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Smiths Code of Business Ethics ('the Code') is based on 12 principles:

1 We comply with the law

2 We compete fairly

3 We act with integrity in all our business dealings

4 We treat our suppliers, partners and customers properly

5 We treat our co-workers respectfully

6 We contribute to healthy, safe and secure workplaces

7 We respect the environment

8 We contribute to our communities

9 We participate in relevant public debates

10 We respect human rights

11 We have high standards of financial record-keeping and reporting

12 The Code applies to all of us

 

In 2008, Smiths introduced a revised Code of Business Ethics ("Code") that sets out 12 broad principles for how Smiths does business: these standards are based on a set of common values based around integrity, honesty, fairness and transparency. These principles cannot address all areas or all circumstances, but they provide a framework for wider policies and programmes. The Code aims to offer clear standards and guidance for the business dealings of every employee. The Code applies to all businesses and employees of Smiths Group worldwide. The Code, in 12 languages, has been provided in a printed copy format and on the Smiths intranet for each employee.

Smiths Code of Business Ethics is available to the public on the Smiths website, www.smiths.com.

In 2009, in order to communicate the revised Code and provide ethics training to individuals across the Group, a Smiths Code of Business Ethics training course was created. In collaboration with Global IT this course was launched online through a custom-built electronic training platform, the Global Learning Resource (GLR), and installed on a Smiths training portal available through the intranet. Smiths employees have been trained on the revised Code of Business Ethics through the intranet, portal or classroom-style training.

The GLR and portal is designed to support future employee training in the areas of business ethics, compliance, safety, and security.

Managing corporate responsibility

The Code Compliance Council for the Code of Business Ethics ('the Council') acts as the steering committee for the ethics programme. The Chief Ethics Officer has the responsibility to report to the Audit Committee periodically on ethics issues and suspected or actual breaches of the Code. The Council and its Chair are assisted by a dedicated, full-time Ethics and Compliance Manager for Smiths Group.

Compliance support to Smiths businesses is provided through legal counsel serving the businesses and other experts who provide advice, export control policies, education, training, guidance materials and risk assessment tools.

Responsibility for managing specific issues lies at different levels within Smiths Group, depending on the nature of the issue and how it can most effectively be managed:

• environment, health and safety (EHS) issues are the responsibility of line management and are overseen through a Group-wide EHS steering committee, a technical implementation committee and local co-ordinators;
• security, also a line management responsibility, is controlled through a Group-wide Security committee;
• employee issues are managed by line management and through the Human Resources function;
• supplier and customer programmes are managed by each business; and
• community programmes are principally managed locally, although there is also some Group-level activity.

Smiths maintains an Ethics Helpline, accessible by both phone and email, to answer queries relating to ethics issues, as well as to act as a confidential reporting line for concerns and allegations. The Helpline is available worldwide to all Smiths employees. There are toll-free phone numbers in approximately 40 countries where Smiths has businesses staffed by individuals who speak the local language. The Helpline is managed by the Chief Ethics Officer, assisted by the Ethics and Compliance Manager.

Health and safety

Smiths is committed to conducting all its activities in a manner which achieves the highest practicable standards of health and safety.

In 2007 Smiths made the commitment to achieve certification to the occupational health and safety management system standard OHSAS18001 by July 2010 at all of its manufacturing facilities with more than 50 employees.

The success of OHSAS18001, together with other targeted initiatives, is measured against the recordable incident rate (RIR) performance. In 2007, we established a RIR goal of 1.5 recordable incidents per 100 employees to be achieved by mid-2010. We have outperformed this goal early, achieving a RIR of 1.03 in 2009, a 46% reduction over our baseline 2007 performance of 1.89 RIR. Since 2004, we have achieved a steady reduction in our RIR with 2009 being our safest on record.

Performance against targets

Target (August 2007 – July 2010)	2009 result
OHSAS18001 certification Certification at all sites with more than 50 employees by July 2010	19 out of 88 certified
Recordable incident rate Better than 1.5 per 100 employees	1.03
Lost time incident rate No target set	0.51

 

Environment

Smiths is committed to ensuring that, as far as is reasonably practicable, any detrimental effects of its activities, products and services upon the environment are minimised. In practice, this means using performance-based environmental management systems to drive improvement throughout the business.

The environmental management system ISO14001 is required at all Smiths manufacturing sites with more than 50 employees. New acquisitions, or businesses that grow above the 50 employee threshold, are required to seek certification. Currently, 67 out of 88 manufacturing sites are certified. ISO14001 ensures that a culture of continual improvement is embedded throughout the organisation.

Three-year targets were set in August 2007 to be achieved by July 2010 for greenhouse gas emissions, waste disposal and water consumption. Each of our key indicators has shown improvement, currently beating our goal. Progress is reported below.

Performance against targets

Target (August 2007 – July 2010)	2009 result
Greenhouse gas emissions No absolute increase over the 2007 baseline	9% reduction
Total non-recycled waste 9% reduction over three years normalised against turnover	31% reduction
Water consumption 9% reduction over three years normalised against turnover	21% reduction

Employees

It is the Company's policy to provide equal opportunities for employment. Smiths recruits, selects and promotes employees on the basis of their qualifications, skills, aptitude and attitude. In employment-related decisions, Smiths complies with all applicable anti-discrimination requirements in the relevant jurisdictions, including concerning matters of race, colour, national origin, gender, marital status, sexual orientation, religious belief, age, or physical or mental disability. Disabled people are given full consideration for employment and subsequent training, career development and promotion on the basis of their aptitudes and abilities.

All Smiths employees are treated with respect and dignity. Accordingly, any harassment or bullying is unacceptable. Smiths respects the right of each employee to join or not to join a trade union or other bona fide employee representative organisation. Smiths believes in good communications with employees and in promoting consultation, co-operation and teamwork on matters of mutual concern.

Smiths offers employees in the US and the UK opportunities to participate in share plans that enable employees to benefit from increases to the company's share price and to align their interests more closely with those of shareholders.

Smiths invests in employees' skills and capabilities, which in turn helps the Company and its businesses to succeed. Current priorities for Smiths are talent development, succession planning and employee engagement.

Developing talent

Smiths has a number of development programmes designed to evaluate and enhance core leadership competencies. These development programmes are designed and tailored to address a wide range of learning styles, incorporating workshops, experiential learning, mentoring, team working and project experience.

Smiths continues to be actively involved in training and developing young people, including initiatives designed to ease the transition from school or study to work. For example, Horizons is a two-year programme for newly and recently appointed graduates and those early in their career. It provides an understanding of the Group and the business world in general, and develops personal and team-working skills.

Succession management

Smiths operates a systematic succession management process for leadership roles. Our businesses identify leadership talent and development needs using common tools and a consistent language. Development plans are monitored by senior management to optimise effective succession opportunities.

Employee engagement

Smiths provides information to and communicates with employees as an important part of doing business. Employees are regularly provided with a wide range of information concerning the performance and prospects of the business in which they are involved by means of employee councils, information and consultation forums, and other consultative bodies that allow their views to be taken into account.

 

Communities

Smiths contributes positively to the communities in which we operate. In addition to providing employment opportunities and playing a beneficial role in local economies, we support community involvement through charitable giving and education initiatives.

This activity is primarily managed at a divisional level. However, Smiths does offer some support to community and charitable organisations from a central budget. Consideration is given to charities and organisations that demonstrate how a donation will enhance the well-being of people through improved education, health and welfare or environment. Projects local to our operational facilities or connected to the industries in which we operate are the primary focus of Smiths support.

Education is a major recipient of our support. For example, working together with the Royal Academy of Engineering in the UK, the Smiths Technology Education Programme is now in its third year. Through the programme, school students are offered the opportunity to participate in summer school courses in engineering and technology. Those students who then go on to take an engineering or technology degree course at university are eligible to receive Smiths bursaries. Smiths also supports the Centre for the Study of Terrorism and Political Violence at St Andrews University by funding a research assistant.

Smiths divisions also deliver significant support. The Smiths Medical Chair of Anaesthesia and Critical Care at University College Hospital is an important example of long-term funding that has enhanced medical care.

In addition to donations, Smiths people devote time to local community projects around the world. For further information, please see the 2009 Corporate Responsibility Report at www.smiths.com/responsibility.

Export & Import controls

All sales of defence equipment and export-controlled products or technology are undertaken in accordance with government export and import approval procedures and regulations. These regulations include the European Union export control regulations, the United States International Traffic in Arms Regulation (ITAR) and Export Administration Regulations (EAR), and the laws of several other countries in which these sales are made or the products used. These laws restrict or prohibit export of certain items to specific countries. In addition, Smiths adheres to all relevant government guidelines designed to ensure that products are not incorporated into weapons or other equipment used for the purposes of terrorism or abuse of human rights, with internal controls to ensure compliance with these guidelines.

FTSE4Good

In 2009, Smiths was again awarded membership of the FTSE4Good Index which acknowledges companies that meet globally recognised corporate responsibility standards. Whilst we are not complacent about the ongoing work required, we were pleased to merit again this external recognition of our corporate responsibility initiatives and business ethics programme.