Ethics and integrity

Sonova and the United Nations Sustainable Development Goals (SDGs)
By adhering to good corporate governance and strictly ethical business practices, Sonova contributes to the SDGs 8 and 16. More information is provided in the corresponding section of this CR Report: Sustainable Development Goals.

Values, principles, standards, and norms of behavior

Corporate values

Our shared core values shape the corporate culture that defines and unites us as a company across all brands and regions:

Code of Conduct and internal regulations

Sonova’s commitment to compliance promotes ethical conduct at all levels of the organization. Compliance means that we follow the laws of each country in which we operate while also abiding by our own Code of Conduct and internal regulations.

Sonova’s Code of Conduct defines general principles for ethical behavior; it applies to all employees of the Sonova Group, its subsidiaries, and any contractors or vendors performing work for the Sonova Group or any of its subsidiaries. Written acknowledgment of the Code of Conduct is part of each new employment contract and inherent part of each supplier contract.  The Code of Conduct is available in 15 languages. The Code of Conduct was prepared by the office of the Group General Counsel in consultation with relevant stakeholders and approved by the Board of Directors.

The entire workforce was trained on the Sonova Code of Conduct when it came into force; all new employees of the Sonova Group including its subsidiaries are trained on its principles as part of their initial orientation. Suppliers are regularly instructed to ensure that they adequately understand and are able to comply with the Sonova Code of Conduct. Sonova’s internal audit function performs independent performance assessments on ethical standards and reports these to the Audit Committee.

The principles of the Code of Conduct are further refined in various internal guidelines and policies, including – but not limited to – anti-bribery, interaction with healthcare professionals, competition law, trade compliance, and Swiss Stock Exchange reporting obligations. Non-compliance with the company’s Code of Conduct or Sonova’s internal policies and guidelines triggers disciplinary action, including – where appropriate – dismissal and prosecution.

Trainings

Our continuing efforts to help us live our values of ethical behavior and unquestionable integrity were further underpinned during the 2018/19 financial year with the following training programs rolled out to all employees worldwide:

Mechanisms for advice and concerns about ethics

Compliance program

Compliance is a shared responsibility at Sonova. Ultimate responsibility and oversight lie with the Board of Directors. The Management Board is expected to lead by example. Local Compliance Champions ensure implementation of the group compliance program within each group company.

During the 2018/19 financial year, Sonova continued to strengthen the Group compliance program, with a particular focus on the integration of our acquired businesses into our compliance culture, along with training sessions and process enhancements in ethics and anti-bribery compliance. The compliance program covers all employees, including part-time workers and contractors.

No fines or non-monetary sanctions for non-compliance with laws and regulations were levied against the company in the 2018/19 financial year.

Internal grievance procedures

Sonova maintains an internal compliance helpdesk for general questions and advice regarding Sonova Group policies as well as a compliance hotline, which enables employees around the world to call to voice concerns related to potential violations of the Code of Conduct. The hotline is operated by an independent, qualified, third-party service partner and allows employees to raise concerns anonymously. The compliance hotline covers all main languages and is available 24/7 to internal and external stakeholders.

In 2018/19, we intensified our efforts to support Code of Conduct compliance with an internal communication and training campaign, “Speak-Up!", that was rolled out globally across the Sonova Group. The campaign included mandatory global compliance online training, which focused on the Sonova Code of Conduct and anti-bribery laws. We also established a new internal online platform as an additional channel to help employees understand Sonova’s Code of Conduct and to make it easy for everyone to report any violations. The “Speak-Up!" platform is available 24/7 in 15 languages.

All reports to the compliance hotline or “Speak Up!" online platform are forwarded to designated functions in the Sonova Group and followed up in a timely manner for further investigation and clarification. Reports are kept confidential to the greatest extent possible, and no complainant or witness will suffer retaliation because of a report made in good faith. The Audit Committee is updated quarterly on any concerns received through the hotline and the measures taken.

The requirements for conflict resolution, including e.g. the use of independent arbitration, are determined on a case by case basis.

Human rights and labor standards

Commitment and policies

Sonova respects and supports human rights, and not just in our business. This commitment is reflected in our Code of Conduct and Group Supplier Principles (SGSP) and embedded in the company culture. We believe in treating everyone with respect and fairness at all times. We value the varied experiences and backgrounds of individuals from around the world, different walks of life, and orientation. We are committed to conducting business in accordance with, and to aligning our codes and principles according to, internationally recognized standards of the United Nations (UN), the International Labor Organization (ILO), and the Organization for Economic Cooperation and Development (OECD).

Sonova is committed to ensuring that its operations and supply chain are free from modern slavery practices, including child labor, forced and bonded labor, and human trafficking.

As a sign of our commitment, Sonova became a signatory to the UN Global Compact in 2016, endorsing its ten principles in the areas of human rights, labor, the environment, and anti-corruption. All employees of the Sonova Group, as well as its business partners, are expected to comply with the Compact's principles.

Principles

Human rights as understood by the Sonova Group include the following principles:

Human rights due diligence

Sonova takes a systematic approach to managing corporate responsibility risks, both in its supply chain and in its own operations. Identifying and mitigating human rights risk is an integral part of our strategic risk management process, and it is reviewed and assessed together with all other business risks. Human rights risks are not currently included in the Group Risk Map, as we do not consider them key risks.

Sonova operates within a highly integrated business model: all manufacturing centers are owned by Sonova. Thanks to its ownership and financial control over its manufacturing sites, Sonova is able to enforce strong ethical business practices even in countries with higher risk of human rights concerns. Sonova’s local management teams and the corporate procurement team are permanently on the alert to prevent any breaches of such human rights principles as nondiscrimination, prevention of child and forced labor, or freedom of association and collective bargaining.

Assessments

In the 2018/19 financial year, no concerns were raised relating to human rights violations. Sonova’s internal audits and supplier assessments found no operations or supplier businesses in which the right to exercise freedom of association and collective bargaining may have been violated or put at significant risk. No operations or suppliers were identified as posing a significant risk for incidents of child labor, forced or compulsory labor, or illegal labor. As a consequence, no remediation or mitigation actions needed to be taken.

Training

In the 2018/19 financial year, Sonova rolled out a major global training program on its Code of Conduct for employees worldwide, as a reminder of the rights and obligations contained in it. The training also concerned aspects of human rights, such as nondiscrimination and nonharassment. As mentioned above, Sonova also launched the “Speak-Up!" campaign, opening additional reporting channels for employees to reporting concerns.

Anti-competitive behavior

Sonova’s Competition Law Policy describes the basic principles of fair competition in doing business. The existing Policy was updated in 2016/17 and rolled out globally to further strengthen employee awareness of competition law matters.

In the 2018/19 financial year, Sonova was not involved in any legal actions related to anti-competitive behavior or violations of anti-trust and monopoly legislation.

Corruption and bribery

Commitment, policies and guidelines

Sonova is committed to high standards of integrity in dealing with its business partners and to compliance with all applicable anti-bribery laws, including the Swiss Criminal Code, the UK Bribery Act, and the US Foreign Corrupt Practices Act. Sonova’s Anti-Bribery Policy was updated in 2018, refining the rules under the Code of Conduct and prohibiting all forms of corruption. The Policy, like the Code of Conduct, is available in 15 languages.

As a global healthcare company, we also recognize that many countries have specific regulations governing interactions with healthcare professionals. These impose further obligations which the company has translated into country-specific guidelines detailing what is permissible and what is not.

Key elements

Key elements of Sonovaʼs Anti-Bribery Policy are:

Communication and training

The Anti-Bribery Policy has been communicated to all directors, managers, and employees worldwide. All Sonova business partners – such as distributors, consultants, or suppliers – must commit to complying with the principles underlying the Anti-Bribery Policy. The Sonova Group Supplier Principles also cover ethical standards, including compliance with all laws and regulations on bribery, corruption, and prohibited business practices. These have been communicated to all our suppliers.

During the 2018/19 financial year, Sonova intensified its communication and training efforts covering anti-corruption policies and procedures. The publication of the updated Anti-Bribery Policy was accompanied by related online training, which was mandatory for all Sonova directors, managers, and employees. Suppliers are regularly instructed to ensure that they adequately understand and are able to comply with the Sonova Code of Conduct and the Group Supplier Principles. Furthermore, bribery and corruption were key topics raised during the global “Speak-Up!" campaign.

Data protection and privacy

Sonova protects the confidentiality and integrity of the data it holds, including the data of employees and customers, by technical and organizational means. We adhere to applicable data protection laws and regulations. We closely monitor developments in data protection law and incorporate its principles into our business processes and product design. We continue evolving our data protection program to meet the changing demands of the digital environment.

Sonova issued a Group Data Protection Policy, effective June 1, 2018. The policy is complemented by standard operating procedures and guidelines that break down the various data protection and privacy topics and provide more detailed guidance.

The Sonova Data Protection Office developed a mandatory online Data Protection Global Training for all employees; they are trained, both on Sonova’s Data Protection Policy and on the EU General Data Protection Regulation (GDPR) and data protection principles.

Responsible marketing and sales

Policies and guidelines

We adhere to strictly ethical sales and marketing practices in all our businesses. Sonova has issued worldwide guidelines to all its Group companies that explain its principles of responsible marketing. Their purpose is to ensure that all our marketing materials, as well as our interactions with customers, provide truthful, accurate, balanced, and non-misleading information, and to prevent inappropriate practices or false claims.

These guidelines are further supported by the worldwide Sonova Group Code of Conduct and the Anti-Bribery Policy. We have implemented refined country-specific codes of marketing and sales practices for Group companies in relevant markets.

Interactions with healthcare professionals

Sonova is committed to ethical interactions with healthcare professionals (HCPs). We interact with HCPs on a daily basis, in a variety of roles and settings. They include audiologists and acousticians, professors, surgeons, ear nose and throat specialists, or researchers. The following “Four-Leaf Clover Principles” govern our cooperation with healthcare professionals:

More detailed information on how we ensure ethical interactions with healthcare professionals is provided in the Sonova Global Anti-Bribery Policy as well as internal Standard Operating Procedures and country-specific guidelines for interactions with HCPs.

Advertising and marketing practices

To make certain that Sonova’s advertising messages to businesses and consumers are properly substantiated, we have established a claims management process and evidence database, maintained by the claims core team. Every claim has to go through a standardized review and approval process by a dedicated committee before being used. This forms an integral part of the end-to-end marketing process and follows formal guidelines on how to identify, substantiate, and administer a claim. The purpose is to ensure both compliance with regulatory requirements and a high quality of marketing communication.

Continuous supplier management

Commitment, policies and guidelines

Our suppliers are an integral part of our international value chain: a risk to them is also a risk to our company and our customers. Sonova requires that all our suppliers be as committed to sustainable development as we are.

The Sonova Group Supplier Principles (SGSP) are based on a range of international standards, customer requirements, and industry characteristics. These principles are non-negotiable; they are the first basis of contact with possible suppliers. Once a supplier has been approved as a Sonova partner, the SGSP, the General Conditions of Purchase, as well as the Sonova Code of Conduct are incorporated into all development and supply agreements. All suppliers have to certify in written form that they will now and at all times in the future comply with these standards and principles in all of their Sonova-related dealings, activities, products, and services. Sonova includes this certification in all supply agreements, and periodically requests suppliers to sign it again in confirmation. The Code of Conduct is available in 14 languages and the SGSP are available in English and German. Both documents are publicly available on the Sonova website.

The Supplier Principles require suppliers to put in place and maintain systems that ensure:

Identification of critical suppliers

In the 2018/19 financial year, we had 10 critical tier-1 and non-tier 1 suppliers. The items or materials we receive from critical suppliers have a direct impact on the performance of our products or come into direct contact with the skin of users. The main criteria for qualification as a critical supplier are related to dependency (critical components, technology, sustainability, quality, regulatory) but other factors, such as high volumes, are also considered. The classification of critical suppliers is carried out at the beginning of each new supplier relationship and is reviewed regularly.

Supplier risk evaluation and mitigation

The procurement department actively participates in the design and planning of Sonova products, solutions, and services. It makes sure from the earliest development stages that a risk assessment is performed for every component, based on the “Risk and Risk Mitigation Matrix” defined by the procurement department.

Sonova assesses all new suppliers on their management systems, including their compliance and management procedures, as well as on environmental, human rights, and labor practices. Our personnel audit and/ or visit potential supplier sites and inspect their management capabilities – through employee interviews, document reviews, on-site inspections, and third-party information searches – to assess potential risks and identify opportunities for improvement. If deficiencies are found, we require the suppliers to take corrective and preventive actions before we begin any active business relationship. A candidate that fails to meet the requirements will not be accepted as a Sonova supplier.

Even after careful supplier selection, we maintain a continuous supplier management process. We annually assess supplier environmental, social, and governance (ESG) risks and identify the risk level for each supplier. We manage our suppliers based on their risk level, regularly risk-auditing supplier sites. If a problem occurs, we require the suppliers to take preventive and corrective measures, and follow up on their progress until the issue is resolved.

We are committed not to use any conflict materials for any product supply to Sonova. Since 2007, Sonova has been proactively asking suppliers to review their sources of materials and confirm the absence of conflict minerals.

Supplier visits and audits

In the 2018/19 financial year, three critical suppliers were audited by Sonova; a further three critical suppliers were certified or recertified by a notified body, and therefore needed no additional audit by Sonova. All critical suppliers have been visited within the last two years in a less formal manner than an audit and assessed on social and environmental impacts. The Group Supplier Principles were always an important topic during the visits.

In 2018/19 we have not identified any critical tier-1 or non-tier 1 supplier as having significant actual or potential negative issues related to environmental issues, labor practices, or human rights matters. No suppliers, therefore, had to take corrective or preventive actions.

Examples of key performance indicators, targets and progress related to sustainable supply chain management until 2022/23 are the following:

Long-term supplier collaboration

Sonova strives for long-term collaborations and long-term contracts with its suppliers. In the 2018/19 financial year, 83% of the total purchase volume came from suppliers with more than 10 years of business relationship with Sonova and 96% of the total purchase volume came from suppliers with more than 5 years of partnership.

Sonova also offers its suppliers financial support to buy necessary equipment and technology.

Taxes

Sonova is a Swiss-based multinational enterprise, with operations almost entirely headquartered in the canton of Zurich where the Group develops, manufactures, and distributes products marketed under multiple brands. Sonova operates in more than 100 countries and owns local wholesale and audiological care distribution subsidiaries in over 30 countries. With this business structure, Sonova’s tax contribution encompasses various direct and indirect, corporate, and employee taxes, as well as customs duties, that make a significant contribution to societies around the world.

Tax strategy and policies

Sonova is committed to the highest level of tax compliance and directs its international flow of goods in line with all applicable tax regulations. Sonova’s tax approach is fully compliant with the spirit as well as the letter of local tax laws and regulations, reporting and filing obligations in all countries of operation as well as in complete alignment with relevant international standards.

As laid down in Sonova’s Code of Conduct, Sonova strives to attain the highest standards in complying with laws, rules, regulations, and reporting, filing, and disclosure requirements. This also applies to tax matters. The publicly available Sonova Tax Principles provide high level information on procedures and internal guidelines for tax compliance within the Sonova Group, that is for all legal entities that are majority-owned or otherwise controlled directly or indirectly by Sonova Holding AG.

Sonova’s commitment to tax transparency and responsibility is further expressed in policies and processes, mostly for internal use only, that guide compliance with direct and indirect taxes, as well as transfer pricing.

Approach towards taxation

Key elements of Sonova’s approach towards taxation are:

Organization and reporting

The responsibility for tax compliance lies with the Corporate Tax team, located in Switzerland, the US, and Germany. The team reports directly to the Group CFO. This function coordinates, educates, and supports local controllers in all Group companies to ensure that they achieve tax compliance in line with local and international laws, rules, regulations, reporting, filing and disclosures requirements as well as Sonova’s standards and policies. A Master Transfer Pricing file is prepared, along with local files that are coordinated with the local organizations according to the OECD guideline Action 13 and Sonova’s Transfer Pricing Processes.

Sonova has prepared an external Country-by-Country Report (CbCR) since 2016, and filed this voluntarily with the Swiss Federal Tax Administration in 2017. In 2018, the CbCR filed with the Swiss Federal Tax Administration was made available for automatic information exchange with the tax authorities worldwide, as foreseen by the BEPS initiative.

Information on earnings before tax, reported taxes, reported tax rate, cash taxes paid, and cash tax rate can be found in the Sonova Financial Report 2018/19. Sonova’s tax rates might be lower than industry group averages because of group-wide net operating losses and net operating losses from previous periods in subsidiaries of acquired groups. Furthermore, Sonova is a Swiss-based multinational enterprise with large activities, substance, risks and assets in Switzerland, and the Swiss tax rate is lower than the global average tax rate. Cash tax paid is largely influenced by advanced as well as final adjustment payments.

Bioethics

As a manufacturer of medical devices, Sonova is required by regulatory authorities to demonstrate the biological safety of any product with body contact by complying with the international standard ISO 10993-1. According to this standard, animal tests need to be considered in biological safety evaluations; in some cases, they cannot be completely avoided.

Sonova also provides components of cochlear implants to cochlear implant research centers and universities, where these are tested on animals for basic research concerning e.g. safety, feasibility or efficacy of new technologies.

Sonova does not carry out any animal testing in-house and only works together with third parties. We are committed to the “Three Rs” principle – replacement, reduction, and refinement – to limit animal testing as far as possible:

Replacement

Reduction

Refinement