In the context of business compliance and governance, companies are faced with a growing number of rules and regulations from legislators and financial markets regarding business management and controlling. In view of the increasing requirements and growing complexity, Henkel has merged previously decentralized compliance functions and appointed a Chief Compliance Officer.

The Chief Compliance Officer steers compliance activities on the corporate level, monitors and reports on compliance with external and internal requirements, and helps the Company to continuously develop and implement its standards. He is assisted by the Internal Audit department, which also reports directly to him.

We carry out regular audits to ensure that our standards are implemented at our production and administration sites. The audits are a key instrument for identifying risks and potential improvements, and play a crucial role in the transfer of knowledge. To gain an integrated view of our regions, we are steadily expanding our audit planning to cover subcontractors and logistics centers as well.

In the course of audits by the Corporate Internal Audit department in 2007, some 800 individual actions were agreed with employees in Accounting, Purchasing, Sales/Distribution, Information Technology, Production, and Supply Chain Management in order to make processes even safer and more secure.

Our 2007 safety, health and environment audits resulted in the initiation of 34 binding corrective actions, whose implementation will be monitored by our auditors. The current status of our SHE audit program is summarized in the section Production and Logisitics.

In addition to the audits, the results of specific surveys – e.g. concerning “especially dangerous processes in Production” – highlighted areas requiring improvement measures and programs.

Since the year 2006, we regularly ask all production sites to carry out a self-assessment in regard to safety, environmental protection, and occupational health and safety. With the help of a detailed questionnaire, the sites report on the implementation of our internal standards. This makes it possible to draw up an overview of the strengths and weaknesses of the sites worldwide, so that actions can be initiated. On the basis of the audits and the self-assessments, the operative business sectors have defined ambitious targets and binding measures at all levels, in order to press ahead with further improvements.

In 2007, an external compliance hotline was set up, through which employees can anonymously report major infringements of our codes and standards. In particular, it should be used when incidents cannot be cleared up directly with the employee concerned or a supervisor. The hotline is run by the independent company People Intouch e.V. in the Netherlands. Depending on their nature and gravity, infringements of our codes and standards may have far reaching disciplinary consequences for the individuals concerned. In 2007, there were a number of dismissals for serious misconduct.

A SHE audit takes several days and is carried out by independent Henkel experts in cooperation with the site's officers. Since 2000, the auditors are using an assessment method with which the translation into practice of the Henkel standards can be systematically recorded and compared. This increases the transparency and comparability of SHE performance at different sites, at the same time creating a better basis for further optimization programs at Henkel. The team then discusses the results of the audit and develops proposals for improvements. Corporate controlling monitors whether the agreed improvements at the site are actually implemented. Henkel experts inspected all major Henkel production sites - except for a few recently acquired companies - at least once.

Due Diligence (DD) is a survey performed during negotiations for the purchase of participations in other companies in order to detect possible risks. Before Henkel acquires a new company, the associated sites, products and brands are subjected to a DD review by corporate experts. Besides balance sheets, legal and financial aspects, human and material resources, and strategic positioning, the scope of the DD review also covers possible environmental or product safety risks. If any risks are detected, these may lead to a cancellation of the negotiations or result in the inclusion of appropriate clauses in the purchase contract. Where necessary, newly acquired companies are brought into line with Henkel standards on the basis of a detailed and targeted action plan drawn up immediately after the DD review.