measures were continued, such as compliance newsletters, compliance dilemmas (where a short compliance case is sent to relevant employees via email that can be answered in the multiple-choice format) or quarterly risk management meetings.
• Outlook: With foundational compliance training complete, the focus will shift to ensuring these foundational trainings are included in the onboarding process for new employees and refreshing core compliance topics periodically. This ongoing approach aims to maintain high awareness levels and reinforce alignment with the organisation’s ethical standards.

Target: Establish a more granular risk management framework related to operations with a potentially higher risk score for bribery or corruption

• Status: We trained selected employees regarding bribery and corruption risk in 2023. The selection of the employees for the training took into account the roles (with a focus on gatekeeper functions as well as customer- and supplier-facing roles) and locations of the employees. To address transactions that carry potentially higher risks for bribery or corruption, the group has implemented additional anti-bribery and anti-corruption questions within the supplier onboarding and annual assessment processes. This approach facilitates more detailed risk analysis and bolsters due diligence efforts across operations. In addition, Group Legal and Compliance conducted risk-based special in-person training in countries with a potentially higher risk score.
• Outlook: The focus will now be on further refining these assessment processes and incorporating findings into broader supplier assessments. Ongoing efforts will help that high-risk transactions are managed with greater precision, upholding the organisation’s commitment to ethical conduct. Risk-based special in-person training will continue to play a pivotal role in our continued compliance efforts.

Target: Focus on raising awareness for antitrust

• Status: Antitrust was already a key compliance topic at the annual top management summer meeting in 2022. In 2024, the Group issued a new Antitrust Guidance with practicable dos and don’ts. The Antitrust Guidance is supported by factsheets providing more details and reinforcing our prevention measures. Furthermore, a series of in-person training sessions and e-learning modules focusing on antitrust and fair competition have been successfully delivered. These sessions targeted management, sales, and procurement roles – areas identified as most susceptible to antitrust risks – to enhance awareness and compliance within high-risk functions.
• Outlook: Moving forward, efforts will centre on reinforcing antitrust knowledge through periodic refreshers and continuous monitoring. Follow-up training will be provided as needed to sustain high standards of understanding and compliance in this critical area.

Metrics

GRI 2: General Disclosures 2021
Disclosure 2-27 Compliance with laws and regulations

GRI 205: Anti-corruption 2016
Disclosure 205-2 Communication and training about anti-corruption policies and procedures

GRI 205: Anti-corruption 2016
Disclosure 205-3 Confirmed incidents of corruption and actions taken

GRI 206: Anti-competitive Behaviour 2016
Disclosure 206-1 Legal actions for anti-competitive behaviour, anti-trust and monopoly practices