CR focus areas
Ethics, risk and compliance
Business ethics and legal compliance
Code of Conduct and internal regulations
Sonova’s commitment to compliance promotes ethical conduct at all levels of the organization amongst colleagues but also in our dealings with our stakeholders. Compliance means that we follow applicable laws and regulations of each country in which we operate while also abiding by our own Code of Conduct and internal regulations. The ultimate oversight for business ethics and compliance lies with the Board of Directors.
Sonova’s Code of Conduct defines general principles for ethical behavior; it applies to all employees of the Sonova Group, all its subsidiaries, and any contractors or vendors while performing work for the Sonova Group. Written acknowledgment of the Code of Conduct is part of every new employment and supplier contract.
The Code of Conduct is reviewed on a regular basis and revised when necessary. It was prepared by the office of the Group General Counsel in consultation with relevant stakeholders and was approved by the Sonova Board of Directors on August 23, 2012, updated in September 2019, and reapproved by the Board of Directors. The revised Code of Conduct contains enhanced content on essential topics such as health and safety, corporate responsibility, minimization of our environmental impact, responsible market practices, dignity and human rights, diversity and inclusion and prevention of any form of discrimination. It has also been updated for a more modern appearance with simpler reading and navigation to ensure that all stakeholders easily understand the content, what action to take in case of a violation, but also the consequences in case of violation. Compliance hotline numbers are on the back for easy access and the number of pages has been substantially reduced. The revised version of the Code of Conduct is now available in 18 languages.
Each employee is required to be trained on the Code of Conduct. All new employees of the Sonova Group, including all 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 Code of Conduct. The annual mandatory Global Compliance training is rolled out to all Sonova employees worldwide, including part-time employees. The training focuses on the content of the Code of Conduct and how to identify and report potential violations, such as conflict of interest, harassment, fraud, discrimination, corruption or breach of secrecy. In 2019/20, we introduced a new Group target of >95% on-time completion for employee annual mandatory Global Compliance training. This annual target was achieved with a training completion rate of 95.3%.
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. The requirements for conflict resolution, including e.g. the use of independent parties, are determined on a case by case basis.
Sonova’s internal audit function performs independent performance assessments on ethical standards and reports these to the Audit Committee.
Group Compliance program
Compliance is a shared responsibility at Sonova. Ultimate oversight lies 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. The Group Compliance program covers all employees, including part-time workers and contractors.
During the 2019/20 financial year, Sonova continued to strengthen the Group Compliance program, with a particular focus on our compliance culture, including training sessions (at leadership and at field level) and process enhancements in ethics and anti-bribery compliance. We reinforced overall Code of Conduct compliance with “Speak-Up!”, an internal communication and training campaign rolled out across the Sonova Group worldwide with a particular focus on employees with less access to online reporting channels, such as those in operations or audiological care stores. Its two main goals are to increase awareness of the revised Code of Conduct and to foster a culture where employees feel comfortable about raising compliance questions and reporting compliance issues. Posters are visibly displayed in numerous locations and clearly indicate how to easily report non-compliance.
No fines or non-monetary sanctions for non-compliance were levied against Sonova in the 2019/20 financial year.
Internal grievance procedures
Sonova maintains an internal compliance helpdesk for general questions and advice regarding Sonova Group policies as well as offers access to an independently operated compliance hotline, which enables internal and external stakeholders 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 and third parties to raise concerns anonymously. The compliance hotline covers all main languages and is available 24/7. The internal “Speak-Up!” online compliance platform is also available 24/7 in 15 languages.
All reports through these compliance channels are forwarded to designated functions in the Sonova Group following a specific process and flow-chart and followed up in a timely manner for further investigation and clarification. Reports are kept confidential to the greatest extent possible. No complainant or witness will suffer retaliation because of a report made in good faith. The Audit Committee of the Board of Directors is informed quarterly about any concerns received through the compliance channels, on the number and types of cases, and on measures taken.
Corruption and bribery
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 is available in 15 languages. Key elements of Sonovaʼs Anti-Bribery Policy are:
- Bribes: As a matter of principle, Sonova avoids dealing with third parties known or reasonably expected to be paying bribes in any form. Potential bribery/corruption risks are therefore an integral component of our business partner due diligence, which is performed not only before entering a business relationship but also regularly thereafter, following a pre-defined process.
- Facilitation payments: Sonova does not permit making facilitation payments.
- Direct or indirect political contributions: Sonova does not allow donations to political parties.
- Charitable contributions and sponsorship: Sonova, its employees, and representatives may make contributions to support charitable causes, subject to appropriate due diligence (including the amount contributed, and the nature and purpose of the charity’s activities). Contributions should be made for bona fide purposes and only where permitted by local law.
The Anti-Bribery Policy has been communicated to all Sonova governance body members and employees worldwide. Sonova business partners – such as distributors or suppliers – must commit to complying with the principles underlying the Anti-Bribery Policy. The content of the Anti-Bribery policy is integrated in the annual mandatory Global Compliance training and was also a key element of the global “Speak-Up!” communication campaign during the 2019/20 financial year.
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.
The Sonova Group Supplier Principles also cover ethical standards, including compliance with laws and regulations on bribery, corruption, and prohibited business practices. These have been communicated to all our suppliers who are regularly instructed to ensure that they adequately understand and are able to comply with all anti-corruption policies and procedures.
At the core of Sonova’s Code of Conduct there is a clear commitment to fair competition. Fair competition is essential because it guarantees that customers and consumers will benefit from the most innovative products and services at the best prices and conditions. At Sonova, we respect and strictly follow antitrust and competition laws and all employees globally have to comply with the principles set out in the Code of Conduct and the Global Competition Law Policy.
Sonova’s Global Competition Law Policy describes the basic principles of fair competition in doing business. It is our goal that the Global Competition Law Policy and related trainings focus on the current key aspects of our business. This requires updates from time to time even though the general principles of the policy do not change. An updated Global Competition Law Policy will be effective as of May 1, 2020. The roll out of the revised policy is supported by bespoke global online training. Both the policy and the training are available in 19 languages.
In the 2019/20 financial year, Sonova was not involved in any legal actions related to anti-competitive behavior or violations of anti-trust and monopoly legislation.
Human rights and labor practices
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 conduct our business in alignment and compliance with the Universal Declaration on Human Rights and the Eight Fundamental International Labor Organization (ILO) Conventions. Additionally, we recognize the international standards of the United Nations, the ILO, and the Organization for Economic Cooperation and Development (OECD), such as the United Nations Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises. 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.
Human rights as understood by the Sonova Group include the following principles:
- Ensuring that there are no children, forced, or illegal workers engaged at any point in our supply chain.
- Never tolerating harassment or discrimination on the basis of gender, race, color, religion, age, disability, ethnic or national origin, gender identity, pregnancy, marital/parental status, sexual orientation, or any other legally protected status.
- Providing fair remuneration that ensures, for all employees and their families, a living wage and an existence with human dignity.
- Arranging the working time of employees in full compliance with applicable law.
- Protecting the privacy of employees, customers, and their patients.
- Ensuring that there are grievance mechanisms for employees and other parties to file complaints in a safe and, if desired, anonymous environment.
- Respecting the legal rights of employees to collective bargaining and freedom of association and to join or to refrain from joining worker organizations, including trade unions.
- Ensure that no exploitation of vulnerable groups, such as migrant workers, indigenous people, or local communities, takes place within our supply chain.
- Strengthening access to hearing care, including for those currently underserved by the healthcare system.
Human rights due diligence (HRDD)
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 they are not considered key risks from a risk management perspective. They are however monitored and will be more systematically addressed in the context of the HRDD project plan (see below). 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 has relatively high leverage on potential human rights impacts and 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.
Sonova is committed to aligning its HRDD process with the United Nations Guiding Principles on Business and Human Rights (UNGP). Our aim is to conduct HRDD throughout our business to proactively assess, identify, prevent and mitigate actual and potential adverse human rights impacts on potentially affected rightsholders across the value chain. In the financial year 2019/20, we worked with external human rights and business experts to conduct a systematic analysis of existing policies, processes, and responsibilities and consult with key internal and external stakeholders to outline the practical application of the UNGP within the business. A step-wise HRDD project plan is being developed and implementation is planned to start throughout 2020/21. The process framework follows five steps as required by the UNGP:
- Policy commitment
- Assess actual and potential impacts
- Integrate findings and take appropriate action
- Track and communicate performance
- Access to grievance & remedy
In the 2019/20 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.
The annual mandatory Global Compliance training is rolled out to all Sonova employees worldwide, including part-time employees. The training in 2019/20 focused on the content of the Code of Conduct and how to identify and report potential violations (grievance mechanism). It also includes aspects of human rights, such as nondiscrimination and non-harassment.
Responsible supply chain
International supply chain
Sonova deals with 413 direct material suppliers to its hearing instruments segment, who deliver components for manufacturing and assembly, and 123 direct material suppliers to the cochlear implant segment. In spending terms, 72.8% of Sonova’s purchase volume is located in the Asia/Pacific region, 11.7% in Switzerland, 12.5% in Europe (excl. Switzerland), 2.7% in North America, and 0.3% in Africa. Our suppliers are mainly high-tech design and component makers, or original equipment manufacturers with a high degree of automation. Sonova engages only a very small number of contractors and licensees. Sonova’s own manufacturing operations extend from fully-automated processes, such as hybrid circuit production, to highly-skilled manual work, such as assembly of hearing aids and cochlear implants.
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 and consumers. 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. The SGSP are available in English and German and are publicly available on the Sonova website. The SGSP require suppliers to put in place and maintain systems that ensure:
- healthy and safe working environments;
- respectful and dignified working conditions;
- environmentally friendly production; and
- legal and ethical behavior.
In 2019 the SGSP were revised and the updated version was published on the Sonova website. All existing suppliers were contacted to secure their agreement with the updated version of the principles.
Identification of critical suppliers
In the 2019/20 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. Critical suppliers for Sonova include suppliers whose items or materials have a direct impact on the performance of our products or come into direct contact with the skin of users (critical components), whose items or materials are not substitutable (e.g. due to criteria related to technology, sustainability, quality, regulations), and who supply high volumes. 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 risks, including 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 2019/20 financial year, Sonova audited one critical supplier and visited the other nine critical suppliers at least once in a less formal manner than an audit. The Group Supplier Principles and assessment of social and environmental impacts were always an important topic during the visits. In 2019/20 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 responsible supply chain management until 2022/23 are the following:
- Share of new and existing tier-1 suppliers having signed the Sonova Group Supplier Principles (target 2022/23: 100%; performance 2019/20: 100%, 2018/19: 100%, 2017/18, 100%)
- Share of critical suppliers visited or audited at least once per business year (target 2022/23: 100%; performance 2019/20: 100%, 2018/19: 100%, 2017/18: 100%)
- Share of purchase volume coming from suppliers with certified environmental management systems (target 2022/23: 75%; performance 2019/20: 72%, 2018/19: 66%, 2017/18: 52%)
Long-term supplier collaboration
Sonova strives for long-term collaborations and long-term contracts with its suppliers. In the 2019/20 financial year, 84% of the total purchase volume came from suppliers with more than 10 years of business relationship with Sonova and 95% 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.
The global health and economic crisis resulting from the COVID-19 pandemic is impacting global supply chains and logistics. Sonova is in a constant and close dialog with key suppliers and partners to monitor and manage the impact of the crisis. Our first priority is protecting the health of our global team, followed immediately by assuring that our operations can continue while complying with emergency regulations. All our manufacturing centers remain operational.
At Sonova, corporate governance is based upon and structured to conform with relevant international standards and practices. The company fulfils its legal duties under the relevant articles of the Swiss Code of Obligations, the SIX Swiss Exchange Directive on Information Relating to Corporate Governance, and the standards defined in the Swiss Code of Best Practice for Corporate Governance. The present chapter describes the principles of corporate governance for the Sonova Group and provides background information with a special focus on environment, social and governance (ESG) issues. Additional information can be accessed at the Corporate Governance chapter of the Annual Report 2019/20 and at the corporate governance section of the Sonova website.
Sonova’s corporate structure includes a two-tier board consisting of the Board of Directors and the Management Board. In accordance with the Sonova Organizational Regulations (OrgR), the Board appoints an Audit Committee and a Nomination and Compensation Committee. In all respects not mentioned in the OrgR, or unless the law or the Articles of Association stipulate otherwise, the policy document ‘Delegation of Authority of Sonova Holding AG’ provides the basis for delegating authorities within the different levels of management in the Group.
Composition of the highest governance body and its committees
The composition of the Board of Directors and its committees is described in detail in the relevant section of the Corporate Governance chapter of the Annual Report 2019/20: Board of Directors.
Diversity is a key topic in any discussion of board composition. The Board’s aspiration is to have a diverse membership in all aspects, including nationality, gender, background and experience, age, tenure, viewpoints, interests, and technical and interpersonal skills.
The Articles of Association of Sonova Holding AG state that the Board of Directors must consist of a minimum of three and a maximum of nine members. The Board of Directors is chaired by Robert F. Spoerry and currently consists of eight non-executive members.
Nomination and selection for the highest governance body and its committees
The processes for determining the composition of the Board of Directors and its committees, as well as the division of responsibility between the Board of Directors and Management Board, are set out in detail in the company’s OrgR and Committee Charters.
The members of the Board of Directors and of the Nomination and Compensation Committee of Sonova Holding AG are elected by the General Shareholders’ Meeting for a term of office until completion of the next ordinary General Shareholders’ Meeting. If a replacement is elected to the Board of Directors during a member’s term, the newly elected member finishes the predecessor’s term. The Audit Committee is elected by the Board of Directors according to Article 2 of the Committee Charters.
The members of the Management Board are proposed by the CEO and appointed by the Board of Directors upon the recommendation of the Nomination and Compensation Committee. More details on the Management Board are provided in the relevant section of the Corporate Governance chapter of the Annual Report 2019/20: Management Board.
Article 4 of the OrgR governs how Sonova deals with potential conflicts of interest. Cross-board memberships of the Board of Directors and significant shareholders (holding more than 3% of shares) are disclosed in the Corporate Governance chapter of the Annual Report. Related party transactions, if any, are disclosed in the Annual Report notes to the Group Consolidated Financial Statement.
Roles, policy, and strategy
The OrgR and the Committee Charters define the roles and the duties of the highest governance bodies. The Board of Directors of Sonova Holding AG is responsible for the overall direction of the company, except in matters reserved by law to the General Shareholders’ Meeting. It approves policy and strategy. The CEO has the duty and authority to link the company’s strategy with its operational management by preparing the corporate strategy documents, policies, and procedures for submission to the Board of Directors’ review and approval. The Management Board supports the CEO in his responsibility to direct the company’s operations by actively participating in directing, planning, and executing the business strategy.
Competencies and performance evaluation
The Board of Directors conducts an annual self-assessment evaluating its efficiency, effectiveness, and internal cooperation. The purpose is to enhance the Board’s understanding of the business and the company, evaluate and define its role, particularly in relation to management, and make best use of the human capital represented in the Board of Directors. More detailed information is available in the Corporate Governance Report.
Consultation between stakeholders and the highest governance body
Sonova actively engages with a broad range of stakeholders on ESG topics as described in the “Stakeholder engagement” chapter of this report. Internal reporting procedures ensure consultation between stakeholders and the highest governance body on all topics deemed highly relevant.
Compensation and incentives
The Compensation Report 2019/20 is an integral part of the Annual Report and covers the compensation principles, system and key components, with a focus on the Board of Directors and Management Board as the governing bodies. Sonova complies with the Swiss Ordinance against Excessive Compensation in Stock Exchange Listed Corporations, which amongst other things stipulates annual binding votes on the compensation of the Board of Directors and Management Board.
We are committed to equal pay for equal work and we are taking the necessary steps to ensure a fair compensation system. Thus, based on our grading and position management processes we are certainly committed to equal pay. We are also reviewing compensation in the context of the relevant local legal and regulatory equal pay requirements as they continue to evolve globally.
The variable cash compensation (VCC) of Sonova’s executive members is based on financial KPIs on a group and business unit level and additionally reflects the achievement of individual objectives as defined in the annual performance review process. To reflect Sonova’s corporate responsibility and sustainable business approach, and as part of the normal business review of compensation components, the Board of Directors decided that both existing and new business relevant environmental, social and governance (ESG) targets will be more formally reflected in the VCC. This adjustment will take place once business has stabilized. Given the COVID-19 related crisis, the current VCC target focus is on financial, cost and liquidity related measures.
In solidarity with our employees and shareholders, the Board of Directors and the Management Board have decided to take a number of compensation related measures including an immediate voluntary reduction in their cash compensation for the duration of the crisis.
The Group has implemented an efficient system to identify and assess strategic, operational, financial, legal, reputational and compliance risks related to the Group’s business activities. The risk management function categorizes risks by impact and likelihood and supports the Management Board in determining the measures necessary to address or mitigate them. In accordance with the Audit Committee Charter, the Audit Committee reviews the company’s risk assessment prepared by Risk Management before it is presented to the Board of Directors. The Board of Directors approves the risk assessment and provides guidance from a strategic point of view. To continuously monitor key risks and their mitigation, Risk Management prepares risk status reports which are presented to the Audit Committee on semi-annual basis. Currently, Sonova’s Group Risk Map consists of 38 risks, of which 15 are designated as key risks.
ESG issues are an integrated part of Sonova’s strategic risk management process. Human rights and environmental risks are evaluated in the regular risk assessment process together with all other business risks. Human rights and environmental risks are currently not considered key risks and are thus not included in the Group Risk Map.
Internal Audit carries out compliance and operational audits and assists the business units in attaining their goals by providing assurance from independent evaluation of the effectiveness of internal control processes. Management is responsible for the control of business risks and for compliance with laws and regulations. The Head of Internal Audit & Risk reports to the Chairman of the Audit Committee. The Audit Committee approves the annual work plans of Internal Audit and ensures that the relevant Group companies are adequately reviewed according to their risk scoring. The Audit Committee also reviews and discusses the reports on completed audits submitted by Internal Audit. Internal Audit together with business controlling monitor the implementation by Group companies of any measures necessary to address findings from previous audits and regularly reports progress to the Audit Committee.
The Group has a comprehensive compliance program in place which is administered by the Head Group Compliance Program and overseen by the Group General Counsel. Quarterly compliance reports are provided to the Audit Committee and an annual compliance report is addressed to the Board of Directors.
In response to COVID-19 we have established global and national Crisis Response Teams that are closely linked and have been meeting in a high frequency. The response to the pandemic is structured in three phases 1) Health and Safety 2) Protecting the Core and 3) Preparing for the Rebound. Disaster Recovery and Business Continuity Planning is being updated to reflect the learnings made by the Crisis Response Team together with the global Group companies.
Corporate responsibility organization
Our Corporate Responsibility (CR) program aligns closely with our business strategy; its material topics and their impacts, risks and opportunities as well as reporting are reviewed at the highest levels of the company. Responsible behavior in environmental, social and governance (ESG) fields is an integral part into Sonova’s core values and continuously overseen by the Board of Directors. The Management Board regularly initiates ESG-related measures and monitors their development in line with Sonova’s integrated Corporate Responsibility program and provides updates to the Board of Directors. These are subject to consultation and review by the full Board of Directors on at least a yearly basis. Good governance is supported by a regular dialogue with proxy advisors, and by Sonova’s continuously active risk management and our compliance functions.
The CR function develops the CR program for the Sonova Group and provides expertise and advice to the Management Board on relevant topics. It implements the strategy approved by the Management Board and coordinates group-wide initiatives in close collaboration with experts from the company-wide CR network. CR country champions represent one or all Sonova Group companies in a given territory and are responsible for gathering data and implementing CR initiatives locally. CR functional champions are linked to group-wide business functions; they report to the CR function on relevant functional issues.
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:
- Taxes follow the business: Sonova is committed not to transfer value created to low tax jurisdictions. Sonova does not use non-business related offshore structures (so-called “tax havens”), nor does the Group allocate functions or risks to international structures purely for tax reasons. Sonova avoids the acquisition of non-business related offshore structures. An important step during the integration process for newly acquired companies is to unwind acquired tax schemes and bring the tax structure of the new business fully in line with Sonova’s tax policy and BEPS (Base Erosion and Profit Shifting) principles.
- Full compliance: Sonova fully complies with the spirit and letter of local laws, regulations and is aligned with internationally recognized standards such as the OECD/BEPS and European guidelines. Sonova’s complex cross-border operations and added value chains are subject to yearly reviews to align Sonova’s Transfer Pricing Processes. Arm’s length profit allocation within the added value chains is granted through yearly reviews in line with multiple benchmarking analysis. Inter-company transactions are regularly monitored to ensure complete alignment with international standards and Sonova’s internal Transfer Pricing Processes.
- Cooperation with tax authorities: Sonova highly values open and proactive cooperation with tax administrations worldwide for any kind of tax matter, irrespective of the fact that Sonova has not entered Advanced Pricing Agreements (APAs). As part of our tax compliance policy, we continuously engage in constructive and transparent dialogue with tax authorities.
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 the Country-by-Country Report (CbCR) since 2017, and filed this voluntarily with the Swiss Federal Tax Administration in 2018. For the years 2018 and 2019, 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 2019/20. 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.
As a general rule, Sonova does not allow donations to political parties. This principle is stipulated in our Global Anti-Bribery Policy.
Sonova actively participates in associations and external initiatives to share its specialist knowledge and to ensure highest quality standards for hearing instruments and cochlear implants.
We are a member of the European Hearing Instrument Manufacturing Association (EHIMA), the Hearing Instrument Manufacturers’ Software Association (HIMSA), the Hearing Industries Association (HIA), the Hearing Instrument Manufacturers’ Patent Partnership (HIMPP), and the Hearing Industry Research Consortium (IRC). Arnd Kaldowski, CEO of the Sonova Group, is member of EHIMA’s Board of Directors. Founded in 1985, EHIMA represents the major European hearing instrument manufacturers. In 2019/20, Sonova contributed around 480,000 CHF in membership fees to trade associations and non-commercial organizations. Amongst the largest contributions are membership fees and contributions to Hear-it AISBL, Bluetooth SIG, Inc., and EHIMA.
Since 2016, Sonova is a signatory to the UN Global Compact, an initiative of the United Nations with a focus on corporate citizenship, dialogue with stakeholders, partnerships, and communication. Sonova is part of both the global and local Swiss networks of the UN Global Compact.