Keeping people and society safe
ANNUAL AND SUSTAINABILITY REPORT 2020 THIS IS SAAB
This is Saab Since Saab was started, we have strived to keep people and society safe. It is a basic human need to feel safe and, as we see it, a human right. Through systems and solutions that increase security, we can make this possible. Today, we serve the global market with world-leading products, services and solutions from military defence to civil security. With operations in most continents, Saab continuously develops, adapts and improves new technology to meet customers’ changing needs.
1 Why we are here? Saab was founded over 80 years ago 2 after the Swedish government’s assess- Mission ment that it needed help in expanding Saab’s mission is to the country’s defence industry’s capa- develop innovative, bilities to protect its people. high-tech and cost- Read more on page 7 efficient military systems to keep society and people safe.
3 Sustainability and values Saab’s core values and sustainability commitments are the foundation of the entire business. By acting ethically and taking responsibility for people and the Strategy environment, we earn the trust of our Saab’s strategy is based on stakeholders. market factors in combina- tion with our innovation capa- Read more on page 60 bilities. By executing on our strategy we can reach our mission and work towards 4 our vision as well as creating greater value. Read more on pages 8-9
CEO comments on 2020 Saab’s investment story Business cases showing Read more about the Saab is a growth company in a growing how we execute in core areas achievements and how Saab market. Read more about how we will Read more about our execution executed on its strategy execute on our strategic priorities to towards our long term financial and during the full year create sustainable shareholder value sustainability goals
4 9SAAB ANNUAL AND SUSTAINABILITY14 REPORT 2020 THIS IS SAAB
Vision It is a human right to feel safe. Content 7 The year in brief 2 CEO statement 4 Our mission 6 Global footprint Saab’s strategy 8 and customers Creating value 9 Saab today has a global foot- A growing market 10 print with customers around Sweden - a strong base for growth 16 the world. Our revenues comes Investing in innovation 18 from long-term customer International expansion 24 contracts in the form of devel- Sustainability as a value driver 32 opment and manufacture of complex systems, products Letter from the Chairman 42 and service assignments and maintenance. Administration report 44 6 Business areas 46 Risks and uncertainties 54 Sustainability report 60 Innovation Corporate governance report 84 Saab is continuously develop- Board of Directors 90 ing new innovations and invests Group Management 92 about a fifth of its sales in research Financial statements and notes 98 and development. We have close Dividend motivation 150 collaboration in development with Proposed disposition of 151 customers, suppliers, academia earnings 2020 and the public sector. Auditor's report 152 Read more on page 18 The Saab share 158 5 Multi-year overview 160 Glossary 161
Sustainability is an integrated part of About this report the business to create further value Sustainability priorities are integrated throughout the In 2020, we increased our efforts to deliver annual report. Pages 60-83 describe Saab’s sustain ability work in greater detail. The formal annual report sustainable value for our society, customers, comprises pages 44-151. Certain figures have been employees and shareholders rounded off, so tables and calculations do not always add up exactly. A printed copy of the annual report can be ordered from [email protected].
SAAB ANNUAL AND SUSTAINABILITY REPORT32 2020 1 THE YEAR IN BRIEF
The year in brief In 2020, Saab strengthened its order backlog significantly, proving the competitiveness of its innovative product portfolio and recognition internationally, while securing continued future growth. Despite a dramatic year with the Covid-19 outbreak and the challenges arising from it, the Group met important milestones and generated a strong positive cash flow for the full year.
KEY HIGHLIGHTS 2020 • Strong order growth of 56%. Continued new contract wins with key customers in a challenging pandemic OPERATING MARGIN environment. Small orders were in line with last year. • Sales in line with previous year. Growth in the defence business but decline continued in the civil business. • Resilient underlying earnings. Operating income, excluding items affecting comparability, was MSEK 3.7% 2,738, corresponding to an adjusted margin of 7.4%. • Positive operational cash flow. Increased to MSEK 2,773 (-1,300) driven by good project execution. • Solid balance sheet. Net financial debt position of SEK 4.3 billion, corresponding to 1.5 net debt/EBITDA. SALES • Sustainability. Saab received A- from the Carbon Disclosure Project, for the second year in a row. KEY RATIOS 35,431 MSEK 2018 2019 2020 Sales 33,156 35,433 35,431 MSEK Organic sales growth, % 4 6 1 EBITDA 3,182 4,305 2,833 EBIT 2,266 2,937 1,315 EBIT margin, % 6.8 8.3 3.7 ORDER INTAKE Adjusted EBIT margin, % 7.7 8.3 7.4 Income before taxes 1,796 2,607 1, 112 Net income for the year 1,366 2,025 1,092 EPS, SEK 11.21 14 .81 8.01 Free cash flow -3,195 -2, 036 3,753 42,328 Net debt to EBITDA ratio 0.46 1.64 1.51 MSEK Dividend per share, SEK 4.50 - 4.70*
* Proposed dividend
2 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 THE YEAR IN BRIEF
OPERATIONAL CASH FLOW
EQUITY/ASSETS RATIO 2,773 MSEK 35.7%
Covid-19 impact on the business The Corona pandemic has continued to impact the world negatively and not least the global aviation industry. During the second half of 2020, Saab saw increased risk related to the effects of Covid-19, impacting parts of its businesses negatively.
BUSINESS IMPACT FINANCIAL IMPLICATIONS ACTION TAKEN SOCIAL CONSIDERATIONS/ The Covid-19 impact on Saab Our assessment of the Covid- Saab took a number of meas- ESG EFFECTS as a company has mainly been 19 related risks had a negative ures to mitigate the pandem- During the height of the crises, associated with uncertainties impact on sales and earnings ic’s impact on its business, in Saab adapted to the needs of and disruptions in the supply during the full year 2020. Total addition to actions to reduce society by temporarily pro- chains. In Q3, actions were impact of project adjustments risks in the supply chain. In ducing protective equipment taken to mitigate increased was SEK -1,779 million. The businesses where demand for the Swedish health care future risks in our operations impact from lower demand in declined, capacity, including system. Moreover, as Saab’s by adjusting project esti- Saab’s civil business affected staffing, was reassessed. customers are dependent on mates, especially within our sales and earnings, especially Saab also introduced shorter Saab for service and support, Aeronautics division. Our civil in the business area IPS. working hours for employees Saab has had to be flexible. business was also impacted in certain business areas. By being prepared, Saab has by the significant downturn in been able to manage the the aviation industry. crises, its risks and contingencies.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 3 CEO STATEMENT
Focused strategy for profitable growth
For Saab, as for many others, most of 2020 was a dramatic year. We have had to adapt to the challenging times, and we have had to take substantial actions to mitigate the effects of the Covid-19 pandemic on our business. However, Saab is still on a growth journey and has seen exceptionally strong order growth throughout the year. Moreover, we managed to reach several key milestones in our large programmes. We also accelerated our international expansion, and we continued to optimise our product offering.
A CLEAR ROADMAP FOR PROFITABLE GROWTH Saab is on an international expansion journey. Our aim is to become a truly global, multi-domestic company; a technology leader, with increased sales and strengthened profitability. In order to achieve our goals, we work strategically with market priorities and performance efficiency. The portfolio offering is opti- mised towards our core areas; Aeronautics, Advanced Weapons Systems, Command & Control, Sensors and Underwater Systems. As a defence and security company, our commitment to sustainability and the UN Global Compact Principles is profound. We aim to deliver sustainable value for customers, partners, employees, owners and society as a whole. Saab’s sustainability commitment serves as the basis for our long-term development and growth.
NEW WAYS OF WORKING IN CHALLENGING TIMES 2020 was a year where our agility was tested more than before. We had to find new ways of working to address the challenges posed by the pandemic and to be able to continue our journey even under these circumstances. The pandemic’s impact on Saab’s military business has mainly been associated with uncertainties and disruptions in the supply chains. We therefore took actions to mitigate increased future risks identified in our operations. Our business within civilian aviation has been severely impacted by the lockdowns and the subsequent downturn in travelling. Altogether, this had a negative impact on Saab’s result. We achieved some very important project mile- stones during the year: the historic delivery of the first Gripen E to Brazil and the delivery of the first and second GlobalEye to the United Arab Emirates. We de- livered the second upgraded Gotland-class submarine to Sweden, and we completed the first Surface Ship and Submarine Firings of our new Saab Lightweight
4 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 CEO STATEMENT
Torpedo. Furthermore, we completed the maiden INNOVATION LEADERSHIP test flight of our new Fighter AESA radar. This was all Saab is an innovation powerhouse. The speed of techno- thanks to a great effort by committed employees. I am logical development is so rapid and we as a company can very proud of how Saab as an organisation successful- never lose focus on our ambition to be in the technolog- ly navigated these challenging times and proved that ical forefront. To ensure our customers’ future needs, we we can deliver even during global lockdowns. daily explore new technologies and innovate. During the year, we have taken further steps in our innovation and CONTINUOUS GROWTH AND technology leadership by establishing Innovation Labs in INTERNATIONAL EXPANSION five areas: Artificial Intelligence, System of Systems, Ad- Saab has continued to win business throughout the ditive Manufacturing, Autonomy and Sensors. With these year. We increased our order intake by 56 per cent and initiatives, we will safeguard our position as an innovation a total of 70% of order bookings was related to markets powerhouse and a thought leader in new technologies. outside Sweden. The demand for our capabilities and During the year almost a quarter of our turnover was innovative solutions is high and we strengthened the or- invested in research and development. der book in 2020. Adjusted for items affecting compara- bility including Covid-19 one-time effects, sales grew by STRATEGIC WORKFORCE PLANNING 4% and the adjusted EBIT margin was 7.4%. Thanks to our talented and pioneering workforce, Saab Saab has a clear and focused market approach is at the very forefront of technological development. with Sweden as the home market and we are active- Our aim is to continue to be an attractive employer that ly increasing our presence in strategic markets, for supports our employees to grow and break new techno- example: the United States, Germany, United Kingdom logical boundaries. Knowing that the speed of change is and Australia. Here we aim to build up local production faster than ever before, we constantly prepare for future and invest in intellectual property in close partnership business needs by investing in our employees. With our with local industry and defence forces. Strategic Workforce Plan, we know what kind of resourc- In 2020 Saab announced the establishment of a es and competencies we have today, what we need to Future Combat Air System (FCAS) Centre in the UK. We have in the future and how to fill the gaps. Diversity is of received the confidence of the Australian government importance to Saab – by bringing together different expe- to deliver Deployable Health Modules, which consti- riences and different perspectives, we reach our business tutes a major step forward in realising our growth and objectives. diversification ambitions in Australia. Construction of I want to thank all of Saab’s employees, who with their the T-7 production facility in USA is progressing talents, engagement and ambition – in this exceptionally according to plan. We are also proud to deliver the special and demanding year - are instrumental to our RBS15 to Germany together with our partner Diehl. success. The United Arab Emirates trusted us with a new order for two additional GlobalEye systems, as well as a sup- Stockholm, February 2021 port contract for the three systems ordered previously. Micael Johansson CEO and President
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 5 OUR MISSION
6 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 OUR MISSION
Keeping people and society safe
When Saab was founded in 1937, our primary aim was to provide military aircraft for Sweden. Today, we serve the global market with world-leading products, services and solutions from military defence to civil security. With global operations, Saab continuously develops, adapts and improves new technology to meet customers’ changing needs.
A COMMITMENT TO PEACE SINCE DAY ONE Saab was founded in 1937, two years later the Second World War broke out with catastrophic consequences. Since the founding, Saab has been dedicated to its objective of supporting the Swedish Armed Forces in its mission to defend Sweden and the country´s interests, freedom and the right of Swedes to live the way of their choices. The commitment to Sweden remains constant. In order to fulfil the comittment over time Saab has de- veloped into a global partner with an increased focus on international cooperation. Saab contributes to increased security and defence capabilities not only in Sweden, but in many other countries around the world.
SAAB’S GREATER TASK Since the founding, a commitment to the needs of society has been at the core of Saab’s business. Peace, security and stability are prerequisites to ensure that we manage to reach the Global Goals for ”We are convinced that high ethical standards and responsibility Sustainable Development that we as a global commu- in our operations are also critical to long-term profitability.” nity have set out. Saab’s innovative and resource-effi- Micael Johansson, President & CEO cient products and services contributes to our socie- ties by ensuring security and sovereignty every day.
FOCUS ON TECHNOLOGY LEADERSHIP AND SUSTAINABILITY Saab’s mission is to contribute to security by push- security and defence capabilities in a responsible ing intellectual and technological boundaries. In a and sustainable way. By acting responsibly in world where threats against our societies are growing everything we do, complying with laws and regulation increasingly diverse Saab contributes to defence and and working closely with national authorities we earn security capabilities around the world. The founda- the confidence of customers, employees and society. tion of Saab’s sustainability commitment is to create
Sweden a strong foundation International growth Share of sales 2020 Order intake 2020
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 36% 52% 7 SAAB’S STRATEGY
A focused strategy for growth
Saab strategy is based on four focus areas – market, portfolio, performance and innovation. This means that we stay close to our customers, we develop our portfolio continuously and we work effectively with innovation as a guiding principle in all our businesses. Sustainability is at the core of our business and affects everything we do, and our engaged employees make the company excel and are the key to our continued growth.
Portfolio Excellence Global Multi Domestic Create world-class portfolio in our core Accelerate our market expansion, with Swe- areas; Aeronautics, Sensors (radar, EW), Un- den as a home base, by building a strong local derwater Systems, Command & Control and presence and strategic partners in our key Advanced Weapons. markets, becoming Global Multi Domestic.
Innovation/ Strategic Technology Workforce Leadership Plan Leverage external Implement our strate- technology supply & gic workforce plans, quicker time to market with focus on com- (TTM) of new capa- petence & leadership bilities than peers by development, includ- driving innovation ing creating a Saab leadership in areas learning landscape to where we can create support continuous unique value close to learning and develop- customers. ment.
Sustainable Business Operational Excellence Sustainability is integrated in all aspects of Create improved customer & shareholder our strategy and focuses on three strate- value by driving Operational Excellence gic commitments: defence and security across all parts of Saab. capability, leading compliance programs and responsibility for people & environment.
8 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 SAAB’S STRATEGY
Creating value for all our stakeholders
Saab has seen substantial growth in recent years For all our stakeholders we aim to create a greater thanks to its strong base in Sweden and innovation value. This will we be able to do by executing on our heritage with world-leading technology assets. This strategy in combination with continued investments has laid the foundation for a unique position in the in R&D and innovation, portfolio excellence, acceler- global defence and security market. With its strong ated presence in strategic markets and by driving an order backlog and more focused business strategy, active sustainability agenda. Our stakeholders is our Saab will continue on its growth journey. society, customers, employees and shareholders.
Saab’s value creation drivers
1 2
A unique position The key to growth is our in a growing market Swedish base & heritage The demand and changing need of defence Sweden is our key customer who gives us and security solutions now and in the future the opportunity to build and develop our is increasing. As an innovative nische player, capabilities. With our Swedish operations with cutting-edge technology, our oppor- as a base, we are well positioned for further tunities are not dependent on increased growth in the global market. defence spending. Read more on page 16 Read more on page 10
3
4 We invest in innovation and increased efficiency Accelerating our By continuing to invest in innovation and efficiency we further strengthen our core international expansion technology areas. Our portfolio strategy to fuel future growth means securing a focus on future success. Our global multi-domestic approach with a Read more on page 18 strong local presence is key in accelerating our international expansion. We target and access our key markets together with stra- tegic partners, alliances and collaborations. Read more on page 24 5 Sustainability creates value Sustainability is an integrated part in how Saab do business and plan to grow. Our sustainability approach, with focus on responsibility and sustainable solutions, will be a key drivers for long-term value creation. Read more on page 32
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 9 THE GLOBAL DEFENCE MARKET
Addressing an uncertain world in change
The world is changing rapidly and the global power is shifting. This is in light of rapid technological development, growing concerns of climate change and the ideas of globalisation and international establishments being challenged. Meanwhile, the COVID-19 pandemic has contributed to highlighting the vulnerability of societies, resulting in an increasing number of nations taking actions to keep its citizens safe. In a complex and fast changing world, Saab is well positioned with a world-class portfolio of solutions that can protect people and societies from the increasing risks and growing threats.
The pandemic has been a dramatic reminder that peo- their struggles—sanctions, export controls, and ple and states are vulnerable and interdependent, but boycotts—with shorter fuses and goals that are more also able to adapt, focus and mobilise great resources explicitly political. in times of distress and crisis. Although the pandemic In Europe, concerns about Russia’s intentions in the has undoubtedly had large effects in the short term, region have been building up since the annexation of developments that are more fundamental are shaping Crimea in 2014, underpinned by increased military ac- the world in the long term. tivity in the Baltic Sea and the Arctic. The effect is that The full extent of COVID-19’s impact on global many European countries are stepping up their military geopolitical balances cannot yet be assessed. Never- capabilities. One example is Sweden, with the Swedish theless, a number of trends are clearly emerging and parliament in 2020 approving an extra €2.5 billion for these have already affected a number of balances that defence spending over the next five years. Sweden previously seemed unchangeable. COVID-19 is evi- has steadily been increasing its defence budget since dently not the cause of such changes, which had been 2014. The total increase from 2014 to 2025 could well underway before the outbreak, but the pandemic reach as high as 85%. This would correspond to has become a litmus test that has further thrust to 1.5 % of Sweden’s GDP in 2025. these developments under the political spotlight. Sweden is Saab’s home market where the Group has a strong market share, representing 36% of Saab’s revenues in 2020. The growing needs of Sweden’s 1 defence capabilities in the coming years will create an INCREASING GEOPOLITICAL UNCERTAINTY opportunity for Saab to both strengthen its position in AND SHIFTING GLOBAL POWER its home market but will also support growth in inter- Global power is shifting, politically and economically. national markets along with continued investments in In recent decades, globalisation has created oppor- innovation and technology developed in close cooper- tunities, reduced poverty, and supported peace for ation with the Swedish customer. billions of people. However, this is endangered by recent years of increased political tensions and trade disputes between countries. A contributing factor 2 is the shifting power balances between the U.S and RAPID TECHNOLOGICAL DEVELOPMENT DRIVING China. While the U.S. has long been the world’s leading A GROWING NEED FOR INFORMATION SECURITY military power, its share of the global defence market Digital technology is reshaping the nature of military is decreasing - while China is on the rise, investing defence and combat. The ability to collect, protect and heavily in its military capabilities. Meanwhile, China exploit data is increasingly determining economical as and the U.S. are decoupling on technology, e.g. 5 G, well as political affluences. This is also true in a military which is disrupting bilateral flows of technology, talent, conflict or on a battlefield protecting borders. Rapid and investment. This creates a deepening business, developments in AI, machine learning and automa- economic, and cultural divide that will risk casting tion are paving the way for new systems and higher deeper global geopolitical uncertainty. Countries efficiency. Many of the same types of platforms for are expected to continue to use economic tools in sea, land and air defence that were used a decade ago are still in demand, but the rapid development of new
10 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 THE GLOBAL DEFENCE MARKET
North America Latin America Western Europe Eastern Europe
SEK billionSEK billionSEK billionSEK billion SEK billionSEK billionSEK billionSEK billion SEK billionSEK billionSEK billionSEK billion SEK billionSEK billionSEK billionSEK billion 160 000160 000160 000160 000 8 000 8 0008 000 8 000 80 000 80 00080 00080 000 16 000 16 00016 00016 000
120 000120 000120 000120 000 6 000 6 0006 000 6 000 60 000 60 00060 00060 000 12 000 12 00012 00012 000
80 000 80 00080 00080 000 4 000 4 0004 000 4 000 40 000 40 00040 00040 000 8 000 8 0008 000 8 000
40 000 40 00040 00040 000 2 000 2 0002 000 2 000 20 000 20 00020 00020 000 4 000 4 0004 000 4 000
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2423222120 252423222120 2423222120 25 252423222120 25 2423222120 252423222120 2423222120 25 252423222120 25 2423222120 252423222120 2423222120 25 252423222120 25 2423222120 252423222120 2423222120 25 252423222120 25
North AmericaNorthNorth America AmericaNorth America Latin AmericaLatin LatinAmerica AmericaLatin America WesternWestern EuropeWestern EuropeWestern Europe Europe Eastern EasternEuropeEastern EuropeEastern Europe Europe
SEK billionSEK billionSEK billionSEK billion SEK billionSEK billionSEK billionSEK billion SEK billionSEK billionSEK billionSEK billion 1 600 1 6001 600 1 600 40 000 40 00040 00040 000 80 000 80 00080 00080 000
1 200 1 2001 200 1 200 30 000 30 00030 00030 000 60 000 60 00060 00060 000
800 800 800 800 20 000 20 00020 00020 000 40 000 40 00040 00040 000
400 400 400 400 10 000 10 00010 00010 000 20 000 20 00020 00020 000
0 0 0 0 0 0 0 0 0 0 0 0 2423222120 252423222120 2423222120 25 252423222120 25 2423222120 252423222120 2423222120 25 252423222120 25 2423222120 252423222120 2423222120 25 252423222120 25
Sub-SaharanSub-Saharan Sub-SaharanAfrica Sub-Saharan Africa Africa Africa MENA MENAMENA MENA APAC exAPAC ChinaAPAC ex China exAPAC China ex China
Growing global defence market
SEK billionSEK billionSEK billion SEK billionSEK billionSEK billion SEK billionSEK billionSEK billion SEK billionSEK billionSEK billion 160 000160 000160 000 8 0008 000 8 000 80 00080 00080 000 16 00016 00016 000
120 000120 000120 000 6 0006 000 6 000 60 00060 00060 000 12 00012 00012 000
80 00080 00080 000 4 0004 000 4 000 40 00040 00040 000 8 0008 000 8 000
40 00040 00040 000 2 0002 000 2 000 20 00020 00020 000 4 0004 000 4 000
0 0 0 0 0 0 0 0 0 0 0 0 2423222120 2423222120 25 252423222120 25 2423222120 2423222120 25 252423222120 25 2423222120 2423222120 25 252423222120 25 2423222120 2423222120 25 252423222120 25
NorthNorth America AmericaNorth America Latin LatinAmerica AmericaLatin America WesternWestern EuropeWestern Europe Europe EasternEastern EuropeEastern Europe Europe Sub-Saharan Africa Middle East and Africa Asia Pacific ex China • High activity level in the industry. • Growing needs of defence SEK billionSEK billionSEK billion SEK billionSEK billionSEK billion SEK billionSEK billionSEK billion capabilities globally. 1 6001 600 1 600 40 00040 00040 000 80 00080 00080 000 • US and EU defence procurements expected to remain at high levels 1 2001 200 1 200 30 00030 00030 000 60 00060 00060 000 despite pressures from Covid-19. • APAC ex China and LATAM fastest 800 800 800 20 00020 00020 000 40 00040 00040 000 growing markets, from low levels. • Swedish defence bill, expect signifi- 400 400 400 10 00010 00010 000 20 00020 00020 000 cant increase 2025. • Saab involved in several tender offers and campaigns. 0 0 0 0 0 0 0 0 0 2423222120 2423222120 25 252423222120 25 2423222120 2423222120 25 252423222120 25 2423222120 2423222120 25 252423222120 25
Sub-SaharanSub-SaharanSub-Saharan Africa Africa Africa MENAMENA MENA APACAPAC ex China exAPAC China ex China Source: Saab and Janes
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 11 THE GLOBAL DEFENCE MARKET
”Climate change increases the risk of conflicts, poverty and hunger, undermines human rights and is a growing cause of forced migration.”
technologies is continuously improving the capabili- UN climate scientists estimate that manmade ties of these products. emissions have generated one degree of global Air power did not replace land or sea power, but warming since preindustrial times, and because the changed the terms of their use. In the same vein, all pace of climate change is fast accelerating, they pre- militaries will need to negotiate the cyber domain dict another half a degree of warming as soon as 2030. - not as a replacement but in addition to traditional Tropical areas will have even more extreme warming, domains. Cyber capabilities are becoming increasingly with a correspondingly higher risk of climate-related important with the Internet of Things bringing the ties insecurity. But millions of people around the world even closer between the physical and online world. are already experiencing record heat waves, extreme This also creates new security needs to develop and precipitation, and rising sea levels—changes that dis- embrace both physical and logical mitigation. It is likely rupt livelihoods and spur migration, exacerbate food that cyber attacks will continue to increase, poten- insecurity, water scarcity and resource competition tially becoming more selective and targeting sectors - i.e. changes that increase the risk of deadly conflict. with a high impact, such as political elections or for corporate espionage. With a general move by society towards mobile devices, attacks could specifically 4 target portable data and associated systems. INTERNATIONAL COOPERATION CHALLENGED The almost universal dissemination of devices to The values, norms and institutions built by western capture and transmit text, image and sound is putting powers post WWII, reinforced after the cold war, are the old weapon of information into new hands. The fundamentally undermined by revisionist and emerg- increasing flow of information is a source of strength, ing powers. Rather than transitioning to a new order, as well as vulnerability of free societies. the world runs the risk of political and economic frag- Saab invests a large share of it’s revenues in mentation, deconstruction of established norms and research and development and stay in close collab- increased conflict along global and regional fractures. oration and dialogue with customers, partners and The return of both economic protectionism and universities to remain in the forefront of technological nationalism is threatening to fracture post-world war leadership. In 2019, Saab created a business unit for institutions and international systems such as EU, cybersecurity. New technology is continuously utilised NATO, the International Humanitarian Law, Law of the to improve delivery efficiency. Sea, the UN Charter and the legal framework of WTO. The may result in less availability to conflict resolution mechanisms - and as a result an increased risk of 3 conflict. CLIMATE CHANGE CAUSING SECURITY THREATS Climate change increases the risk of conflicts, poverty and hunger, undermines human rights and is a growing cause of forced migration. This means that the realities of climate change have a security dimension, as well as their wider SAAB WELL POSITIONED TO RESPOND TO impact on the world population and the environment. INCREASING SECURITY NEEDS Extreme weather conditions affect agricultural output, On the back of current global trends, Saab has resulting in people abandoning the countryside in never been more important for its customers favour of the cities. Potential food insecurity also and the people they serve. To build on these inevitably leads to an increase in migrants seeking to growing needs, Saab has made significant in- move to more stable areas such as Europe and North vestments in the last decade, which combined America. Mass relocation due to geopolitical tensions with strategic partnerships, have enabled the has witnessed a rise in illegal immigrants and a migrant company to build a strong and clear position crisis that could lead to potential security threats. in the export market through its technological Extreme weather also brings direct threats to secu- know-how, providing security and defence ca- rity as damage to infrastructure from floods, bush fires pabilities to Sweden as well as other countries. and storms makes protecting vital installations even The company will continue to invest in its core more of a challenge. During 2020, examples include technologies to further strengthen its position. the fires in California and Australia and floods in East Africa and Europe.
12 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 THE GLOBAL DEFENCE MARKET
INTERVIEW
“The choices we make today will be shaping the world for many decades”
“The world is facing a defining moment in history with a constellation of forces coming together with a sharpness caused by the effects of the pandemic”, says Damon Wilson, Executive Vice President of the Atlantic Council, a non-partisan American think tank. “Increasing challenges from authoritarian regimes combined with democratic erosion and a dramatically changed geopolitical and technological landscape, mean that we need to step up the efforts if we want to defend our way of life in the free, democratic world in the long term”, he says in this interview.
DESCRIBE THE MAIN CURRENT CHALLENGES TO THE GLOBAL SECURITY SITUATION - First, strong stabilizing, international systems that have been in place since after World War II, like NATO and the EU, are being challenged. Secondly, we see increased competition between great powers. For the first time in many generations, we can imagine a real conflict between great nations. This is combined with the rise of authoritarian capitalism and perhaps an Damon Wilson, Atlantic Council erosion of confidence in democratic capitalism, with a populist backlash in some countries. WHICH AREAS DO YOU SEE AS MOST CRITICAL – This takes place against a backdrop of fast IN THE DEFENSE OF THE FREE WORLD? technological development disrupting our societies, – Cooperation, as I mentioned, will be essential. offering a great potential, but also a great peril. Finally, That’s why the role of NATO will be increasingly impor- we’re facing the forces of climate change. tant. Over time, China will represent the single most – All of this come together at an accelerated pace significant challenge to NATO allies. Some degree of caused by the pandemic. Meanwhile, the uncertainty economic interdependence is inevitable and benefi- about the role of leading nations willingness to, or cial. Yet, in this new era of geoeconomic competition, capable of, playing in the future contributes to bringing NATO must learn to compete. With this approach, the systemic challenges we’re currently facing to a NATO would also step up its efforts to bolster the defining moment in history. resilience of its members in all emerging battlefields; against cyber threats, to ensure the security of tele- WHAT WILL THIS LEAD TO? communications networks and critical transportation – What we’re seeing is a clash between the free world infrastructure, to safeguard critical supply chains, and authoritarian states. I’m pretty optimistic, however, boost energy independence, and help set standards about where we’re going. The reason is because for the use of artificial intelligence, quantum comput- democracies have built defense systems of self-cor- ing, and other new technologies. rection, to hold our selves accountable and to address – We need to invest both our “soft” and “hard” pow- our own shortcomings. But we’re going though a peri- er. We need to leapfrog our adversaries in technology, od of figuring out how to provide the right framework an area in which Saab plays an important role to the for future prosperity and security. U.S. But we must also use the soft power of setting a – To protect our democratic way of life against the good example of inspiration, rather than intimidation. threats against it, democratic nations across the globe We should let our adversaries know that we have the need intensified cooperation when it comes to a num- military capabilities to both defend our people and to ber of areas, whether it’s R&D, 5G, the UN, or a summit of reach others so that we don’t have to use them, while democracies, a much discussed topic in the US at the setting a good example of investing in our people. This moment. The choices we make today will be shaping the could lead to a new democratic wave throughout the world for many decades. We’ve seen a full-scale assault world. from Kremlin using all its instruments, from disinforma- tion, corruption and manipulation to military action like The Atlantic Council is an American think tank in the in Georgia, the Ukraine and the Arctic, which explains field of international affairs. Founded in 1961, it pro- why countries like Sweden is stepping up its military vides a forum for international political, business, and capabilities. Also, we’d better figure out how to deal with intellectual leaders. the threat of China – and we’d better do it together.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 13 CASE: GROUND COMBAT SUCCESS STORY
CASE
Driving growth and profitability in Ground Combat Ground Combat is one of Saab’s business units within business area Dynamics which in recent years have been a success story in the market.
Ground Combat is one of Saab’s business units within business area Dynamics, which has been a success story in recent years, showing a strong track-record DOUBLING SALES AND DRIVING in sales growth, market share gains and improved MARGIN EXPANSION margins. Saab seeks to strengthen further through its • Strong track record of sales growth in the “Program of record” position in markets in US and to last five years be the customer’s first choice and preferred partner for dismounted support weapon systems. In 2020, CONTINUED STRONG GROWTH IN 2020 Saab welcomed Norway as the 14th country to choose • Strong profitability growth the latest generation of the Carl-Gustaf M4 for its - double digit margins armed forces. A key foundation for future success, • Strengthened market share as a market leader in this segment, is the possibility • Leading position in Europe, US and India of building operations in Ground Combat outside of within support weapons segment Sweden to increase capacity and drive growth and • With an improved product offering and margins further. solutions, including C-G M4 and new ammunition, significant volume gains have been made since early 2010’s
A HIGH QUALITY CUSTOMER BASE • Serving more than 40 customers globally including being the US Army’s Program of record since 2013 • 14 customers have chosen the latest generation Carl-Gustaf M4 including Sweden, US, India, Australia and Canada
POTENTIAL TO CAPTURE FURTHER MARKET GROWTH • Increasingly unstable world resulting in re-focus on national defense • Saab’s proven success and track record with its niche products • Latest generation system adapted to meet emerging threats • Strong understanding and ability to adapt to customers’ needs • Strong focus on broadening the portfolio with partners and innovation
Ground Combat sales growth 2015 – 2020
14 +115%SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 CASE: SUSTAINABILITY
CASE
Establishing climate-adapted facilities to enable sustainable growth Saab works actively with mitigation of risks when establishing new sites to support Saab’s long-term growth plan in accordance with Saab’s policies and climate goals.
Energy efficient buildings are a part of Saab’s overall environmental, climate and cost saving strategy to secure sustainable business. As the number of square meters increases globally and the annual floor space grows in relation to Saab’s growing business, Saab has a process in place to build according to all legal requirements, such as climate and environmental requirements in the country in question and in most cases best practice principles according to BREEAM or LEED standards. At the start of a project, physical risks and transition risks related to climate change are assessed. Since most carbon dioxide emissions come from energy use, the simplest step in managing emissions is to reduce consumption through energy-efficient design. The next step is to replace sources of fossil energy with carbon dioxide-free renewable energy on site, and that we address our energy infrastructure. Examples are of initiatives are Saab’s solar PV projects in South Africa and Australia, as well as at our Kallebäck (Gothenburg) site in Sweden. Another example is taking measures to mitigate the occurrence of physical climate risks like extreme weather such as heavy rain, storms and rising sea levels when planning new facilities around the world Saab also strives for achieving the best possible comfort and function for employees, within following the framework set out in by our company’s goals so e.g. in Saab’s establishment projects, which entails that best practice according to standards such as BREEAM are important for us to follow.
Mary Harben Workplace Design Manager
“ It’s important to incorporates energy efficient design, not only to meet our company’s environmental goals, but to provide a more comfortable and productive work environment for our people.”
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 15 SWEDEN AS A BASE FOR GROWTH
Sweden – strong heritage and continued importance
Sweden remains at the core of Saab’s strategic priorities. It is Saab’s home market, and supporting Sweden has been a main mission since Saab was founded in 1937. As back then, Sweden today yet again meet an increasingly unsecure and unpredictable world. Hence, the Swedish Parliament has decided substantial increase in its Armed Forces through an unprecedented increase of funding.
Serving Sweden’s national interest has always been at The company is also behind some of the biggest Saab´s heart, and today we supply the Swedish Armed defence investment projects that have been carried Forces with equipment and services in a wide range of out in Swedish history. These include Saab 35 Draken, areas. Through a close collaboration, Saab has devel- Saab 37 Viggen and most recently Gripen E – the oped high-technological and cost-effective capabili- next generation military aircraft. These projects have ties adapted to Sweden’s location and preconditions. yielded great technical knowhow and new applications Today Saab’s products: the Gripen-fighters, the in a number of areas. Saab has also become a world Erieye-sensor, the Visby Corvette at the sea and the leader in other technical areas, including advanced Gotland Submarine beneath it among many others are weapon systems, underwater technology, Control & an integral part of Sweden’s defence. All under com- Command systems and sensor systems. mand and control of the professional Swedish Armed This has been made possible by a close relation- Forces. And these capabilities are under constant ship with The Swedish Defence Materiel Adminis- development. Having this strong position obliges and tration, FMV, and the Swedish armed forces which with that comes a great responsibility. Saab invests has provided Saab with the vital opportunity to make in competences and new technology in order to meet Sweden a reference customer for its products. In par- tomorrow’s threat environment. Every new capability allel, Sweden has been provided with well-adapted and is designed in close collaboration with professionals, cost-efficient defence systems from a supplier that to safeguard that we meet the high demands set by can deliver even in times of conflict. There have also our customer. been important spillover effects from the research and Sweden is Saab’s main reference customer and an development carried out by Saab into civilian areas. important launch market. When Saab was founded in In order to be able to continue developing and 1937, its primary aim was to provide military aircrafts delivering leading technology and systems, thus en- for Sweden. The company began launching aircrafts suring the country’s defence capabilities, Saab needs during World War II and has been playing an important to further expand its business internationally. Going role in Sweden’s defence capabilities ever since. forward, Saab aims to continue building on Saab’s long-standing and close relations with the Swedish authorities and Armed forces.
Swedish defence spending Total value of defence funding Expected defence spending as increase 2025 vs 2020 from 2020-2025 (billion SEK) a percentage of GDP in 2025
16 40% ~500SAAB ANNUAL1.5% AND SUSTAINABILITY REPORT 2020 SWEDEN AS A BASE FOR GROWTH
”Saab aims to continue building on Saab’s long- standing and close relations with the Swedish authorities and Armed forces.”
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 17 INVESTING IN INNOVATION
An environment that promotes innovation
Saab was born from innovation. It is also the key to Saab’s future success. Constant exploring of new ideas is encouraged and promoted within the organisation, as well as in collaboration with customers and partners. A significant portion of Saab’s employees are engaged in R&D work, and more than 20 per cent of the annual sales are invested in innovation together with customers. Focus is on Saab’s core areas – but also in new technologies to improve both the existing and future product offering.
AN INNOVATION STRATEGY THAT significantly increase R&D efficiency by reducing the SECURES THE FUTURE number of unique or special-order system and to Innovation has been key to the global success that increase the number of shared components as well Saab has achieved over the decades and to the world as software. leading position it has attained in its core areas. Saab is one of the Swedish tech companies that invest most EVALUATING NEW TECHNOLOGIES heavily in R&D. An increasing number of employees – The rapid technological development offers new in 2020 over 20 per cent of the work force worldwide opportunities to improve existing products, as well as - are dedicated to R&D work. potentially extending Saab’s operations into new are- Saab’s approach to innovation is based on manag- as. Saab is investing in disruptive technologies such ing innovation as business critical. An important part of as AI, autonomy, 3D printing, sensors, cyber, cloud this is based on promoting an innovation friendly cor- and space, which could potentially be used for a wide porate culture, where new ideas are encouraged. It is range of products, spanning from fighter aircrafts to also to create arenas for innovation, both internally and cloud storage, from facilitating complicated decision externally in collaboration with customers and various making to fire fighting. partners to broaden the supply of innovative thinking. The company continuously evaluates new business One of Saab’s strengths is the fact that the com- models to capitalise on these new technologies, pany is relatively small from a global perspective, with potentially with partners. Saab has already made major a flat organisation and short lead times. Another ad- investments in digitisation, software defined systems vantage is that Saab’s engineers areas encouraged to and virtualisation and has a world leading position in move between its different core areas when it comes both sensor and 3D printing technology. The company to technologies such as AI and automation, identifying aims to further develop its portfolio in a way that cre- potential synergies between the areas. This, in turn, can ates value for the customer. The opportunities that are lead to new solutions or combinations of product areas. identified will be scaled up from demonstration in the Innovation Labs, through development and industrial FOCUS ON DRIVING R&D EFFICIENCY adaption and ultimately, to final delivery. Saab concentrates product development to its five core areas – Aeronautics, Advanced Weapon systems, SAAB’S INNOVATION LABS Command and Control systems and Sensors and Saab’s five Innovation Labs, which cover strategic Underwater systems - in order to predict and meet the technology areas, are the company’s way of achiev- customers’ long-term needs. Products that recently ing a faster introduction of new technology. They key have required considerable R&D resources include the focus for these is to demonstrate new technology to development of the fighter aircraft Gripen E, the sur- customers and partners. A prioritised project is typi- veillance system GlobalEye and the submarine A26. cally given a small amount of funding and has a short In 2020, Saab continued the work initiated in 2019 development lifespan with the motto of ‘fail fast’, to to consolidate its portfolio. The long term aim is to avoid being self-indulgent.
18 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 INVESTING IN INNOVATION
SAAB INNOVATION GREENHOUSE In 2020, Saab continued to build its “greenhouse”, aimed at encouraging new ideas within the company. Employees who have insights, ideas and innovation opportunities can apply for the support of the Saab Innovation Greenhouse. The Greenhouse provides selected projects with support in testing and develop- ing the idea with a view to scaling it up as a prospect for wider business. In order to promote any potentially interesting opportunities Saab looks at the desirability first and then the feasibility and viability of the project. Saab had initially planned to take the Innovation Greenhouse on a roadshow in 2020 to a number of Saab facilities to further encourage employees to apply for support of their ideas, but this had to be postponed due to the pandemic.
Total R&D spending Increase in own-financed Share of R&D in % of sales R&D 2020 new product development
SAAB ANNUAL21% AND SUSTAINABILITY REPORT 2020 3% 2/3 19 INVESTING IN INNOVATION
”Saab is working continuously on optimizing its product portfolio, reviewing and evaluating what products and solutions to invest in to stay competitive.”
START-UP COLLABORATIONS produce and develop photo-realistic 3D products and The Start-Up team at Saab continuously meets with digital elevation models globally. As part of the Group’s Swedish and international start-up companies to strategy to create value through innovation, Saab identify promising collaborations. The team also works divested its shares in Vricon in 2020 for 117 MUSD. with many of Saab’s business units to identify needs and challenges that could be addressed in start-up AN INNOVATIVE WORKPLACE collaborations. Saab offers an inclusive, safe and healthy workplace. The company is also characterised by its innovative SAAB VENTURES spirit. Diversity gives the organisation access to Occasionally, Saab’s development projects also result different perspectives and stimulates innovation. in potential applications that fall outside the core busi- This means that diversity among employees is en- ness. These projects are managed by Saab Ventures, couraged and an important parameter in Saab’s global which further develops them and, if possible, togeth- recruiting process and leadership training. er with external investors. In this way, technologies Gender equality is a high priority and Saab’s goal by developed by Saab can create long-term value even 2025 is to increase the share of female managers to outside the company’s core markets. Saab Ventures 30 per cent globally and 35 per cent in Sweden. also collaborates with start-ups and other small and Equal treatment and non-discrimination are also medium-size companies. In 2015, Saab entered into aligned with human rights. Everyone who works a 50/50 joint venture - Vricon Inc. - with Maxar to with recruiting at Saab receives regular information on diversity issues, and diversity is a parameter in leadership training and the recruiting process. The company has a number of networks for women and for diversity in a broader sense. By working actively with occupational health and safety, Saab reduces the risk of accidents, illnesses and on-the-job injuries in the short and long term. Read more about how Saab takes responsibility as an employer on page 71.
OPTIMIZING THE PORTFOLIO Saab is working continuously on optimizing its product portfolio, reviewing and evaluating what products and solutions to invest in to stay competitive and profitable in the long term. By reviewing the portfolio, synergies can be identified between product areas, which can lead to new solutions or combinations of product are- as. It also allows Saab to identify products that should be exchanged – or divested. In 2020, Saab’s product portfolio has been reduced by around 30 products.
RESOURCE EFFICIENT PRODUCTS Saab’s products are designed for a long operating life. By using resources efficiently through the entire lifecycle, the company creates products with less en- vironmental impact and low lifecycle costs, something that distinguishes Saab’s products. One of the fighter aircraft Gripen’s competitive advantages, apart from an optimised design with light materials for low fuel consumption, is a unique maintenance concept that extends its lifecycle. For more information on how Saab’s products help to reduce environmental impact, see page 40-41. At the moment, a major part of the R&D work is performed in Sweden, but the strategy is to increase
20 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 INVESTING IN INNOVATION
its R&D capabilities in selected markets. The aim is to build up the company’s intellectual property, extend its industrial partnerships, e.g. with Boeing in the US, increase collaborations with universities. At the Impe- rial College in London, for example, Saab has opened an innovation hub to tap British expertise in various areas. Initially, focus is on radar technology. Focus on creating virtual innovation hubs in order to promote cross-border c ooperation between Saab’s operations in different locations worldwide is also increasing.
JOINT INITIATIVES Saab is a member of a number of cross-industry initiatives on industrial transformation and innovation such as Combient and AMEXCI. An important part of product efficiency is participating in and utilising the results of these partnerships. AMEXCI is Saab’s R&D partner in additive manufacturing.
Products in portfolio Phased-out products in 2020 Divestments since 2019
SAAB~450 ANNUAL AND SUSTAINABILITY REPORT 2020 ~30 3 21 CASE: RADAR AND DIGITALISATION
CASE
Innovation that drive our customers security strategies
LEADING THE DIGITAL TRANSFORMATION OF SENSOR SYSTEMS
New doctrines evolve Ever-changing market demands with technology mean our design teams need to development respond quicker than ever. The new Hypersonic Counter- ”A2/AD” answer to yesterday’s solution with ”A2/AD” Anti Access expensive and time-consuming Area Denial midlife upgrades is software- defined capabilities.
Requirements on Saab is in a perfect position to uti- systems for joint level lise its fully digital AESA-antennas, All domain integration Awareness which are software-defined and flexibly configured. Continuing the road to all domain multi-functional systems with force projection –
Command & control Swift operations digital transformation.
Rapidly emerging Core technology areas are: technologies software defined radar and radio Early warning networks Data fusion frequency receivers, digital and Taking advantage analogue radio frequency design, of them requires antenna technology and signal digitalisation processing. The system design Quantum computing Open data Big data benefits from digitalisation through larger scalability, modularity, data usage, continuous learning and
Robotics development, and more.
The system needs to By exploring the power of software withstand new threats. defined capabilities with continu- Adversaries develop Cyber warfare Electronic Warfare ous deployment of new functional- their traditional military ity (the DevOps-loop), the cus- effectors. But they also tomer solutions will benefit from use cyber warfare to significantly shorter lead times, i.e. take advantage of any innovation time to market. software weaknesses By meeting emerging threats with and use electronic war- updated functionality, the systems’ fare to disrupt sensors. operational capability stays rele- vant at all times.
22 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 CASE: OPTIMIZING THE PRODUCT PORTFOLIO
CASE
How we are optimizing our product portfolio for increased efficiency Our long-term aspiration is to increase sales combined with a strengthened margin by serving our defence and security customers better than our competitors. As part of this strategy, Saab is driving a portfolio efficiency initiative that will continue over the coming years.
A foundation of our strategy is to support our custom- of projects, which are non-core and where significant ers’ existing and future defense capabilities by deliv- investments were needed to create first contracts, e.g. ering world-class and profitable products in our core some civil avionics products. Our efforts to further areas; Aeronautics, Underwater Systems, Command focus R&D and innovation into differentiating parts of and Control, Sensors and Advanced Weapon Systems. our core portfolio started beginning of 2019, and has These represent areas where we have a world leading so far resulted in three divestments: QPS, NVH (Noise position and where significant growth is expected. Vibration Harshness) and Vricon totaling 1.2 BSEK in As part of this strategy we have been driving a divested value. portfolio efficiency initiative geared at focusing our Reduction of our overall product portfolio with overall R&D efforts into future capabilities within our approximately 20 per cent. The program will continue core areas. over the coming years, with the ambition to generate Over the year we have phased out more than significant improvement of R&D productivity. 30 products, divested one product area QPS (Quality Positioning Services) releasing more than 100 MSEK that have been re-invested into our core platform R&D programs. The majority of products that have been phased-out are products were we have new and more modern alternatives, e.g. earlier versions as well as old ammunition types of our Carl-Gustaf weapon system. Furthermore we have stopped development
Petter Bedoire, Chief Technology Officer
”A foundation of our strategy is to support our customers’ existing and future defense capabilities”
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 23 INTERNATIONAL EXPANSION IN STRATEGIC MARKETS
Accelerating our international expansion
Saab’s future success will be determined by its ability to expand internationally. Its strategy for global growth is based on offering its world-leading expertise in five core areas while continuing to invest in innovation to retain and strengthen its position. Focus is on strategic markets, such as the US, the UK and Australia - where the goal is to increase Saab’s presence by establishing a global multi domestic base with strong local position to become a natural part of these countries’ national defence capabilities, similar to the role the company has attained in Sweden.
STRENGTHENING SAAB’S POSITION be able to export what they develop and produce to IN STRATEGIC MARKETS other countries. The company aims to create autonomous entities During the year, the establishment of local produc- with development and production capabilities in key tion capacity for the T-7 aircraft was progressing in the markets; such as the US, the UK and Australia. These US, while in Australia’s order for Saab’s solution for de- markets have been chosen based on the fact that they ployable health modules, a global development centre, are democracies with a low degree of corruption. They was established in the country. Saab also announced are also attractive because of the volume, maturity and a decision to create a new FCAS (Future Combat Air business conditions of their domestic defence markets. System) centre in the UK, in order to further develop Saab has an established local operational presence the close working relationship with the other FCAS in these countries, and to some extent an installed industrial partners and the UK Ministry of Defence. base, where future business opportunities has been identified. Growth will be achieved through increased LEVERAGING OUR EXPERTISE AND domestic sales, R&D, investments and export with INSTALLED BASE IN ESTABLISHED MARKETS support from partnerships as well as industrial and Saab has well established business in some 20 university collaborations to build platforms for further markets, which has been identified as having a good growth. The aim is to attain national industry status in potential to grow. Growth will be achieved through selected niche areas. leveraging on local presence and the existing installed The goal is to achieve a global and multi-domestic base. One example is Germany, where Saab in 2020 cluster, where Saab’s operations become a natural received an order from its German partner Diehl De- part of these countries’ defence capabilities. One rea- fence for the RBS15 anti-ship missile for provision to son is that development of high-tech defence systems the German Navy. The order value is approximately is regarded as of national interest in many countries, 1.7 BSEK with deliveries between 2022 and 2026. Saab which make them unwilling to import this type of also continuously evaluates opportunities to grow in technology. One example is the US. With a market strategic markets through mergers & acquisitions. share of 40 per cent, it is the world’s largest defence market – but it only accounts for 1 per cent of the total FOCUSING ON MEGA DEAL OPPORTUNITIES global import. Mega deals refer to major platform sales, e.g. Gripen, Saab is currently establishing competence hubs in GlobalEye and submarines. These deals provide different areas in these markets, including Control & Saab with multiple business opportunities; i.e. initial Command systems in Australia and radar systems in sales, recurring business and aftermarket services. In the US. The aim is that competence will be shared with 2020, Saab delivered its first and second GlobalEye other regions and that these operational entities will early-warning aircraft to the United Arab Emirates. The initial contract between the UAE and Saab included
24 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 INTERNATIONAL EXPANSION IN STRATEGIC MARKETS
MAJOR PART OF SAAB’S ORDER INTAKE 2020
SWEDEN 13 BSEK +63% NORTH AMERICA WESTERN EUROPE EASTERN EUROPE 4.4 BSEK 7 BSEK 1.5 BSEK +20% -26% >100%
MIDDLE EAST AND AFRICA 12 BSEK >100%
AUSTRALIA 3.8 BSEK >100%
SAAB’S MARKET STRATEGY
USA GERMANY UK AUSTRALIA BRAZIL Expand Saab’s Partnerships and/ Partnerships and Focus to expand cur- Positioning Saab business as a key or M&A with local organic growth to rent strong position and deepening the supplier in estab- industry in order to increase Saab’s in Command and partnership with lished niches such increase presence workshare and Control towards sen- Brazilian companies as Ground Combat, and market position efforts in the FCAS sors and expansion to support develop- Command and Con- within key tech- project, as well as into other segments ment, operational trol and Radar, as well nology areas that looking into opportu- to diversify Saab’s introduction and as in major national encompass Saab’s nities to strengthen offering in the do- support of Gripen, as sensor and aeronaut- core areas C2, Sen- position in Ground mestic-eco system. well as winning new ics programs based sors, UW and Missile Combat, Sensors, large orders. on partnerships. Systems. Autonomy and AI.
three aircrafts equipped with long-range radar and organization, stringent processes, internal audits other surveillance sensors. During the year a support and specially adapted IT tools, in addition to regular contract was signed with the UAE and at the end of the training of key personnel. Read more about export year, Saab signed a follow-on contract for two addi- compliance on page 74. tional GlobalEye aircrafts to the customer, proving the strength of Saab’s defence system capabilities. The ZERO TOLERANCE FOR CORRUPTION aim is to offer GlobalEye to more customers. Saab has zero tolerance for corruption and is guided by its fundamental values, code of conduct, current EXPORT COMPLIANCE laws, industry codes of conduct and clearly defined The security and defence equipment market is highly internal processes to prevent corruption risks. These regulated and Saab is committed to complying with all efforts are in line with the Saab group’s sustainability export control regulations applicable to its business. efforts. Read more about the work on anti-corruption To enable compliance Saab employs a competent on page 66-67.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 25 INTERNATIONAL EXPANSION IN STRATEGIC MARKETS
Core technologies enabling international growth
Saab is investing in technology to remain a market leader. Our core areas comprises aeronautics, advanced weapon systems, command and control systems, sensors and underwater systems. They constitute areas where Saab has a world leading position, strong support from customers and where the company expects significant growth going forward. Saab will continue to focus its R&D investments to these areas in order to secure excellence in competence and future capabilities.
Aeronautics Saab’s Aeronautical competence encompasses Gripen, a world-class Advanced Weapons fighter systems, but also research, systems development and production of other The company offers a market-leading aircraft systems. This includes future product portfolio comprising ground manned and unmanned systems, as combat weapons, missile systems well as further development of existing and torpedoes for all branches of products. Collaborations with other armed forces. world-leading entities are an important success factor. With its all-encompassing capabili- ties, ranging from complete system The development and export suc- integration to subsystems and com- cess of Gripen has paved the way for ponent expertise, Saab has a flexible partnerships with other industries and business model utilizing international nations, with Saab experiencing strong partnerships to fulfil customer international demand for its leading requirements on security of supply technology and competence in the and local production. area. An example is the new Advanced Pilot Training system T-7, which has The product range features the been designed and developed together man-portable, multi-role weapon sys- with Boeing primarily for U.S. Air force. tem Carl-Gustaf, which allows dis- mounted soldiers to deal with multiple Another example is that the UK and challenges on the modern battlefield. Sweden has signed a memorandum of understanding regarding the develop- Orders in 2020 included a multi-year ment of the next generation combat framework contract with the U.S. air systems (FCAS – Future Combat Air Army for the latest version of the Systems). Saab is leading Sweden’s Carl-Gustaf, known as the M3E1 in FCAS industrial participation in close U.S. Army service and M4 globally. co-operation with Sweden’s Ministry of Products also include missiles in the Defence. Meteor programme, which sees the A number of other nations and indus- UK, Sweden, France, Germany, Italy tries are currently showing interest in and Spain unite to provide access to taking part of Saab’s expertise in the technology and expertise across aeronautical area. Europe.
26 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 INTERNATIONAL EXPANSION IN STRATEGIC MARKETS
Sensors Saab’s sensors solutions provide situational awareness for customers Underwater systems in all domains through state-of-the- Saab is an innovative supplier of art surveillance, decision support, world-class naval systems, engagement guidance and threat specializing in low observable sur- detection, localisation and protection. face vessels, advanced underwater Saab is world leading in sensor, weapon systems and submarines. microwave and antenna technology The company bases its position on for radars and electronic warfare platforms with high survivability and solutions, ranging from airborne early a high level of systems integration warning systems, and combat air meeting demanding customer solutions to land and naval applica- requirements in difficult operational tions. The sensor portfolio provides environments. Saab is especially Saab’s core products with unique strong in underwater systems. capabilities and supports our part- ners as Tier-2 providers. The area includes manned and unmanned naval systems, with com- GlobalEye is Saab’s latest airborne pletely new designs as well as further early warning and control system. It is development of existing products. the only system of its kind on the mar- Military products are developed in ket to offer multi-domain capabilities Sweden, while products for the com- and air, maritime and ground surveil- mercial market are developed in the lance in a single solution. In 2020 Saab Command and UK. delivered the first two GlobalEye air- craft to the United Arab Emirates and Control systems With the growig Torpedoes are still a received a follow-on order for two Command and control solutions are key very effective weapon in today’s additional systems. part of Saab’s overall offer, providing naval warfare, and more advanced, customers with superior situational intelligent and adaptable than ever The sensor portfolio also includes the awareness and critical decision sup- before. Saab’s new lightweight tor- world-class multi-mission Giraffe port. Saab provides complete com- pedo system, now under develop- radar family with its wide range of mand and control solutions as well as ment for one of the toughest environ- applications, from naval surveillance solutions that form parts of large, com- ment in the world, i.e. the Baltic Sea, to ground based air defence and plex system-of-systems. lives up to the requirements for the weapon locating capabilities. The future. radars can be configured for a wide The offer ranges from fire control to range of missions, from protecting complete integrated combat systems, Through the acquisition of Kockums troops and important infrastructure, including multiple sensors, effectors in 2014, Saab can rely on more than major events and top-secret facilities. and missiles for the naval, air and land 100 years of shipbuilding expertise The naval Sea Giraffe radars provide domains. Being a competitive lead sys- with continuous injections of world naval vessels with air and sea surveil- tem integrator requires a strong com- leading innovations and technolo- lance. Sea Giraffe has been a success mand and control offer. This is crucial in gies. This experience combined with on the US market, with different con- order to provide capabilities that sup- technology leadership is now mani- figurations selected or installed on six port national sovereignty on our key fested in the development and pro- classes of US ships. Saab signed mul- markets. Interoperability and informa- duction of two Blekinge-class sub- tiple contracts during 2020 to further tion assurance are also increasingly marines for the Swedish Navy. develop the system for US require- important to further strengthen the Besides the orders from the Swedish ments, with the development and command and control area. Navy other nations also have shown interest in the system. Meanwhile, supply chain at Saab in the US. The command and control solutions are Saab has teamed with Dutch ship- The electronic warfare products pro- the brains behind Saab products and builder Damen Shipyards Group to vide Gripen with unique capabilities to solutions including our platform solu- explore future opportunities in the increase survivability and protection tions. This includes the civil and secu- international submarine market. of the aircraft. They also add offensive rity market such as civil traffic manage- jamming and electronic attack capabil- ment and high-value asset protection. The companies have an exclusive ities. The Gripen EW program is one of During 2020, Saab signed large naval agreement to work together in pur- the world’s most advanced electronic command and control contracts, a suit of the potential Walrus-class warfare programmes giving Saab Swedish integrated ground base air submarine replacement programme unique and advanced capabilities to be defence programme, and multiple civil for the Netherlands. In addition to this used across the whole EW portfolio. and security contracts, for example to project, Saab and Damen will also The EW solutions are compatible with provide the Irish Police Service with the explore ways in which they might bid other Saab and third-party platforms SAFE unified command, control and jointly on other submarine procure- in the land and naval domains. communications platform. ment programmes.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 27 CASE: STRENGTHENING THE FOOTPRINT IN THE US
CASE
Strong growth potential in our U.S. operations The United States is the largest market in the world for defence equipment, systems and services. It is also an important engine for Saab’s future growth.
Operations were initially focused on channelling prod- ucts designed in Sweden to the U.S. market, including the Giraffe radar and Carl-Gustaf. But in recent years, SAAB STARTS CONSTRUCTION OF NEW Saab has redefined its position and now maintains “SMART” U.S. PRODUCTION FACILITY a solid foothold as Saab Inc. Operations in the U.S. In 2020, Saab started construction of a new, gained strong momentum with the 2018 agreement highly automated U.S. facility for advanced with Boeing on developing the T-7A advanced pilot manufacturing and production in West training system for the U.S. Air Force. Lafayette, Indiana. The facility is an important Today, Saab Inc. develops, modifies and delivers part of Saab’s growth strategy in the United Saab’s portfolio to U.S. customers, based on tech- States, creating strong organic capabilities nology developed both in the US and in Sweden. The for the development, manufacturing and sales company actively transfers technology from Sweden of its products. The site will be located at the where appropriate, while utilizing a supplier base Purdue University-affiliated Discovery Park across 24 U.S. states. With roughly $400M USD in District. Saab has entered into a partnership annual U.S. sales, Saab has about 650 employees, with the Purdue University, and through this and operates out of seven U.S. locations. Technology intends to expand its U.S. based Research developed by Saab Inc. is also available for export and Development with focus on cutting edge outside the U.S. technology in areas such as sensor systems, Saab’s growth strategy in the U.S. is based on build- artificial intelligence and autonomous systems. ing a strong, unified brand, while gaining a position as Initially, the facility will be producing major an “embedded” supplier; i.e. a member of the national structural sections and perform the final as- defence industry contributing to job opportunities, tax sembly of the Saab parts of the T-7 advanced revenue, political constituents and generating military jet trainer, developed by Boeing and Saab for technology focused on US requirements. Establishing the United States Air Force. The location was Saab as “embedded” further enables the pursuit and chosen based on the support of the State of capture of funded research and development. The tar- Indiana, the cooperation opportunities with the get is high priority U.S. customer needs and missions world-leading Purdue University and its strate- that are currently underserved by US suppliers. Recent gic position geographically. contracts include orders in the Threat Simulator domain.
Sales (MUSD)
~400Employees
28 SAAB ANNUAL~650 AND SUSTAINABILITY REPORT 2020 CASE: STRENGTHENING THE POSITION IN AUSTRALIA
CASE
Strengthening our position in Australia Australia is one of Saab’s strategic markets with significant potential for strengthening the current strong position and capturing further growth. The ambition is to become a natural part of the country’s defence capabilities.
There are several reasons for the importance of well-established operations, a highly skilled workforce Australia as a strategic market. These include a and a growing product portfolio in the country. long-term government commitment to increasing the In 2020, Saab achieved order bookings of over 160% defence budget (+70 per cent to 2030) and to focus its compared to 2019 and organic sales grew by 4% for investments on the local defence industry capabili- the full year. ties. Meanwhile, Saab has a long history of success- fully partnering with the Australian Defence Force,
Saab’s achievement in Australia in 2020: Healthy profita- bility of EBIT>10%
Record order intake Continued positive of 3.8 BSEK cash-flow generation
~2.1 BSEK Record sales of 1.5 BSEK, Deployable Health and expected to continue capability contract growing strongly in 2021
Partnering agreement with Defence for Combat Management Systems across Australian Navy fleet
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 29 ‘s
CASE: SAAB’S ROADMAP IN THE UK
INTERVIEW
UK as a strategic defence market with future growth potential Nigel Maddox is the Senior Military Advisor for the Defence sector at the Department for International Trade’s Defence and Security Exports that supports British companies in the defence, security and cyber sectors overseas. Below is a summary of an interview with Nigel regarding the importance of the British defence sector and its potential for Saab as a strategic partner.
The UK and many of its trading partners share a common goal of a safe and secure world. Increasing exports enables industry to invest in developing new technologies and innovation, providing the UK’s armed forces and security agencies with access to leading- edge technology, training and support. Collaboration with allies and partners helps develop valuable new technologies and capabilities further. While this need to access external resources is common to countries in many sectors, the need to collaborate with like-minded countries is ever more apparent in the technological sectors. More must be done with limited R&D budgets. Countries and their technology companies are innovating at ever faster rates to maintain competitiveness and therefore see technical or R&D alliances not as an option but as a strategic need. The British Government’s new investment of an additional £5.8bn in defence R&D will accelerate the development of next generation technology and capabilities for British Armed Forces, enabling them to better defend the UK and its interests. The investment will also develop a pipeline of future capabilities by developing generation-after-next technologies for our Armed Forces of tomorrow. Team Tempest has attracted £800m of private sector co-investment, driving cutting edge research in areas such as big data and Artificial Intelligence. Long Nigel Maddox, Senior Military Advisor, term, the project will help to retain the UK’s strategic Department of International Trade ability to develop future combat air systems; maintain the UK’s defence aerospace export market and sus- tain jobs; and we are pleased to have Saab as a partner in this area. ”The UK and many of The UK will remain a committed partner and ally to its friends, not simply because we face the same threats and interests, but because the UK has a deep, its trading partners share historic belief in the same values that Europe stands for: peace, democracy, freedom and the rule of law, a common goal of a safe in our continent and beyond. Promoting our shared values, tackling our shared threats, and maintaining a and secure world.” strong and prosperous economy will require a deep and special partnership in defence, security and de- velopment engagement.
30 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ‘s
CASE: SAAB’S ROADMAP IN THE UK
KEY FACTS ABOUT THE UK DEFENCE MARKET: • In 2018-19, the Ministry of Defence (MOD) spent a total of £38bn on acquisition, support and personnel and the recent Spending Review Settlement over 4 years should increase that figure by £16.5bn. • The UK share of the global defence export market was estimated at 16% in 2019 and the UK’s largest defence export markets have been the Middle East, Europe and North America. SAAB’S STRATEGIC DIRECTION IN THE UK: • On a rolling 10-year basis, the UK remains the • The UK and Sweden signed a MoU on FCAS second largest global defence exporter after co-operation in July 2019. Saab is leading the USA. Sweden’s FCAS industrial participation in • In 2019, the UK won defence orders worth close co-operation with Sweden’s Ministry £11bn, compared to the previous year (£14bn) of Defence. and illustrative of the volatile nature of the • In July 2020, Saab took the decision to invest global export market for defence. initially 50 MGBP as part of its commitment • In 2019, the value of UK security export sales to build a long term relationship with the UK was £7.2bn, an increase from 2019 (£5.2bn) related to FCAS. lifting the UK to 3rd place (from 4th in 2018) in • The centre forms part of Saab’s long term the rankings. The UK’s largest security export plans for the UK market to develop local markets were Europe, North America and capabilities, invest in research and develop- Asia-Pacific. ment and grow intellectual property.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 31 SUSTAINABILITY AS A VALUE DRIVER
Saab’s sustainability commitment
Saab will deliver sustainable value for customers, partners, employees, owners and society as a whole. Saab’s sustainability commitment serves as the basis for our long-term development and growth.
A comittment to society is at the core of Saab. Peace, SAAB’S SUSTAINABILITY PRIORITIES security and stability is a prerequisite to ensure that Saab’s products create security and defence capabil- we manage to reach the Global Goals for Sustainable ities in Sweden and other countries. The portfolio also Development that we as a global community have includes products that contribute to decrease climate set out. In a world where threats against our societies impacts. To continue to create value in the long term, it are growing increasingly diverse, Saab contributes to is imperative that Saab operate in an environmentally defence and security capabilities around the world. and socially sustainable way. A long-term approach Saab was founded as a response to a growing threat to is extremely important, not least because several of Sweden´s sovereignty. Saab has since then developed Saab’s projects extend over very long periods. Saab into a trusted international partner that contributes to continuously measure and monitor key sustainability increased security and defence capabilities in Sweden aspects and integrate them in its processes. In Saab’s and many other countries around the world. sustainability report (pages 60-83), Saab’s goals and The foundation of Saab’s sustainability commit- performance in each area is shown. Saab’s priorities ment is to create value for its stakeholders in a respon- can be summed up in three main commitments (see sible and sustainable way. By acting responsibly in illustration below). everything Saab do, following laws and regulation and working closely with national authorities the company earn the confidence of customers, employees and society.
Defence and security Industrial Cooperation capability Product safety
Research & Development
SAAB’S Leading compliance Anti-corruption programs SUSTAINABILITY Export compliance COMMITMENT Information security
Responsibility for Diversity people and environment Environment
Health and safety
32 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 SUSTAINABILITY AS A VALUE DRIVER
SAAB CONTRIBUTES TO THE UN’S SUSTAINABLE DEVELOPMENT GOALS The UN’s Sustainable Development Goals (SDG) have set the global agenda for achieving sustainable eco- nomic growth, social integration and protection of the environment. Saab contributes through its operations to most of the SDGs. The goals that Saab has the greatest ability to influence and that are tied to the business strategy are goals 4, 5, 9, 13 and 16. For more information on how Saab contributes to the SDGs, see pages 60-63.
IMPACT OF COVID-19 ON SUSTAINABILITY WORK collaborations with partners around the world more The Covid-19 crises has been a driver for change as difficult. Saab has mitigated these challenges when new challenges has forced Saab to adapt and find possible in order to fulfil the sustainability commit- new ways of working. This has included decreased ments. As Saab’s customers are dependent on Saab business travel nationally and internationally. The for service and support, Saab has had to be flexible increased amount of digital meetings has shown that during this period. The Covid-19 crises has there- it is possible to some extent to manage business rela- fore enabled Saab to become better at preparing for tionships via digital tools and decrease business travel. risks and contingencies. Saab also adjusted to the The Covid-19 crises has affected Saab’s sustainability needs of society by temporarily producing protective work within some areas, as for example interactions equipment for the Swedish health care system during throughout the supply-chain has been difficult. The the height of the pandemic. Saab initiated another 35 limitations on international travel has also made similar initiatives during the year.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 33 SUSTAINABILITY AS A VALUE DRIVER
Security and defence capabilities
Saab was founded over 80 years ago during a turbulent time in the world and Sweden needed the capabilities to uphold its sovereignty. Since then, Saab has developed into an international partner that contributes to security and defence capabilities in Sweden and other countries around the world.
FOCUS ON THE CUSTOMER’S NEEDS INNOVATION CENTRES To maintain technological leadership, Saab continu- Sweden is seen by many countries as a leader in entre- ously develops new innovations and invests a large preneurship and innovative thinking. Saab brings the share of sales in research and development. Saab also way research and development is done in Sweden to has close development partnerships with suppliers new markets by building relationships with academia, and customers and contributes to broad-based col- businesses and the public sector. For example, Saab is laborations between industry, academia and the public one of the founders of the Swedish-Brazilian Research sector. All with an eye on developing products that are and Innovation Centre CISB in Brazil. During the year safe to use and adapted to the customer’s needs. Saab has also continued to work cross-functionally to identify areas where collaborations with start-ups UNIVERSITY PARTNERSHIPS would be mutually beneficial. An important part of Saab’s innovative capabilities is how Saab collaborate outside the company to gain INDUSTRIAL COOPERATION access to new knowledge. The partnerships with When Saab wins large contracts the customer country universities are an example, where employees from often demands industrial collaborations, many times Saab have the opportunity to research for a PhD, with technology and skills transfers as important while researchers and students from the schools can elements. Through customised offers, Saab and be involved in Saab’s work. Saab also helps to fund a its partners have contributed to several successful number of adjunct professors. projects that are helping national economies. One example is the industrial collaboration tied to the Gripen programme in Brazil. Saab brings Swedish ways-of-working to new markets by building relation- ships with academia, businesses and the public sector.
PRODUCT SAFETY With a product portfolio containing everything from advanced aviation systems to submarines, it is vital that Saab’s products are safe to use. System safety engineers in Saab’s organisation handle analysis work in the projects and share product safety knowledge through information and training.
READ MORE... about how Saab works with research and development, industrial cooperation and product security in sustainability report on pages 60–83.
34 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 SUSTAINABILITY AS A VALUE DRIVER
”An important part of Saab’s innovative capabilities is how we collaborate outside the company to gain access to new knowledge.”
Number of PhD candicates University partnerships Total R&D spending % of sales
SAAB ANNUAL AND SUSTAINABILITY48 REPORT 2020 +30 21% 35 SUSTAINABILITY AS A VALUE DRIVER
Leading compliance programme
One of Saab’s fundamental values is trust. We are honest, reliable and keep our promises. By following the guidelines and principles in Saab’s Code of Conduct, our employees show what this value means in practice. The areas of anti-corruption, export control and information security are critical to Saab. The company therefore works continuously to develop better routines and processes. The goal is to have industry-leading compliance programmes.
ANTI-CORRUPTION INFORMATION SECURITY Saab is a long-term, reliable business partner and Saab manages information that is vitally important promotes an open and transparent market. Our con- to its customers and in many cases to Sweden’s and tracts run for 10, 20 or even 30 years. It is therefore other nations’ security. In an increasingly uncertain important that every part of the company has a sound world with growing cybersecurity challenges, contin- and ethical business culture. Corruption has negative uous and systematic security management is critical. consequences for society and the business commu- To take advantage of the opportunities that new nity and is something that Saab can never accept. We technologies offer, Saab must continuously improve are guided by our fundamental values, the Code of security management within the company, of which a Conduct, laws, industry codes of conduct and clearly key element is risk management. defined internal processes to prevent corruption risks. EXPORT COMPLIANCE The security and defence equipment market is highly regulated and Saab is committed to complying with all export control regulations applicable to its business. To enable compliance Saab employs a competent organization, stringent processes, internal audits and specially adapted IT tools, in addition to regular train- ing of key personnel. The majority of Saab’s exports are from Sweden, where the Inspectorate of Strategic Products (ISP) de- termines on behalf of the government which defence products Swedish industry may sell to which coun- tries. Decisions on export permits are made on a case- by-case basis where ISP weighs a number of criteria in a comprehensive assessment. ISP also takes into account the type of product involved.
EXPORTS ARE IMPORTANT FOR DEFENCE CAPABILITIES To stay competitive and cost-efficient, Saab is dependent on exports and partnerships with other countries. Multinational collaborations help to strengthen the Swedish defence industry, which is critical for Sweden to meet new security challenges.
36 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 SUSTAINABILITY AS A VALUE DRIVER
INTERVIEW
Strengthening anti-corruption efforts
In 2020, Saab began appointing local Ethics and Compliance Officers to continue strengthening Saab’s anti-corruption work. With these new roles, the preventive efforts will be better adjusted to each business area’s risks, while employees are provided with easier access to advice and support. Susanna Sjösten is newly appointed Ethics and Compliance Officer at Saab’s business area Kockums.
HOW HAVE YOU APPROACHED THE TASK? It started with a thorough introduction program along with our central team to gain an understanding for our way of working and the policies and procedures that we must relate to at Saab. After this, I began to define a roadmap for our work here at Kockums. The starting point was to, based on our policies, map out which of our functions are affected. Following this, I initiated meetings with the organisation to learn how we’re working today and the challenges that we face. We’ve also had a dialogue around how I can support the organisation going forward. All of this will be used as a basis for continued training efforts to further increasing the understanding within the organisation.
WHAT CHALLENGES DO YOU SEE WITH YOUR NEW ROLE? The area of responsibility linked to the role concerns many parts of the organisation. It’s really important to adapt the work to our business and our specif- ic prerequisites. It’s a challenge to reach out with messages to all employees concerned in one way or another. Certain situations could potentially have a major effect on our business and therefore it feels ensuring that we have a clear message from our CEO concerning anti-corruption and that I have an open dialogue with my management.
”The area of responsibility Susanna Sjösten Ethics and Compliance Officer linked to the role concerns many parts of the organisation.”
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 37 SUSTAINABILITY AS A VALUE DRIVER
Responsibility for people and the environment
No company can live in isolation. We are all dependent on a well-functioning and sustainable society in order to survive. For Saab, it is given that we will take responsibility for people and the environment throughout the value chain.
RESPONSIBLE EMPLOYER SUPPLIERS ARE AN EXTENSION To be even more competitive in the future, Saab has OF OUR OWN OPERATIONS to stay on the forefront of technology. Employees are We see our suppliers as an extension of our own op- the driving force that will take this work forward. Saab erations and expect them to take the same social and is therefore an inclusive, safe and healthy workplace. environmental responsibility we do. Systemic meas- Diversity gives the organisation access to different ures to ensure that responsibility is being taken in the perspectives and stimulates innovation. Everyone supply chain not only minimise risks, but also lead who works with recruiting at Saab receives regular to higher quality in the products we buy. Our code of information regarding diversity issues, and diversity conduct for suppliers, which is based on the UN Global is a parameter in leadership training and the recruiting Compact’s principles, is included in all new contracts process. By working actively with occupational health and in contracts that are renegotiated. In the code we and safety, Saab reduces the risk of accidents, illness- stipulate that we expect our suppliers to place similar es and on-the-job injuries in the short and long term. demands on their subcontractors. Read more about how Saab takes responsibility as an employer on pages 71-73. LOWER IMPACT ON THE ENVIRONMENT To remain competitive in the future, Saab is working actively to reduce its impact on the environment and climate. Saab’s environmental strategy focuses on reducing greenhouse gas emissions, resource efficiency and phasing out hazardous substances. Saab’s climate goal is to reduce greenhouse gas emissions from its operations by 33 per cent by 2030. Our a mbition is to increase circular flows of resources within our product life cycles and in our operations. Saab is also working strategically to phase out haz- ardous substances in products and contribute to a non-toxic environment.
READ MORE... about how Saab works with diversity, reducing environmental impacts, and health and security in the sustainability report on pages 60–83.
38 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 SUSTAINABILITY AS A VALUE DRIVER
”Everyone who works with recruiting at Saab receives regular information regarding diversity issues.”
Share of female managers Employee engagement GHG emission reduction
SAAB ANNUAL26% AND SUSTAINABILITY REPORT 2020 81% -37% 39 SUSTAINABILITY AS A BUSINESS CRITICAL DRIVER
Developing sustainable solutions
An important part of Saab’s work to reduce our environmental impact is through research and development, as well as collaborations, aimed at creating sustainable solutions. Furthermore, by using resources efficiently through the entire lifecycle, we create products with less environmental impact and low lifecycle costs, which differentiates Saab’s products.
Saab’s portfolio has during the 2000s grown to In order to continuously develop and increase include products and services that actively con- our environmentally sustainable offerings, as well tribute to reducing our customer’s environmental as r educe emissions from our operations, we have impacts, for example through creating more efficient established the Saab Climate Fund to support flows on the ground and streamlining products in sustainable innovations throughout the company. the air or at sea. Therefore Saab has initiated our The first innovation to receive contribution towards Climate Impact Portfolio, where we are categorizing development was Remote Support, that enables our products and services that can help contribute remote service of our complex products. This is done to more sustainable operations and lessen climate by making use of a secured AR/VR-solution – thereby impact from business. This is our way of contributing directly reducing our own and our customers need to a more sustainable society, as well as meeting to travel and thereby also reducing greenhouse expectations from our customers, investors and also gas emissions. our employees.
Aerobahn REDUCING EMISSION THROUGH IMPROVED AIRPORT TRAFFIC FLOWS Saab has a strong footprint on the market within both aviation and maritime traffic management. One way Saab contributes to reduce the carbon footprint within avia- tion is through our air traffic management SeaEye systems, present at many of the world’s A WORLD LEADER IN ELECTRIC UNDERWATER ROBOTICS largest airports. Aerobahn CDM Suite is a Reducing environmental impact through robotic technology that solution that improves efficiency in traffic is smart, powerful and flexible is important to Saab Seaeye as flows, thereby helping to lower fuel con- world leader in electric underwater robotics. sumption on the ground. With Aerobahn, aircraft emissions on the ground are Trusted to perform a huge array of vastly different tasks across reduced by more than 15%. widely diverse commercial and scientific sectors, as well as defence, Saab Seaeye’s pioneering technology enhances environmental responsibility. This results in cleaner seas, smarter energy usage and greater scientific knowledge. Our fully electric robot technologies cut CO2 emissions by reducing the number and size of support vessels that would otherwise be required, keep seas cleaner by providing leak detection while monitoring pipeline integrity and undertake im- portant scientific research missions in the marine environment.
40 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 SUSTAINABILITY AS A BUSINESS CRITICAL DRIVER
Remote Support PROVIDING EXPERT ASSISTANCE USING AR/VR Through Saab’s maintenance services both in Sweden SUM and globally, there is an increased need for secure digital communication to increase access to Saab’s SUSTAINABLE UNDERGROUND MINING staff and the opportunity to solve technical problems The mine of the future emits zero carbon dioxide, with shorter lead times, for example from reduced is digitalised and autonomous. As a partner in this, travel needs This is especially desired in times when Saab subsidiary Combitech has been a founding travel is limited, in situations when the state of our member of the Sustainable Underground Mining world changes. alliance made up by LKAB, ABB, Epiroc and Sand- vik, with the goal of setting a new world standard Our remote guidance tool gives the possibility to share for sustainable mining at great depths. live video and instruct personnel who are on location at the site, while service experts need not be situated Together, the five companies will establish a test at the same site. The tool also incorporates the use of mine where new technology will be developed and augmented reality through overlay technology. tested in a real mining environment, as well as a virtual test mine. The test bed is being built in LKAB’s underground mines in Kiruna with the help from Combitech and utilising know-how and solu- tions from Saab & Combitech.
Sea Traffic Management IMPROVING PROTECTION OF THE MARITIME ENVIRONMENT WITH SMART TECHNOLOGY Efficient traffic flows and safety are of high importance within shipping. An example of Bleed Air Heat Saab’s contribution to these aspects is Saab’s active role in the Sea Traffic Management Detection (STM) initiative, where Saab contributes at multiple levels. Saab is founding member of the AIRCRAFT WEIGHT Navelink industry consortium that provides an ecosystem to plan the complete route of a REDUCTION THROUGH FIBER ship from berth to berth. At the same time, Saab provides the transponder technology that OPTIC SENSOR TECHNOLOGY allows the exchange of information essential for that same route planning. This product, developed by Another example is when the Government of Queensland selected Saab to upgrade their Saab as part of the Clean Sky re- Vessel Traffic Management Information System (VTMIS). The VTMIS enables both efficient search program, is our solution and safe shipping by providing detailed information on sea conditions, ship traffic and po- for monitoring the distribution of tential hazards. This enables authorities and ship crews to implement safer routes that avoid hot air from the aircraft engines sensitive marine areas along the 2500 km coastline of the Great Barrier Reef. to the cabin space through the use of fiber-optics. This reduces the system’s weight by 80% and the number of parts by 90%, leading to reduced environmen- BLADE tal impact of up to 340 tonnes of BREAKTHROUGH LAMINAR AIRCRAFT CO2 during the life of an aircraft. DEMONSTRATOR IN EUROPE The solution has thereby earnt multiple innovation awards such BLADE is an Airbus project within the European as Airbus Innovation Award. Clean Sky framework to flight test experimental laminar flow wing sections on an A340 aircraft. Flight tests were carried out with final aerody- namic analysis done during 2020. The laminar flow wing section was developed and Flaps and Slats Actuation system built by Saab. During the flight test campaign the REDUCING AIRCRAFT DRAG USING ELECTRO- Saab developed wing performed excellent and MECHANICAL ACTUATORS & CONTROLLERS showed stable laminar flow on very large part of As part of the Clean Sky research program, our business unit the wing surface. Avionics Systems is currently engaged in developing solutions for The use of the Saab wing concept integrated reducing fuel consumption and more efficiently monitoring aircrafts into a new aircraft has a potential to reduce the systems. On the Boeing 787, for example, Saab’s electric motors are total aircraft drag by around 9% if applied on the part of a system that adapts the shape of the wing during flight to wing and empennage and saving about 5% in minimize resistance and fuel consumption, reducing emissions over fuel consumption. the life of the aircraft by as much as 10,000 tons of CO2.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 41 LETTER FROM THE CHAIR OF THE BOARD
Protecting our society in an uncertain world
IMPORTANT ROLE DURING CHALLENGING TIMES 2020 will be described as one of the most dramatic and challenging years in modern history. The Covid-19 virus has had devastating consequences for life and health, in all parts of the world with grave impacts on society. It is now a new year but the virus is still holding us in its grip and it is obvious that the effects will be felt in all parts of society for a long time to come. Unfortunately, we have seen a trend during the past year where openness, collaboration, engagement in global institutions and free-trade has become more under pressure. These tendencies have intensified during the pandemic which is worrisome. When the vaccines begin to take hold, countries, people and companies hopefully will return to every- day life with a more positive and collaborative agenda. However, a positive agenda can never be taken for granted. We have during the last year seen tension rise and the global security landscape become more insecure. Saab’s mission is to contribute to peace and stability by being a long-term, high-quality and trusted partner to our customers.
MAKING IDEAS FLY At the heart of Saab lies innovation and being at the forefront of technology, a leader in system integration with the ability to develop and produce complex plat- forms cost-effectively. To continue to develop this market position we rely on the great people we have, but also by being in close dialogue with customers about future needs and to work with many professional partners from all over the world. Saab builds its success on engineering inge- nuity and an openness to collaboration. That is why almost one quarter of Saab’s full year revenue is ded- icated fully to research and development. That gives
42 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 LETTER FROM THE CHAIR OF THE BOARD
us a unique position to develop cutting edge products shutting down. Notwithstanding these circumstances, and to support our customers long-term. we have been able to deliver major programme mile- Saab has proven its ability to swiftly transform ide- stones to customers around the world. The direct and as into world-leading products. One example is the Air- in-direct efforts of the pandemic has had a negative borne Early-Warning and Control System GlobalEye, impact on profitability, mainly due to effects on supply which took only five years from order to delivery. chain and challenges in the civil aviation business. Our belief is that we have managed to weather the storm MAKING THE WORLD FOR THE BETTER in a professional way. Saab stands ready for future The most important part of Saab’s contribution to so- endeavours. ciety lies in the mission to keep people and societies On behalf of the Board of Directors, I want to thank safe, as it has been since the company was founded Saab’s CEO, Group Management, all the 18,000 in the late 1930’s. But, as for every company, the employees and partners who work hard every day to responsibility extends above and beyond that. Saab support our customers in developing our company for is actively working according to the principles of the the benefit of all shareholders. UN Global Compact. Particular focus lies on good working conditions, high environmental standards and Stockholm, February 2021 anti-corruption, areas that are instrumental to Saab’s credibility, long-term development and growth. Saab’s Marcus Wallenberg sustainability commitment goes beyond just living up Chairman to existing laws and regulations.
WELL SET TO CAPTURE VALUE-CREATING OPPORTUNITIES Saab’s task is to create value to existing and future shareholders by being a reliable partner to customers and nations. Constantly improving its efficiency means Saab is able to maintain financial flexibility, ensuring readiness to take advantage of value-creating oppor- tunities, now and in the future. Saab is on a journey for profitable growth. The com- pany’s international expansion serves the purpose of becoming a truly local force and partner to customers in selected home markets. During last year, despite headwinds, we have seen strong developments in the markets where Saab is active, resulting in an increased order intake. The Saab team has made exceptional efforts in fending off the challenges coming with societies and markets
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 43 ADMINISTRATION REPORT
Administration report and financial statements
Content Financial review 2020 45 Business areas 46 Other significant events 52 Risks and uncertainties 54 Sustainability report 60 Corporate governance report 84 Remuneration and Long-term 94 incentive programmes
Financial statements and notes 98 Dividend motivation 150 Proposed disposition of earnings 2020 151 Auditor’s report 152 Information to shareholders 157 The Saab share 158 Multi-year overview 160 Glossary 161 Saab in the world 162
44 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
Financial review 2020 – Group
FINANCIAL REVIEW 2020 Australia, with local offices in more than Saab AB (publ.), corporate identity number 30 countries around the world. 556036-0793, has its registered address Saab was organised in six business in Linköping, Sweden. The head office's areas in 2020: Aeronautics, Dynamics, visiting address is Olof Palmes gata 17, 5tr, Surveillance, Support and Services, Indus- 111 22 Stockholm. The telephone number trial Products and Services, and Kockums. to the head office of Saab AB is +46 8-463 00 00. CORPORATE Saab has been listed on Nasdaq In addition to the business areas, Corpo- Stockholm since 1998. The largest rate comprises Group staff and depart- shareholder is Investor, with 30.2 per cent ments as well as other operations outside of the shares, corresponding to 40.6 per the core business. cent of the votes. The voting percentage is Corporate reported operating income calculated based on the number of shares, of SEK 49 million (-377) in 2020. excluding treasury shares, at year-end. At year-end, there were a total of 135,845, LONG-TERM FINANCIAL GOALS 847, shares in the company, distributed The long-term financial goals as of between 2,383,903 Series A shares with 2011 consist of goals for organic sales ten votes each and 133,461,944 Series B growth, operating margin (EBIT) and the shares with one vote each. equity/asset ratio. At year-end, a total of 3,598,774 Series Organic sales growth will average 5 B shares had been repurchased to guaran- per cent per year over a business cycle. tee the Group’s share matching plans. The In 2020, organic sales growth was 1 per repurchased shares are held as treasury cent (6). shares. The operating margin (EBIT) will average at least 10 per cent per year over a busi- Corporate Governance Report ness cycle. In 2020, the operating margin In accordance with the Swedish Annual was 3.7 per cent (8.3). The operating Accounts Act, Saab has prepared a cor- margin excluding non-recurring items was porate governance report. The corporate 7.4 per cent (8.3). governance report, found here on pages The equity/assets ratio will exceed 30 84-93, contains the Board of Directors' per cent. At year-end 2020, the equity/as- report on internal control of financial sets ratio was 35.7 per cent (34.8). reporting, which includes disclosures on both the Parent Company and the Group. DIVIDEND AND DIVIDEND POLICY Saab’s long-term policy is to pay a divi- Sustainability Report dend corresponding to 20-40 per cent of In accordance with the Annual Accounts net income over a business cycle. For the Act, Saab has prepared a sustainability re- financial year 2020 the Board of Directors port, which can be found in this document is proposing a dividend of SEK 4.70 per on pages 60-83. For information on Saab’s share (0.00). T he proposed dividend corre- business model, see pages 6-9. sponds to 58 per cent (0) of net income.
OPERATIONS OUTLOOK 2021 As one of the world’s leading high tech- Sales growth: organic sales growth to be in nology companies, Saab offers products, line with our long-term target of 5 per cent. solutions and services for military defence Operating income: EBIT margin for the and civil security. In 2020, the Group had full year to be in line with adjusted EBIT customers in over 100 countries, while margin, 7.4 per cent for 2020. research and development is concentrat- Operational cash flow: positive for the ed in Sweden. The Group has employees full year. mainly in Europe, South Africa, the U.S. and The uncertainty surrounding Covid-19 and its future effects remains high.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 45 ADMINISTRATION REPORT
BUSINESS AREA
Aeronautics
PRODUCT OFFERING Aeronautics is an innovative supplier of world-class aircraft systems and is engaged in research, devel- opment and production of military aircraft systems. It also conducts studies as preparation for future manned and unmanned aircraft systems as well as further development of existing products.
• Gripen is the world’s most adaptable and flexible combat aircraft system. With its modular design, it can be upgraded and adapted to customers’ requirements. • Development of future manned and unmanned aircraft systems. • Saab and Boeing have jointly developed the next generation trainer jet for the U.S. Air Force the T-7A.
Aeronautics includes the business units Gripen E/F, Gripen C/D,Aeronautical Solutions and Advanced Pilot Training Systems (T-7).
ANNUAL REVIEW Aeronautics showed a lower order intake for the full year 2020 compared with 2019. Sales decreased Jonas Hjelm Head of Business Area in 2020, mainly due to the adjustment of project Aeronautics estimates of SEK 1,121 million in the Gripen E/F pro- grammes. When excluding the impact from the ad- justed project estimates, sales for the year was in line with the previous year. The activity level in the Gripen programmes has remained high, at the same time as the business is in an early production stage in the Gripen programmes. Operating profit for the full year, excluding the impact from the adjustment of project estimates and and a write-down of the shareholding in an associated company of SEK -32 million, deteri- orated slightly compared to 2019. Higher marketing costs as a result of five ongoing Gripen campaigns Share of sales 2020 had a negative effect on earnings.
Key figures Order bookings Sales 20%Operating margin
MSEK 2020 2019 SEK billion SEK billion Order bookings 2,025 2,979 10 10 10 Order backlog 36,838 42,120 8 Sales 7,307 8,218 8 8 6 EBITDA -431 737 4 EBITDA margin, % -5.9 9.0 6 6 2 Operating income (EBIT) -500 677 0 Operating margin, % -6.8 8.2 4 4 -2 -4 Adjusted operating income¹⁾ 653 677 2 2 -6 Adjusted operating margin, %¹⁾ 7.7 8.2 -8 Operational cash flow -2,226 -1,591 0 0 -10 ¹⁾ See note 42 for additional information regarding items affecting comparability 18 19 20 18 19 20 18 19 20
46 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
BUSINESS AREA
Dynamics
PRODUCT OFFERING contractor Thales, for delivery to the United King- Dynamics offers a market-leading product port- dom and France. An agreement was also signed for folio comprising ground combat weapons, missile the Carl-Gustaf M4 to Norway, which will be the 14th systems, torpedoes, unmanned underwater vehicles, country to use the latest generation of the Carl- training systems and advanced camouflage sys- Gustaf system. Sales showed a growth of 13 per cent tems for armed forces. The product portfolio also for 2020 compared with 2019. High activity level and consists of niche products for the civil and defence increased delivery rate contributed positively to the markets such as underwater vehicles for the offshore sales volume increase, driven by Ground Combat. industry. The operating margin for 2020 improve due to the positive volume effect. The business area’s earnings • G round combat weapons, including Carl-Gustaf, were affected by SEK -15 million in adjustment of AT4 and NLAW. project estimates related to Covid-19. • Land-based air defence systems, including RBS 70, RBS 70 NG and BAMSE. • RBS 15 air-to-surface missile and international missile programmes such as Meteor, Taurus, IRIS-T and GLSDB. • Underwater systems, including remotely operated and autonomous vehicles as well as torpedoes and underwater sensors. • Training solutions for the land domain including ground combat as well as virtual. • Advanced camouflage systems, including the proucts Barracuda Mobile, Static and Soldier Görgen Johansson Head of Business Camouflage. Area Dynamics
Dynamics includes the business units Ground Combat, Missile Systems, Underwater Systems, Training & Simulation, and Barracuda.
ANNUAL REVIEW Order bookings for 2020 grew 38 per cent and reached a record high level. The strong growth was driven by international orders for, among other things, missile systems, but also orders in the underwater segment. The first orders for the mine disposal vehicle MuMNS were received via prime Share of sales 2020
Key figures Order bookings Sales 19%Operating margin
MSEK 2020 2019 SEK billion SEK billion Order bookings 9,231 6,706 10 10 14 Order backlog 16,527 14,264 12 Sales 6,913 6,140 8 8 EBITDA 917 792 10 6 6 EBITDA margin, % 13.3 12.9 8 Operating income (EBIT) 829 716 6 Operating margin, % 12.0 11.7 4 4 Adjusted operating income¹⁾ 844 716 4 2 2 Adjusted operating margin, %¹⁾ 12.2 11.7 2 Operational cash flow 551 158 0 0 0 ¹⁾ See note 42 for additional information regarding items affecting comparability 18 19 20 18 19 20 18 19 20
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 47 ADMINISTRATION REPORT
BUSINESS AREA
Surveillance
PRODUCT OFFERING implementation and Covid-19 related disruptions in Business area Surveillance provides world-class the business had a negative impact on sales volumes solutions for surveillance, command & control but also the result. The result was charged with ad- and self-protection systems for defence, safety justments of project estimates of SEK -166 million. and security applications. Surveillance develops world-leading sensor solutions for airborne, ground based and naval platforms. The systems are high- performing, compact, robust and easy to operate, and can effectively be integrated into our customers’ existing solutions. • One of the world leaders in surface based radar systems for air defence, weapon location and sense & warn • The world’s biggest customer base in airborne early warning & control • One of the international leaders in electronic warfare self-protection, signals intelligence and combat systems & C4I solutions • Products include the GlobalEye early warning & control solution, the Giraffe surface radar family, the electronic warfare suite Arexis and the 9LV range of command and control and combat man- agement systems as well as fighter radar and the secure cyber platform Egira. Anders Carp Head of Business Area Surveillance Business Area Surveillance is also the competence center in Saab for cyber security, Artificial Intelli- gence and big data analysis. Surveillance includes the business units Combat Systems and C41 Solu- tions, Cyber Security, Electronic Warfare Systems and Radar Solutions.
ANNUAL REVIEW For 2020, Surveillance showed a strong order intake of approximately SEK 14 billion, corresponding to an increase of 48 per cent. The strong order intake was largely driven by two major wins, a system solution Share of sales 2020 for integrated air defense capability for Sweden and the additional order for two GlobalEye airborne sur- veillance system for the United Arab Emirates. Sales for 2020 were in line with the previous year. A lower level of activity, timing in project
Key figures Order bookings Sales 21%Operating margin
MSEK 2020 2019 SEK billion SEK billion Order bookings 13,928 9,390 14 10 12 Order backlog 22,183 16,465 12 10 Sales 7,888 7,699 8 10 EBITDA 852 1,151 8 6 EBITDA margin, % 10.8 14.9 8 Operating income (EBIT) 505 853 6 6 4 Operating margin, % 6.4 11.1 4 Adjusted operating income¹⁾ 671 853 4 2 Adjusted operating margin, %¹⁾ 8.3 11.1 2 2 Operational cash flow 1,281 1,156 0 0 0 ¹⁾ See note 42 for additional information regarding items affecting comparability 18 19 20 18 19 20 18 19 20
48 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
BUSINESS AREA
Support and Services
PRODUCT OFFERING Support and Services offers reliable and cost-effi- cient service and support for all of Saab’s markets. This includes support solutions, technical mainte- nance and logistics as well as products, solutions and services for military and civil missions.
• Customised support solutions in all areas – over the product’s entire lifecycle. • From individual spare parts to availabilitybased commitments. • T echnical services, maintenance and repairs. • Products and integration for airborne surveillance systems, communication systems, military elec- tronics, field solutions and CBRN (chemical, biologi- cal, radiological and nuclear) defence solutions.
Support and Services includes the business units Aviation Services, Airborne ISR, Gripen Support, Communication and Tactical Solutions.
ANNUAL REVIEW The business area showed strong order development for 2020, an increase of 191 per cent. Both larger Ellen Molin Head of Business and smaller orders made a positive contribution. The Area Support and business area’s part of the follow-up contract for the Services two airborne surveillance systems GlobalEye was an important contributor. Sales volumes in 2020 showed growth compared to 2019. This was due to good project execution within the support work for Gripen C/D and positive volume effects from GlobalEye, despite continued negative volume and impact on earnings from the civil aviation business. The business area’s earnings were charged with SEK -118 million for inventory write-downs relat- ed to Covid-19. Share of sales 2020
Key figures Order bookings Sales 18%Operating margin
MSEK 2020 2019 SEK billion SEK billion Order bookings 11,945 4,099 12 10 14 Order backlog 14,238 8,986 10 12 Sales 6,521 5,821 8 10 EBITDA 788 762 8 6 EBITDA margin, % 12.1 13.1 8 Operating income (EBIT) 711 742 6 6 4 Operating margin, % 10.9 12.8 4 Adjusted operating income¹⁾ 829 742 4 2 Adjusted operating margin, %¹⁾ 12.7 12.7 2 2 Operational cash flow 1,856 11 0 0 0 ¹⁾ See note 42 for additional information regarding items affecting comparability 18 19 20 18 19 20 18 19 20
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 49 ADMINISTRATION REPORT
BUSINESS AREA
Industrial Products and Services
PRODUCT OFFERING mainly due to reduced demand due to the current Industrial Products and Services (IPS) are mainly fo- pandemic. Operating income decreased compared cused on commercial B2B business with world lead- with the previous year. The result was charged with ing customers in various safety critical sectors. The a loss contract provision within the Aerostructures market demands secure and sustainable solutions. business unit of SEK -315 million related to lower IPS works with a number of unique development forecast delivery rates and volumes in the commer- projects with a focus on a more sustainable cial flight programmes as a result of the pandemic. and digitized society.
• Technical consulting services for customers in industry, defence and the public sector. The company offers a broad range of services, with cutting-edge expertise in cybersecurity and digitisation through the wholly owned independent subsidiary Combitech. • Leading technology for air traffic management, marine traffic management and public safety. • Development and production for the aviation industry with a focus on wings, flaps and doors for commercial aircraft manufacturers such as Boeing and Airbus. • Safety critical avionics systems and components such as computers, displays and actuators for de- manding environments for aircraft and helicopters. Jessica Öberg Head of Business Area Industrial Products & The business area Industrial Products and Services Services includes the business units Aerostructures, Avionics Systems, Traffic Management and the independent consulting firm Combitech.
ANNUAL REVIEW IPS showed increased order intake during 2020. This was primarily driven by the Traffic Management business unit, where a number of orders in the Public Safety and Security area were signed. Business unit Combitech also showed a strong order intake. Sales in 2020 decreased compared with 2019. The Share of sales 2020 Combitech business unit made a positive contribu- tion, while other business units reported lower sales,
Key figures Order bookings Sales 13%Operating margin
MSEK 2020 2019 SEK billion SEK billion Order bookings 5,611 5,515 6 10 10 Order backlog 8,794 9,035 8 5 Sales 5,846 6,556 8 6 4 EBITDA -322 324 4 EBITDA margin, % -5.5 4.9 6 2 Operating income (EBIT) -398 238 3 0 4 -2 Operating margin, % -6.8 3.6 2 -4 Adjusted operating income¹⁾ -83 238 2 -6 Adjusted operating margin, %¹⁾ -1.4 3.6 1 -8 Operational cash flow 1,028 -302 0 0 -10 ¹⁾ See note 42 for additional information regarding items affecting comparability 18 19 20 18 19 20 18 19 20
50 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
BUSINESS AREA
Kockums
PRODUCT OFFERING the underwater business. Operating profit strength- Kockums is a world leader in its segment in the ened slightly compared with the previous year. The development, production and in-service support of business is in a transition from development to submarines, surface vessels and naval systems. The production and productivity measures to improve product portfolio includes submarines with air-inde- profitability continue. pendent propulsion, warships with stealth technol- ogy, minesweeping systems, and high-speed patrol and pilot boats. Kockums also supplies subsystems and components for integration in naval solutions for customers in and outside Sweden.
• D esign, construction and in-service support for submarines and surface vessels. • Design, construction and in-service support for high-speed patrol and pilot boats.
The business area’s unique expertise is in stealth technology, shock resistance, modularity and sys- tems integration. Kockums’ products are designed for availability, simplified maintenance and a long operating life. One example is the Gotland-class submarines built in the ’90s, which after a mid-life upgrade are equipped with modern technology that makes them state-of-the-art in conventional sub- Lars Tossman Head of Business marines. Kockums’ production facility in Karlskrona Area Kockums has undergone major modernisation since Saab’s acquisition. Through investments in methodological improvements, industrial robots and digitisation, Saab Kockums ranks as one of the world’s most mod- ern shipyards for production and in-service support of submarines. Kockums has three business units: Submarines, Surface Ships and Docksta.
ANNUAL REVIEW Kockums showed an increased order intake during 2020 compared to 2019. The increase was mainly attributable to additional orders within the current Share of sales 2020 submarine programme. Sales in 2020 were in line with the previous year and was due to a good level of activity, primarily in
Key figures Order bookings Sales 8%Operating margin
MSEK 2020 2019 SEK billion SEK billion Order bookings 1,801 1,216 4 4 6 Order backlog 3,631 4,852 Sales 3,027 3,007 5 3 3 EBITDA 153 124 4 EBITDA margin, % 5.1 4.1 Operating income (EBIT) 119 88 2 2 3
Operating margin, % 3.9 2.9 2 Operational cash flow 983 -70 1 1 1
0 0 0 18 19 20 18 19 20 18 19 20
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 51 ADMINISTRATION REPORT
Other significant events
OTHER EVENTS IN 2020 IN BRIEF: • Supported by Sweden, Saab in July sub- AMB radar and command and control • In January, Saab started assembly mitted its proposal for the Future Fighter shelter. production of its section of the T-7A ad- Capability Project (FFCP) to Canada. The • In December, Saab received an order vanced trainer in Linköping. The T-7A has proposal comprises 88 Gripen E fighter from FMV to define to define what is been developed and is being produced aircraft, with a comprehensive support needed to meet Sweden’s requirements together with Boeing for the U.S. Air and training package and an industrial for the continued, effective operation Force. and technological benefits programme and availability of Gripen C/D until 2035. • On 29 January, Saab appointed Lars • In August, Saab divested QPS (Quality The order value is SEK 185 million. Tossman as the new head of business Positioning Services), a provider of hy- • In the fourth quarter, Saab signed a area Kockums. Lars Tossman assumed drographic software solutions. follow-on contract with the United Arab his new position 1 February, at which • On 24 September, the first Brazilian Emirates regarding the sale of two point he also became a member of Gripen E concluded its first flight in Brazil. GlobalEye systems, Saab’s advanced Saab’s Group Management. The aircraft flew from the airport in Nave- airborne surveillance system. The order • On 4 March, it was announced that Saab gantes to Embraer´s facility in Gavião value is USD 1.018 billion and the con- Digital Air Traffic Solutions (SDATS) Peixoto. tract period is 2020-2025. has been selected to provide a Digital • In September, Saab delivered the second Tower system as an Operational Concept GlobalEye Swing Role Surveillance Sys- For more information on orders received Demonstrator for the Royal Air Force at tem to the United Arab Emirates. during the year, see our press releases their air force base by Lossiemouth in the • In September Saab signed a contract on https://www.saab.com/newsroom/ United Kingdom. with the Australian Department of press-releases. • In March, Saab announced an order Defence to deliver deployable health from the United Kingdom’s Ministry of modules for the Australian Government’s EVENTS AFTER THE CONCLUSION OF Defence for a mid-life extension and Deployable Health Capability Program, THE PERIOD support for the Arthur weapon locating Joint Project 2060. The order value is • In January, Saab received the first order system. 337 MAUD (2,150 MSEK) for the years from prime contractor Thales for the • On March 26, it was announced that 2020-2027, including 5 years of support. Multi-Shot Mine Neutralisation System Saab has signed a 24-month Revolving • In October, Saab signed a seven-year (MuMNS). The order value is approxi- Credit Facility Agreement of SEK 4 billion framework contract with the U.S. Army mately SEK 300 million and deliveries of with a group of three banks. for the Carl-Gustaf M4 multi-role weap- the first systems will take place in 2022. • On 1 April, the Annual General Meeting on. The value of the contract is approxi- • In January, Saab signed a framework was held in Stockholm. mately SEK 770 million. agreement with the Norwegian Armed • In April, Saab received an order from the • In December, Saab signed a contract Forces for the Carl-Gustaf M4, the latest Swedish Civil Contingencies Agency with the Swedish Defence Materiel version of the Carl-Gustaf multi-role (MSB) for aerial firefighting capabilities. Administration and received an order weapon system. • In April, Saab successfully completed the for an integrated sensor and command • In January, Saab and FMV signed two first air trials with its new fighter X-band and control system for use with ground agreements concerning the next gener- Active Electronically Scanned Array based air defence. The order value is ation of surface ships and corvettes: a (AESA) radar. approximately SEK 2.1 billion and the Product Definition Phase for the Mid-Life • In April, Saab delivered the first contract period is 2020-2025 Upgrades (MLU) of five Visby-class cor- GlobalEye Swing Role Surveillance Sys- • In December, Saab signed a contract vettes and a Product Definition Phase for tem to the United Arab Emirates (UAE). with the German shipbuilding company the next generation corvette. The com- • In May, Saab’s Board of Directors ap- Lürssen and received an order to provide bined contract value is SEK 190 million. pointed Christian Luiga as the new CFO and integrate the combat system for • In February 2021, Saab delivered the and deputy CEO starting September the Bulgarian Navy’s new Multipurpose third GlobalEye system to United Arab 2020. Anders Carp was also appointed Modular Patrol Vessels, MMP. Emirates. deputy CEO. • On December 16, Saab delivered the • In May, Saab signed a contract for an second of two Gotland-class submarines Airborne Early Warning and Control to FMV after extensive upgrades. (AEW&C) system based on the Saab • In December, Saab signed a contract 2000 aircraft and Erieye AEW&C. The with the French Armament General order value was SEK 1,553 million. Directorate (DGA) for an upgrade and life • In July, Saab completed the divestment extension of the French Air and Space of all its shares in the U.S.-based joint Force’s mobile command and control venture Vricon Inc. systems, which feature Saab’s Giraffe
52 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
On 24 September, the first Brazilian Gripen E concluded its first flight in Brazil. The aircraft flew from the airport in Navegantes to Embraer’s facility in Gavião Peixoto.
On December 16, Saab delivered the second of two Gotland-class submarines to FMV after extensive upgrades
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 53 ADMINISTRATION REPORT
Risks and uncertainties
All businesses entail risk. Risks that are
managed well can lead to opportunities IDENTIFYIN G and add value, while risks that are not RISK managed properly can cause damages and losses. Saab takes a structured and
proactive approach to identify and man- STRATEGIC ISK aging risks and opportunities to safeguard R S L S A the business. O N R E P R I M I E O A S T C L A Saab develops, manufactures and sup- T I L IT R K N Y N K V A IC I I S E S A plies technologically advanced systems T O L K T L I P S A I S C R C N and products to military and civil custom- M R I D
S
A O K
C ers around the world. Operations largely LONG-TERM S consist of major projects carried out over TARGETS long periods of time, usually several years, in close cooperation with customers, L F A suppliers, partners and institutions. IN N A IO
R N T
I C A S
Saab is affected by geopolitical factors S IA R
K L PE SK S O I and industry- and business-related events R M that can give rise to uncertainties and T
A R K
N IS N risks. The ability to identify, evaluate and A K IS E G R M manage risks is therefore essential to EM SS E SE strategy implementation and in govern- NT AS ance and control. The aim, by understand- ing risks and their impact, is to better support decision-making and meet Saab’s long-term goals through balanced risk-tak- business areas as well as Group Manage- EXTERNAL ENVIRONMENTAL ing within an established framework. ment and Group functions. AND CLIMATE RISKS The ERM function works actively with Climate aspects are also important to RISK MANAGEMENT overarching risk management. The most Saab’s long-term strategy work, since Within Saab, each business area and pressing risks and uncertainties and how future climate change can impact op- Group function is responsible within its they are managed are regularly reported to erations. Natural disasters can disrupt respective organisation for identifying and Group Management, the Audit Committee operations and/or affect the supply chain, managing risks in accordance with the and the Board of Directors during the year. and rules and requirements for industrial Group’s risk process and current policies, In addition, Saab’s internal audit unit is processes are continuously tightened or guidelines and instructions. responsible for independently reviewing sharpened. When combined with Enterprise Risk the effectiveness of a sample of internal Saab works to mitigate these risks on Management (ERM), which focuses on control processes each year. the business and invests in sustainable the overarching risks and uncertainties innovations to reduce our environmental the Group is exposed to, we get both a INSURANCE AND LOSS PREVENTION impact as well as create products with less top-down and bottom-up view to support The Saab Group’s global insurance environmental impact. See examples on Saab’s strategy and long-term goals. programme contains all the usual types page 40. The internal analysis of financial The purpose of ERM is to provide a of business insurance, including prod- risks and opportunities associated with Group overview of the risks and uncer- uct liability. Insurance is procured in both physical and transition risks related tainties Saab is exposed to and to support the S wedish and international markets. to climate change has continued during value creation, ensure risk awareness and Insurance policies comply with local laws 2020. The work is based on the guidelines balance risk versus return. where applicable. of the Taskforce on Climate-related Finan- Most of the operating risks that are iden- The main purpose of loss prevention is cial Disclosures (TCFD) and will continue tified are managed at a local level. Among to prevent incidents, property damage and in 2021. these risks, Saab identifies a number interuptions. A Group-wide programme One example is when planning new through the ERM process that individually called Saab Blue sets the requirements facilities around the world, risks related to or in combination can have a large impact for physical protection, preventive work climate change are assessed. Saab is tak- at the business area level. These risks are and action plans if incidents occur. To ing measures to mitigate the occurrence weighed against the company’s risk toler- ensure that the requirements are met and of risks like extreme weather, higher ener- ance, and decisions are made on the appro- to support the business operations in the gy costs and taking environmental consid- priate measures to avoid, reduce, spread or preventive work, risk inspections are con- erations regarding building requirements accept risks. A number of these risks can ducted on an annual basis and the results as well as striving to achieve best possible potentially also affect the entire Group. of these inspections are compiled and comfort and function for employees in ac- ERM work is part of the strategic work reported to Group Management. cordance with Saab’s environmental policy and involves the managements of the and climate goals.
54 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
RISKS RELATED TO COVID-19 its crises management organization and The planning for a safety return to work- The COVID-19 risks and uncertainties for actions taken to mitigate the pandemic’s place in relation to COVID-19 in 2021 has Saab has mainly been related to employee impact were, among others, work from started. To mitigate liquidity risk a new 4 bn health and well-being, disruptions in sup- home and social distancing for employees SEK Revolving Credit Facility was signed ply chain and limitation in meetings with working in the facilities, alternative sourc- with three of Saab’s core banks. A credit customers and suppliers as well as the ing, production re-planning, increased guarantee was also established with the significantly declined demand in commer- digital communication and internally Swedish Export C redit Agency, EKN. cial aviation. Saab immediately activated reallocation of resources.
Risk Description Management STRATEGIC RISKS The strategy to grow globally by strengthening its presence in Strategic risks are managed through strategies and plans key markets, developing innovative solutions and acquiring established by the Board of Directors, Group Management companies in priority areas exposes Saab to various risks that and the managements of the business areas. can affect its ability to create value and reach the goals. Development and Saab’s success is dependent on its ability to develop and • Investments in new products are made after analysis and introduction of new manufacture innovative products and launch them on the assessment of future business opportunities. high-tech systems market at the right time and at competitive prices. Due to long • To reduce the development risk inherent in major systems and products development cycles, market changes can mean that demand multinational partnerships are imperative and for internally has changed when products are ready to bring to market. The risk developed products, such as for example radar, command and is that the products do not generate the previously expected control, and electronic warfare systems as well as tactical return. weapons it is important to early identify a launch customer. Historically, a large share of Saab’s product renewal has been • Saab expects Sweden to account for the largest share of its achieved collaboratively with the Swedish Armed Forces and development expenditures in the fighter aircraft, missile and FMV and together with other nations. underwater areas.
There is also a risk that competitors develop new products • Develop certain technology in partnership with other companies, or disruptive technologies that can make Saab’s products e.g. the T-7 trainer aircraft together with Boeing. appear obsolete. • Product development through modularisation which enables new models to be developed continuously, cost-effectively and faster. • Saab is active in AI, machine learning and automation. International Acquisitions and collaborations are an integral part of Saab’s • Business case driven expansion in focus countries. expansion and international growth strategy to further strengthen its presence • International collaboration programs, partnerships and Joint collaborations in selected key markets. ventures with other companies. • Allocation of resources and local stakeholder management • Research collaborations with universities. • A central organisation that is responsible for the acquisition process and supports the business. • Thorough analysis in connection with acquisitions and expansion. Attract and retain Saab’s future competitiveness depends on its ability to globally • Strategic talent mapping and planning ensures access to key employees attract and retain employees and leaders with the right skills in e.g. employees with the right skills at the right time. Strategic multiple technologies, production, IT security, business Workforce Planning. development and project management. Saab is also dependent • Apply a structured process to develop employees and identify on the professional development of its employees. talents. Job rotation. Retention management. Saab works with very complex technology and the product life • Work long-term to position Saab as an attractive employer cycle is very long. It could therefore also be a challenge to ensure among students and young professionals. competence continuity over time. • Offer PhD services, trainee programmes, master’s thesis A detailed description of Saab’s sustainability work and key perfor- opportunities and summer jobs. mance indicators for employees can be found on pages 62–63. • Promote education and an interest in technology among younger students to broaden the future recruiting base. Information Saab manages information that is vital to its customers and in • Continuous and systematic information and IT security work and management and many cases to their national security. The information security risk periodic audits of IT security. cyber-related risks for Saab is that information will fall into the wrong hands if handled • Clearly defined rules, processes, routines and technical solutions incorrectly or in the event of an IT breach or manipulation of for information, IT and communication security. communication channels. • Standardised processes to implement new systems, upgrades The cybersecurity risk has also increased in light of the increased and daily operations. use of homeworking during the pandemic. • All employees receive training in information management Cyberthreats are a category of risk that has increased for Saab’s and security. products, which contain a large amount of software and defence • Security measures taken and extra information to employees secrets, since it has become more common for these products to regarding security aspects at homeworking. be linked to civil networks. • Different levels of physical and digital security classifications to Saab also relies on IT systems in its daily operations. Disruptions to reduce the risk of information leaks. or errors in critical systems can have a direct impact on operations. • Established the business unit Cyber Security, which works with Mismanagement of financial systems can impact the company’s solutions to increase cybersecurity in Saab’s products. financial reporting. • Routines to ensure that the GDPR regulation is followed.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 55 ADMINISTRATION REPORT
Risk Description Management MARKET AND About 85 per cent of Saab’s sales consists of defence materiel, Saab works proactively to manage market and political risks and POLITICAL RISKS which is regulated by national laws and regulations as well as uncertainties, including through strategic impact assessments international conventions, and more than half of total sales are and alternative strategies. It is impossible, however, to completely international. Saab is therefore dependent on stable political and avoid losing business opportunities or incurring damage if political multinational relationships around the world and national priorities. or other market risks are realised. Geopolitical and Demand for the defence materiel is dependent on the political • Market intelligence. macroeconomic mandate and willingness of national governments as well as fiscal • Dialog with authorities and the political establishment. risks and flexibility. The defence industry is therefore affected by a number uncertainties of macroeconomic factors, e.g. global economic growth, trade • Proactive measures to assess and manage risks and opportunities. barriers and changes in exchange rates. It is also exposed to • Major investments are mainly in a small number of focus countries. geopolitical risks. • International partnerships. The large share of Saab’s order backlog consists of contracts with • Terms and conditions. an order value over SEK 1 billion which will be delivered over many • Export guarantees, insurance solutions and other instruments years. Consequently, the impact on Saab could be significant if a major contract is broken or amended and renegotiated because the customer is adversely affected by market factors. Regulatory The large share of Saab’s exports is from Sweden, where the • Continuously monitor laws, regulations and ordinances to adapt changes Swedish Inspectorate of Strategic Products (ISP) determines the business as needed. which defence products Saab may manufacture, market, sell and • Dialogue with authorities in the political establishment export to which countries. ISP does an overall assessment that weighs several factors. Since 2018, the democratic status of the • Terms and conditions. recipient country is also playing an important role. Saab may also • Central and local export control functions. be dependent on export control laws in other countries where it has operations or suppliers. Some of Saab’s civil products are governed by export controls on dual-use products. The risk for Saab arises from changes to laws, regulations and permits.
Risk Description Management
OPERATIONAL Operational risks can affect Saab’s ability to deliver on its Operational risks are managed in tactical and operational RISKS commitments and are important to day-to-day operations. decisions as well as at an operating level throughout the The risks include risks relating to order bookings, contract organisation. Information about Saab’s work with product liability management, project implementation, suppliers, product liability, and with environmental and occupational health and safety risks the environment, and occupational health and safety. can be found in the sustainability report on pages 54–70. Risks related to Saab’s operations involve complex, long-term development • Before contract is signed, a thorough analysis is made of the execution projects on the leading edge of technology that in some cases terms and risks. of long-term also include industrial cooperations with the customer’s country. • An established quality assurance process – the Win Business customer projects When a contract is signed, the product may not be fully developed process – includes a comprehensive analysis of risks and what is in some instances. Contracts also often include a fixed-price required to manage them. component, which can entail a risk of incorrect pricing if the costs cannot be adequately estimated. • During project execution – the Execute Business process – various types of reviews with clear toll-gates are conducted The risk in long-term customer projects is therefore that Saab continuously to identify and assess these risks and the measures does not succeed in delivering cost-efficient high-tech solutions taken to mitigate them. as per the terms of the contract or in implementing the required • Effective management of both delivery projects and industrial industrial cooperation. Consequently, the commitment may not be cooperations. fulfilled and the costs may run significantly higher with na egative impact on financial position and cash flow. • Focus on best practice governance and high efficiency. • High demands are placed on project planning and control as well The Group applies the percentage of completion method to as monitoring to ensure at any given time that assumptions and recognise revenue from the majority of long-term customer assessments provide a satisfactory basis for reporting revenue projects. An estimation of total costs, including assessments and results. of technical and commercial risks, is critical to revenue recognition and provisions for project losses as well as inventory valuations. • Saab’s largest projects are also regularly monitored by Group Revised estimates of total project costs have a retroactive impact Management and reported to the Board of Directors. on results. • Other projects with high impact are regularly monitored by each business area management and reported to Group Management. • Saab’s internal audit is also independently reviewing the process adherence of a number of projects each year.
56 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
Risk Description Management Dependence on A large share of Saab’s revenue comes from a limited number of • The marketing organisation has been reorganised to more clearly new contracts customers and relatively few contracts. Saab is therefore depen- focus marketing and sales on key markets with the potential for and increased dent on winning new contracts in a market with limited access, new business. competition since there are only a certain number of governments and defence • Saab has identified three strategic markets: Australia, the UK contractors to sell to. and the US, where the local presence has been and will be further Competition in the military market as well as the commercial strengthened. aircraft and security market is fierce. US and European companies • Product portfolio optimisation. are especially strong players, with competition also increasing • Focus on quality, innovation, security, development times, from companies in other parts of the world. Many competitors are delivery precision and price. also strong in their home markets. • Reference customers, partnerships and industrial collaborations. • Increased local presence in selected markets with own operations, sales offices and own personnel. Supply chain risks Saab is dependent on deliveries from subcontractors of e.g. sub- • Select, evaluate and document suppliers and business partners systems, components and equipment. For certain subsystems, based on objective criteria such as quality, the environment, Saab is dependent on deliveries from one or a few suppliers. delivery, price and reliability.
The suppliers must share the same values as expressed in Saab’s • Active work with supply chain alternatives, such as second sour- supplier Code of Conduct and have sustainable production to cing, in- and outsourcing. avoid negatively impacting Saab. • C lose cooperations with suppliers for high quality. • Systematic measures to ensure that suppliers take ethical, social and environmental responsibility and work proactively to prevent damages. • Saab’s supplier Code of Conduct and compliance monitoring. Pandemic risks A pandemic may potentially affect part of or the whole business • A well prepared crises management organisation in place. from order intake, operations, deliveries, supply chain to employee • Prepared for disturbances in for example supply chain. health and well-being. • D igital tools for secure meetings with customers and suppliers A pandemic could potentially delay decisions due to other priori- and possibility for homeworking. ties in national budgets and in the long-run impact defence bud- • Increased partnerships and local operations. gets. Larger procurement campaigns may also be affected. It could also increase protectionism in certain markets.
Risk Description Management FINANCIAL RISKS Financial risks can affect the ability to protect Saab’s financial Financial risks are governed by the Group’s financial policy, which position. The risk consists of potentially negative effects on Saab’s is adopted by Saab’s Board of Directors, as well as detailed directi- financial assets and liabilities as well as contractual commitments. ves and processes. Management of these risks is centralised in For more information, see note 36. Group Treasury and largely involves the use of financial instru- ments. The goal is to actively manage financial risks in order to There is potentially also a risk that Saab not fulfill financiali nstitutes reduce any negative impacts on the Group’s results, competitive and investors requirements on sustainability (ESG). The risk strength and financial flexibility. consists of being de-selected. The risk of being de-selected is managed by implementing TCFD guidelines, communication and KPI reporting.
Group Treasury also supports the business areas in implementing financial policies and guidelines, and with training. Interest rate risk The risk that Saab’s net financial items will be negatively affected • Interest rate futures and swaps to achieve the desired interest by changes in interest rate levels. Saab is exposed when the rate duration. market value of certain items in the statement of financial position • Interest rate and foreign currency risk from foreign currency is affected by changes in underlying interest rates. The item with funding is managed with currency swaps (internal) or cross the largest exposure is pension obligations. Saab has both currency basis swaps (external). interest-bearing assets and liabilities. Currency risk The risk that unfavourable exchange rates will negatively affect • Currency exposure in the order backlog (transaction exposure) results or equity, e.g. when revenue and expenses are in currencies is hedged through netting and with currency derivatives (mainly other than the functional currency (transaction exposure), when forward exchange contracts), which means that changes in translating foreign subsidiaries to SEK (translation exposure) and exchange rates do not affect the order backlog’s future results. when submitting fixed-price tenders in foreign currency. • Foreign currency risk due to translation exposure is not hedged. • Fixed-price tenders in foreign currency are managed in a tender portfolio.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 57 ADMINISTRATION REPORT
Risk Description Management Refinancing risk The risk that Saab cannot refinance maturing loans with either • Debt is managed by Group Treasury and loans are primarily raised new loans or its own funds, or that it becomes significantly more by the Parent Company to ensure efficiency and risk control. expensive. For more information, see note 30. • A revolving credit facility with eight banks (RCF). Financial debt mainly consists of bonds issued under a Medium • A diversified loan maturity structure. Term Note programme. • Capital is tied up in the loan portfolio for an average of 24-60 months. • A new 4 bn SEK Revolving Credit Facility was signed to mitigate refinancing risk. • A credit guarantee with EKN was established. Counterparty risk Saab is exposed in its day-to-day operations to credit risks, • Accounts receivable payment risks are when deemed necessary mainly in transactions with customers and financial institutions. covered through letters of credit or through export credit insurance. • All financial counterparties must have a long-term credit rating of Credit risk in accounts receivable is considered low, since the no lower than A- from Standard and Poor’s or A3 from Moody’s. receivables are primarily from governments and public authorities. Financial credit risk consists of exposure to financial institutions • ISDA master agreements with financial counterparties through e.g. deposits, investments and outstanding derivatives. Reporting risk The risk related to communication the financial information to the • Saab’s units regularly report their financial position in accordance and tax risk capital market is that the reports do not provide a fair presentation with the International Financial Reporting Standards (IFRS). of Saab’s actual financial position and results. Saab’s consolidated accounts, based on these reports, are pre- pared in accordance with IFRS and relevant parts of the Annual Risks associated with transfer prices, but also new tax rules and Accounts Act. See more information in note 1. guidelines and local tax laws in the countries where Saab operates. • Saab’s result is analysed by business area and group functions before publication. • Saab has routines to ensure legal compliance, e.g. internal control, internal audit and external auditors. • The central unit Group Tax is responsible for policies, instructions and guidelines in the tax area, and monitors compliance with local tax laws and transfer price policies. Pension obligations Post-employment benefits refer to defined-contribution and • For its defined-contribution pensions Saab pays fees to a defined-benefit pensions. separate legal entity that assumes the obligations.
See more information in note 32. • Defined-benefit pension obligations remain in the Group and are secured through Saab’s pension foundation or insurance. • Obligations are compared annually to the foundation’s assets, and in the event of a deficit Saab reports this as a debt in the statement of financial position.
Risk Description Management COMPLIANCE RISKS In its operations Saab is obligated to follow laws and regulations, Compliance issues are integrated in the business strategy and be compliant with agreed customer regulations and make consci- affect Saab’s strategic priorities. This work is guided by Saab’s ous decisions about which global standards Saab will live up to. Code of Conduct, which is adopted by the Board of Directors.
Saab does business around the world and has relationships with • Policy of zero tolerance for bribes and corruption. customers and other stakeholders on every continent. Ethical • Training in Saab’s Code of Conduct. values, transparent relationships and compliance are critical for • Strict scrutiny of marketing consultants and business partners. Saab. The trust of the public and the political system, together with employee pride, is critical to Saab’s long-term profitability • Whistleblower system. and survival. • Supplier Code of Conduct. Saab’s operations are also affected by approvals, licenses, • Clear roles and responsibilities. patents and other intellectual property. • Information and IT security strategy and security classification. Learn more about Saab’s sustainability work and key • Internal training on information management for all employees. performance indicators on pages 54–70. • Systematic environmental work to reduce environmental impacts. • Occupational health and safety policy. • Participation in the UN’s Global Compact. • ISO 9001 and 14001 certified. • Saab’s internal ethics and compliance function. • Internal Control and Internal Audit.
58 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 59 ADMINISTRATION REPORT
Sustainability report Saab was founded over 80 years ago during a turbulent period in history when Sweden needed the capacity to protect its sovereignty. Saab has since then developed into a trusted international partner that contributes to increased security and defence capabilities in Sweden and many other countries around the world. A commitment to the needs of society has always been at the core of Saab’s business.
SUSTAINABILITY APPROACH minimise the potential negative impacts Saab is today an integral part of the Since the founding of the company, a of its operations and is committed to security and defence capability of Sweden commitment to the needs of society contributing to sustainable development. and many other countries in the world. As has been at the core of Saab’s business. Sustainability is integrated in all aspects such, Saab has a responsibility to provide Peace, security and stability is a prerequi- of Saab’s strategy in order to mitigate risk our customers with high quality, sustaina- site to ensure that we manage to reach the and realise opportunities. ble and cost-efficient products, especially Global Goals for Sustainable Development Saab develops innovative, high-tech considering that our products are most of- that we as a global community have set and cost-efficient systems to increase se- ten procured by state actors. As one of the out. In a world where threats against our curity for societies and individuals. At the largest investors in research and develop- societies are growing increasingly diverse, same time, there is an awareness through- ment in Sweden, Saab also contributes to Saab contributes to defence and security out the business that some of the systems society through sustainable innovations capabilities around the world. and solutions that contribute to greater and promoting interest in technology in Through its operations Saab has security can also be misused. This entails countries where Saab is active. Through positive impacts on economic, social a major responsibility. By acting respon- transfer of technology, industrial coop- and environmental areas. This includes sibly in everything we do, following laws eration and collaboration with academia for example security, sustainable innova- and regulation and working closely with na- through so called triple-helix programs tion, interest in technology, international tional authorities we earn the confidence Saab aims to spread knowledge and con- cooperation, anti-corruption and diversity. of customers, employees and society. tribute to the development of society. Saab continuously strives to mitigate and
Defence and security Industrial Cooperation capability Product safety
Research & Development
SAAB’S Leading compliance Anti-corruption programs SUSTAINABILITY Export compliance COMMITMENT Information security
Responsibility for Diversity people and environment Environment
Health and safety
Saab contributes through its operations to most of the UN’s Sustainable Development Goals. The goals that Saab has the biggest opportunity to influence and which have a connection to the business strategy are Goals 4, 5, 9, 13 and 16.
60 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
PRIORITY SUSTAINABILITY ASPECTS Sustainability is integrated in every part Saab’s sustainability priorities can be Saab serves governments, public authori- of Saab’s strategy and lays the foundation summarised in three commitments: secu- ties and companies around the world with for the company’s long-term development rity and defence capability, leading compli- solutions for military defence, aerospace and growth. It is critical for Saab that our ance programmes, and responsibility for and civil security. We continuously devel- stakeholders have confidence that Saab people and the environment across the op, adapt and improve new technology is a responsible actor that contributes to value chain (illustration on previous page). to meet changing customer needs and sustainable development. create value in line with our vision to keep society and people safe.
ABOUT SAAB’S SUSTAINABILITY REPORT Saab’s sustainability report contains information on the com- Index with cross references to the UN Global Compact can be pany’s development and impact in the areas of anti-corruption, found at the end of the Sustainability Report. Information about the environment, employees, human rights and society. The Saab’s business model can be found on page 6-9. The informa- report describes work practices, goals, results, performance tion about Saab’s carbon dioxide emissions has been subject to indicators and material sustainability risks for each area. The a limited assurance and the assurance statement sustainability report is prepared in accordance with the Annual can be found on page 156. Since 2006, Saab Accounts Act and comprises all of the Group's operations reports climate aspects to the carbon disclosure for the financial year 2020, unless indicated otherwise. Saab initiative CDP. For more information on CDP and also reports sustainability data in accordance with the Global Saab’s complete report, see www.cdp.net. Reporting Initiative (GRI) and the UN Global Compact. The GRI
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 61 ADMINISTRATION REPORT
Goals and results
In this sustainability report Saab reports prioritised sustainability issues, please Development Goals, and has chosen to its priority sustainability aspects based on see page 60. Saab’s prioritised sustaina- prioritise five of them that are closely tied the Swedish Annual Accounts Act’s five bility issues are integrated in the business to Saab’s business strategy. areas for sustainability - anti-corruption, strategy, business plan and contribute to environment, employees, human rights Saab’s strategic priorities. Saab contrib- and society. For an illustration of Saab’s utes to several of the UN’s 17 Sustainable
ANTI-CORRUPTION Connection to Connection to Priority sustainability issue Long-term goals Results 2020 strategic priority the UN’s SDGs1) Zero tolerance for Saab’s anti-corruption program will See pages 66-67 Market Target 16.5: Reduce corruption be among the best in the industry. corruption and bribery. All employees will understand the importance of and promote openness and integrity.
ENVIRONMENT Connection to Connection to Priority sustainability issue Long-term goals Results 2020 strategic priority the UN’s SDGs1) Reduce climate impact Reduce Saab’s GHG emissions by 37% reduction due to reduced Performance Goal 13: Climate action. 33% by 2030 (related to 2017). business travel and reduced test flight operations, as well as reduced production in some countries due to Covid Phase out hazardous Phase out chromates, cadmium and Analysis of current status and Portfolio substances other prioritized hazardous substances establishment of measure- ment method. See page 68-70 Resource efficiency Reduce waste to landfill by 10% by 2025 90% reduction due to reuse of Portfolio (related to 2019) blasting material and annual variations
Reduce water usage by 20% by 2025 4% increase due to increased (related to 2018) production and a leakage in refrigeration plant
Reduce number of chemical products The total amount of chemical with 20% within product categories products has decreased with adhesives and paints by 2025 (related 4% while adhesives has to 2018) increase with 6% and paints with 2%
EMPLOYEES Connection to Connection to Priority sustainability issue Long-term goals Results 2020 strategic priority the UN’s SDGs1) Health and safety Higher propensity to report 4,5 reported incidents per Performance incidents with the goal of 10 reported workplace injury incidents per workplace injury. (Increased incidence reporting leads to fewer accidents.) Gender equality and At least 25% of employees and 30% of 23% of employees and 26% Innovation Goal 5: Gender equality diversity managers will be women by 2025. of managers were women Personal development 100% of employees will meet 73% of employees have dis- Performance annually with their manager to discuss cussed their personal goals, goals, personal development and development and perfor- performance. mance
HUMAN RIGHTS Connection to Connection to Priority sustainability issue Long-term goals Results 2020 strategic priority the UN’s SDGs1) Export compliance Saab will continuously develop rules See page 74-75 Market Target 16.4: Reduce illicit and processes to remain a leader in arms flows. export control. Responsible supplier Saab will continuously collaborate with See page 74-75 Performance relationships suppliers on social and environmental responsibility.
62 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
SOCIETY Connection to Connection to Priority sustainability issue Long-term goals Results 2020 strategic priority the UN’s SDGs1) Information security Integrate information security in all Integration in 40% of all Performance central processes. central processes Product safety The safety level in Saab’s systems See page 76-77 Performance and products will meet relevant laws, regulations, international standards and best practices. Innovation and spreading Saab will annually have at least 48 PhD candidates Innovation Target 9.5: Encourage innova- knowledge 30 PhD candidates. tion and substantially increase the number of research and development workers. Promote education and an Increase partnerships with primary and See page 76-77 Innovation Target 4.4: Increase the interest in technology secondary schools in communities number of youth and adults where Saab is active. with relevant skills including technical and vocational skills, for employment.
1) Saab contributes to several of the UN’s SDG’s. Shown here are only the connections to the five goals Saab has prioritised.
Goal 4. Quality education Saab focuses in particular on target 4.4, to increase the number of youth and adults with relevant skills, including technical and voca- tional skills, for employment. Saab contributes to the goal through its commitment to promote education and an interest in technology.
Goal 5. Gender equality Saab focuses in particular on target 5.5 to ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making. Saab contributes to the goal by working Based on its priority sustaina- actively to increase the number of female leaders at Saab. bility issues and opportunities to make a difference, Saab has Goal 9. Industry, innovation and infrastructure chosen to focus on five of the Saab focuses in particular on target 9.5 to encourage innovation UN’s Sustainable Development and substantially increase the number of research and development Goals. They are also connected workers. Saab contributes to the goal through university partnerships, to Saab’s strategic priorities as industrial and innovation collaborations, and technology transfers. indicated in the s ustainability goals and results. Goal 13. Climate action Saab contributes to the goal and especially target 13.2 by developing sustainable innovations and systematically reducing carbon emis- sions from its own operations.
Goal 16. Peace, justice and strong institutions Saab focuses in particular on target 16.4 to fight illicit arms flows and target 16.5 to fight corruption and bribery. Saab contributes by com- plying with export controls that apply to its products and working systematically to prevent corruption. Saab is also of the opinion that democracy and social welfare cannot be achieved without security, which Saab’s products contribute to.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 63 ADMINISTRATION REPORT
Stakeholder dialogue and materiality analysis
Stakeholder expectations on Saab, to- The sustainability issues most stake- Saab has identified a growing interest gether with Saab’s own strategic assess- holders point to as especially important for from stakeholders to engage with Saab ment, serve as the basis for selecting Saab’s operations are zero tolerance for on sustainability topics. Especially owners priority aspects for Saab’s sustainability corruption, export compliance and climate and investors have shown an increased in- work (see pages 60-63) and, as a result, change. In regard to climate change stake- terest in engaging with Saab on sustaina- the contents of this report. Saab receives holders want to know how Saab works with bility topics during 2020. This is something input from stakeholders through a number sustainable innovations, the reduction of that Saab welcomes. Saab is continuously of channels, several examples of which carbon emissions from our operations and developing its materiality assessment are shown in the table below. Saab also how Saab can contribute to a sustainable and processes for stakeholder dialogue participates in several collaborations and society. The mitigation of adverse human to answer our stakeholders’ expectations. organisations that provide valuable contri- rights conditions in the supply-chain This will be a focus during 2021 as Saab butions to the work. is another important topic for Saab’s continue to develop and improve its per- stakeholders. Each stakeholder group also formance within the sustainability area. has expectations on Saab based on their specific area of interest.
Stakeholder group Primary forms of dialog Owners and investors • Separate meetings with investors on sustainability issues • Annual General Meeting • Sustainability surveys from investors and analysts • Continuous dialog with investors and analysts Employees • Continuous dialog on the job • Personal reviews • Employee surveys • Dialogue with unions Students and potential employees • Labour market days and similar events • University collaborations • External surveys on what students expect from future employers Customers • Personal meetings, trade shows and conferences Society as a whole, including decision- • Participation in defence forums and debates, e.g. Almedalen and Folk and Försvar in Sälen makers and stakeholder organisations • Participation in trade organisations in Sweden and EU • Collaborations with public organisations and authorities, e.g. the EU and FN • Volunteer work and collaborations with non-profits • Focus groups Suppliers and partners • Continuous contact with suppliers and partners
Governance of sustainability work
The Board of Directors is responsible for ZERO TOLERANCE FOR CORRUPTION REDUCE ENVIRONMENTAL IMPACT overseeing the company’s strategic direc- The Board of Directors is responsible, Group Function Environmental Manage- tion, in which sustainability is an important through the Audit Committee, for over- ment develops strategies and targets in part, to ensure long-term profitability. seeing the Code of Conduct and has the area and coordinates environmental The Board adopts the Group’s Code of ultimate responsibility for monitoring and work within the Group to satisfy the re- Conduct and sustainability reports. The evaluating business ethics. The Ethics and quirements of Saab’s stakeholders. Goals Strategy Board, which is comprised of Compliance Board leads and draws up set at the Group level are broken down for representatives from Saab’s Group Man- guidelines for this work, makes decisions each business area. The business areas agement and is led by the Chief Strategy on ethical issues and follows up whis- perform the environmental work, which is Officer, proposes priorities to Group Man- tleblower cases. It meets at least eight ultimately the responsibility of the head agement. Saab’s Corporate Responsibility times a year and is led by Saab’s General of the business area. The Group Envi- function coordinates sustainability work Counsel, who reports to the Board of Di- ronmental Council ensures that external within the Group. For each sustainability rectors’ Audit Committee. Other important and internal environmental requirements priority, a person is appointed to drive the functions include Ethics and Compliance, are embraced and met. Follow-up and process and report each year on the goals which is responsible for managing and evaluation of the work takes place once and results. developing Saab’s anti-bribery and corrup- a year through Management’s Review, tion programme, and Market Network Man- and during audits at different levels within agement, which operates the onboarding the company. Environmental targets and processes for Business Partners. activities are followed-up quarterly from the bottom up.
64 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
EMPLOYEES representatives from each business area, Saab’s Head of Group Human Resources who are led by the central procurement has overarching responsibility for HR work function. A cross-functional reference within the Group. This work is further de- group is also available as support. veloped in close collaboration with the HR functions within each business area and CONTRIBUTE TO SOCIETY is led by the HR staff. To promote diversity Saab’s ambition is to contribute to social and inclusion, the work is planned and development in the markets where we op- carried out by an engagement team with erate with a focus on promoting education representatives from all parts of Saab. This and an interest in technology. This work is team gets direction from and is overseen guided by Saab’s vision and business idea by a steering group with representatives, and should, according to the strategy for called “Champions”, from each business social engagement, mainly be done with areas management team, together with the help of Saab’s employees and tech- representatives from HR. Their work is nologies and focus on encouraging young overseen by Group Management. people to take an interest in technology Within the business areas occupational and education. health and safety work is led by the head Sponsorships are a form of collabora- of the business area, who has ultimate tion in which Saab, in return for financial or responsibility. The head of the business other types of support, receives the right area then delegates duties within the to use the collaboration as a brand-build- business area. The HR function supports ing activity. Decisions on social engage- the work through a specially appointed oc- ments and sponsorships are made by the COLLABORATIONS, INITIATIVES cupational health and safety coordinator. head of communications in the initiating AND MEMBERSHIPS A group function for occupational health unit. If the sponsorship entails a public or Saab has participated since 2011 and safety coordinates and develops the political organisation, the decision must in the UN Global Compact and has work by providing common processes and be approved by the Ethics and Compliance pledged to follow its ten principles support tools. Board, which is comprised of members of on human rights, labour, the environ- Group Management. ment and anti-corruption. HUMAN RIGHTS As guidance in its sustainability Saab has identified compliance with POLICIES work, Saab has chosen to partici- export regulations (right to life, freedom Saab’s sustainability work is managed pate in a number of sustainability and personal safety) and responsible through established policy documents initiatives and organisations. Exam- supplier relationships (right to fair working such as the Code of Conduct, Supplier ples include: conditions) as its most important human Code of Conduct, Environmental Policy, • The business ethics committee of rights risks. The company has Group-wide Anti-Bribery and Corruption Policy, Mod- the Aerospace and Defence Indus- policies and tools to facilitate compliance ern Slavery Policy, Conflict Minerals Policy, tries Association of Europe (ASD) with the export controls that apply to its Occupational Health and Safety Policy, • The steering committee of the products and operations. The Head of Procurement Policy, Diversity Policy, International Forum on Business Export Compliance is responsible for the Business Travel Policy and Security Policy. Ethical Conduct (IFBEC) company’s overarching policy, directives The Code of Conduct contains sections • Environmental collaborations and governing policy documents as well as on business ethics, information security, through the Swedish Security and for providing advice to the businesses on social responsibility, the workplace, the Defence Industry Association operational issues and monitoring compli- environment and more. The Code is availa- (SOFF) ance within the company. In addition, each ble in Swedish, English, Portuguese, Span- • Environmental collaborations with- business area has its own export control ish, German, Arabic and Czech. Saab also in Europe through the Aerospace organisation to manage the work at an has a Supplier Code of Conduct based on and Defence Industries Associa- operational level. To encourage collabora- the UN Global Compact’s ten principles tion in Europe (ASD) and globally tion and prioritise needs, Saab also has an and the International Labour Organiza- through the International Aero- Export Control Council with representa- tion’s core conventions. Saab does not space Environmental Group (IAEG) tives from business areas. have a separate policy for human rights, • International Council of Swedish Saab works continuously to find better since these issues are covered in the other Industry (NIR) ways to minimise social risks in the supply policies. Group policies are available to all • Global Compact Network Nordic chain. The Procurement Council, which is employees in Saab’s global management Countries comprised of Saab’s procurement manag- system. Saab is certified according to ISO • Climate disclosure to CDP ers, has overarching responsibility. Strat- 9001, ISO 14001 and ISO 45001. • Fossil Free Sweden (Fossilfritt egies are developed by a Group procure- Sverige) ment unit. The work at an operational level • Global Reporting Initiative (GRI) is coordinated and developed through • Green Chain a work group made up of procurement • ICC Sweden
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 65 ADMINISTRATION REPORT
Anti-corruption
Corruption has negative consequences and (iii) follow-up and control the business Procurement, respectively, which will be for society and business and is some- intermediary’s performance and con- included in the training programme. thing Saab will never accept. We are duct. The Ethics and Compliance Board guided by our fundamental values, the approves individual engagements above WHISTLEBLOWER SYSTEM Code of Conduct, laws, industry codes certain thresholds and reviews statistics. Employees who become aware of or of conduct and clearly defined internal Saab’s internal auditors conduct suspect non-compliance with laws or processes to prevent corruption risks. reviews each year of a number of selected Saab’s Code of Conduct are expected business intermediaries to verify com- to report it through Saab’s whistleblower CORRUPTION RISK ASSESSMENT pliance and ensure that the intermediary system, which complements traditional Saab seeks to identify and assess corrup- is acting in line with Saab’s values and line reporting. tion risks and programme improvements contractual terms. The system is administered by an in multiple ways. The compliance module Similar corruption risk management external party and allows employees to of the enterprise risk management (ERM) processes are applied for other high-risk report anonymously online and by phone, process serves to rate the corruption business partners, such as prime contrac- or to pose questions regarding ethical risk in Saab’s business dealings. This is tors, offset suppliers and joint ventures. issues. done using a method that measures the corruption risk in all business prospects GIFTS AND HOSPITALITY INTERNATIONAL CO-OPERATION above 50 MSEK against a set of weighted Saab’s rules on gifts and hospitality pro- Saab engages in industry initiatives, such risk indicators and a country risk multi- vide clear guidance and set requirements as IFBEC, ASD and SOFF, to benchmark plier. In addition, Ethics and Compliance of approval depending on the value of the the quality of our anti-bribery and anti- performs an annual group-wide corruption benefit. A tool is in place to document and corruption efforts and share best practice. risk assessment to identify and man- identify red flags. Saab also has rules on age corruption risks and gaps in Saab’s sponsorships that require all public sector EXAMPLES OF ACTIVITIES IN 2020 anti-corruption programme. Data to the commitments to be approved according • Updated the business partner on-board- group-wide corruption risk assessment to special procedures. ing process is collected from a number of sources in- • Introduced a group-wide corruption cluding stakeholder workshops, regulatory TRAINING risk assessment requirements, external benchmarking, Web-based Code of Conduct and basic • Launched a corruption risk tool for ERM-output and other metrics. Local com- anti-corruption training is mandated for all Enterprise Risk Management pliance reviews in foreign operations are employees. Senior executives, business • Produced new e-learnings for marketing conducted in person at regular intervals leaders and those in high-risk functions & sales and procurement of three to four years to verify compli- including marketing and sales, industri- • Conducted training of Board of Directors ance and identify improvements to the al co-operations, project management and Group Management programme. The result of all assessments and sourcing also receive recurring and and activities are converted into actions in customized classroom training. The Board PLANNED ACTIVITIES IN 2021 annual activity plans or road maps. of Directors receives more extensive • Introduction of Ethics and Compliance anti-corruption training every three years Officers at Business Areas SCRUTINY OF BUSINESS PARTNERS with the latest training taking place in • Digitalisation of business partner on- We could not realise all of our achieve- 2020. In 2020, Saab produced two new boarding process ments without our business partners. At e-learnings for Marketing and Sales and • Review of Mergers & Acquisitions process the same time we recognise that business • Update of face-to-face training material partners may pose a legal and reputational risk if not managed correctly. Therefore, we divide our business partners into four Performance indicators categories based on risk, with each cate- 2019 2020 Goal gory being subject to specific corruption Number of classroom anti-corruption training sessions 16 43 risk management procedures. Number of business intermediaries audited during the year 5 21 5
Business Partners that are engaged in 2 Number of concerns reported through whistleblowing system 13 11 promoting or assisting our marketing and sales efforts or strategic planning (“busi- 1) Due to travel restrictions 2) Further information can be found on page 79 ness intermediaries”) are deemed to rep- resent the highest risk. Their engagement is therefore governed by a centralised pro- PRIMARY RISKS PRIMARY POLICY DOCUMENTS cess serving to (i) assess the business in- • Non-compliance can have a • Code of Conduct termediary’s credentials and suitability for negative impact on social devel- • Supplier Code of Conduct the assignment through due diligence and opment in the countries where • A nti-bribery and Corruption background controls, (ii) train and bind the Saab is active and result in loss of • G ifts and hospitality business intermediary to Saab’s anti-brib- confidence in Saab and the values • Spo nsorships and social ery and compliance expectations through the company stands for. engagement appropriate contractual commitments,
66 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
2020 Update of Business Partner on-boarding process
2006 Launch of group-wide corruption Process introduced to recruit risk assessment and manage marketing consultants 2019 Annual certification of 2008 Code of Conduct for Consolidated senior executives introduced Code of Conduct
2018 2009 Internal Ethics and Compli- Introduction of ance portal created whistleblower system Corruption risk management process for business partners established 2010 Establishment of a central function to manage the recruitment process for 2017 External reconciliation of remunera- marketing consultants tion model for marketing consultants
Formation of Guidelines for whistleblower Ethics and Compliance Board investigations introduced
2011 2016 Instruction for corruption risk Update of management established Code of Conduct
Update of Code of Conduct 2015 Supplier Code of Conduct introduced 2012 Chief Compliance Officer appointed
Reporting structure for 2014 External whistleblower system Audit Committee launched established 2013 Audit programme for marketing Customised web-based consultants started anti-corruption training launched
Giraffe AMB
SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 67 ADMINISTRATION REPORT
Environment
To strengthen and maintain competi- activities focusing on increased energy also provides for a long and efficient oper- tiveness in the future and contribute to efficiency and local energy production ating life. a sustainable society, Saab is working through solar PV at our site in South Africa, Saab has several examples of circu- actively to reduce its environmental continue to result in lower emissions lar business models where we provide a impact, both from its own operations from our operations there. Furthermore, service or functionality instead of selling and its products. increased investments have been made the specific equipment or hardware. This throughout the company during 2020 extends the products’ lifecycles and Saab’s environmental strategy is focused which are estimated to reduce electricity optimises use of resources. One example on reducing our own climate impact, and heat consumption by up to 3 540 MWh during 2020, is an order from the Swed- phasing out hazardous substances and per year. ish Civil Contingencies Agency (MSB) on using the resources more efficiently. Climate aspects are an important con- aerial firefighting missions. Saab provides Environmental aspects and requirements sideration in Saab’s long-term business full aerial firefighting services with our own are reflected in Saab’s global management strategy, since climate change and related aircraft, pilots and maintenance. Another system and integrated in every stage of requirements most likely affect our busi- example is where Saab allows customers the product lifecycle, from product devel- ness. During the year, Saab has therefore to lease combat training material, instead opment to end-of-life. initiated work with an internal analysis of of making a purchase, which contributes financial risks and opportunities associat- to a more efficient and circular use of REDUCE CLIMATE IMPACT ed with climate change. The work is based resources. In 2018, Saab set a corporate wide goal on the guidelines of the Taskforce on Cli- Within production, Saab’s increasing to reduce greenhouse gas emissions by mate-related Financial Disclosures (TCFD) use of additive manufacturing (also known at least 33 per cent by 2030. The goal and is expected to continue in 2021 and as 3D printing) will contribute to meeting was set in order to contribute to the Paris thereafter. our target on reduction of raw material Agreement. Saab reports climate aspects to the usage and preventing waste. During 2020, Compared to 2017, the greenhouse gas global reporting framework CDP and in ac- a demonstrator on one of Saab’s products emissions during 2020 have decreased cordance with the Greenhouse Gas (GHG) showed that additive manufacturing can by 37 per cent, whereby emissions from Protocol. We are proud that for 2020 we decrease raw material usage by as much business travel have decreased by 65 per received the CDP rating A- . For informa- as 75 per cent. Currently, several of Saab’s cent in large due to travel restrictions from tion on CDP and Saab’s complete report, products contain 3D printed components the Covid-19 pandemic. see www.cdp.net. and the number of components ready for Despite the effects of reduced travel serial production is steadily increasing. due to travel restrictions dependent RESOURCE EFFICIENCY Digitalisation is often seen as an on Covid-19, Saab has continued the AND CIRCULARITY enabler within circular economy. In 2020, efficiency efforts to reduce greenhouse Within the area of resource efficiency and Saab established one of Sweden’s first live gas emissions. In spring Saab joined the circularity, Saab has set targets to reduce installations of a Private Network. Private Swedish initiative Fossil Free Sweden use of raw material, water use and waste networks makes it possible for the owners (Fossilfritt Sverige) to support Sweden’s to landfill as well as to reduce the number to introduce 5G technology in their own IT work towards becoming the world’s first of chemical products and further improve infrastructure with full control over both fossil-free welfare nation by the year 2045. design of our products concerning envi- equipment and data. This can be used Parallel to this, Saab took the decision to ronmental aspects. within areas such as logistics to track and phase out fossil-fuel-only vehicles used Saab continually works to ensure optimise flows or to follow up on the us- in business travel by 2025. Meanwhile the resource efficiency and limit environmen- age, wear, and service needs of machinery decision was also taken to facilitate and tal impact at an early stage in our product and tools to increase efficiency and enable accelerate the deployment of fully electric development process. Architectural solu- extension of product lifecycles. vehicles, whereby Saab has installed tions are evaluated against criteria such Another example of circularity is found charging stations for electric vehicles at as ability to meet requirements (such as at Saab Kockums’ shipyard in Karlskrona. all main sites and has set a 5-year plan to modularity, hazardous material, environ- Saab Kockums has taken measures during further increase the number of charging mental impact), ability to adapt to project- the year to further enable reuse of sand/ stations. ed future needs, development potentials steel blasting material. Previously, approx- A large share of Saab’s carbon emis- and aspects on maintenance, support and imately 100-200 tonnes of blasting waste sions come from business travel. Because logistics. Through this process, Saab’s per year was disposed of at landfills. Now of this, we try in various ways to travel products are designed for long operating the blasting material is either reused within more efficiently and encourage the use of lives. One example is the Gripen multirole the site or externally. digital meetings. The pandemic has given aircraft which, besides having an opti- insight that it is possible to use digital mised design with light materials and low meetings to a larger extent and most likely, fuel consumption, has a unique mainte- this will contribute to a change in behav- nance concept that extends its operating iour even after the pandemic. life. Gripen’s smart and easily adaptable To reduce emissions from own oper- technical solutions enables rapid upgrade ations, we are also improving the energy of the avionics of the aircraft whenever efficiency of our properties. Previous years new technology becomes available, which
68 SAAB ANNUAL AND SUSTAINABILITY REPORT 2020 ADMINISTRATION REPORT
GHG emissions relative to Saab's climate target 2030 GHG emissions by source
T O2 0 000 202 20 0 Scope 1 - Own furnaces and 0 000 chemical processes 44,099 0 000 Scope 1 - Company owned vehic- tonnes CO2e les and aircraft 0 000 Scope 1 - Occasional emissions, 0 000 e.g. through accidents Scope 2 - Heat, steam and cooling 0 000 Scope 2 - Electricity (market- 20 000 based) Scope 1 - Own furnaces and c hemical processes, Scope 3 - Goods transportation 4.1% 0 000 Scope 3 - Business trips - Air Scope 1 - Company owned vehicles and aircraft, Scope 3 - Business trips - Car, 24.3% 0 * 02 2 2 2 2 2 2 222 20 train Scope 1 - Occasional emissions, e.g. through Climate target accidents, 1.3% The values for GHG emissions for 2017 - 2019 were adjusted Scope 2 - Heat, steam and cooling, 17.5% during the year. This was because more detailed data was col- Scope 2 - Electricity (market-based), 18.6% lected and the analysis methods were improved. Scope 3 - Goods transportation, 11.4% Scope 3 - Business trips - Air, 15.7% Scope 3 - Business trips - Car, train, 7.1% Waste directed to disposal
T