OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS Observations for a better world Annual report 2019 1 Contents Vaisala in brief 3 CREATING VALUE SUSTAINABLE BUSINESS PRACTICES GOVERNANCE FINANCIALS Strategy 11 Reporting principles, policies, Corporate Governance Statement 75 Key figures 94 OUR YEAR Business model 12 and due diligence 48 Risk management 84 Board of Directors’ Report 95 Chairman and CEO’s message 6 Value creation model 13 Environment 49 Board of Directors 88 Financial statements 2019 109 Highlights of the year 8 Dashboard 14 Personnel 55 Management Group 90 Auditor’s report 173 UN Sustainable Development Goals 15 Occupational health and safety 58 Information for shareholders 92 Megatrends 17 Ethics and compliance 59 Contacts 177 Business areas 20 Responsible supply chains 61 Global markets 27 UN global compact 63 Operations 28 Signatures 64 Stakeholder engagement 30 Independent assurance report 65 Value for customers 31 GRI content index 67 Value for employees 34 Value for society and environment 37 Value for investors 45 About this report: In its annual report, Vaisala applies the operations through exploring the different types of value Vaisala content index at the end of the Sustainable business practices How to navigate this report Integrated Reporting Framework, as defined by the International creates for its stakeholders. Thus, this comprehensive report section together with an Independent assurance report. Disclosure Integrated Reporting Council (IIRC). The primary purpose of includes information about Vaisala’s sustainability, governance of non-financial information in accordance with Finnish Accounting Read more about an Integrated Report is to describe how a company creates and financials, as well as value creation. Vaisala has published Act chapter 3 a is presented in the Sustainable business practices this topic value over time. We started our work towards this goal in 2016: standalone sustainability reports since 2008. section as well as in the Business model and Dashboard chapters this Vaisala annual report is the fourth one to apply the This report caters also to those who gather data from GRI included in the Creating value section and the Risk management international <IR> Framework. Our aim is to develop our (Global Reporting Initiative) reports. You can find the GRI chapter included in the Governance section. Vaisala in brief Vaisala is a global leader in weather, environmental, and industrial measurement. Building on over 80 years of experience, Vaisala provides its customers with reliable measurement solutions and services for better decision-making, safety, and efficiency. Vaisala is headquartered in Finland, and Vaisala’s A shares are listed on the Nasdaq Helsinki stock exchange. 3 Key figures for 2019 Business areas Weather and Environment net sales Weather and Environment business area MEUR serves selected weather-dependent 403.6 markets where accurate, real-time, uninterrupted, and reliable weather data is essential to run efficient operations. NET SALES BY Main markets: meteorology, aviation, BUSINESS AREA operating result ground transportation, and renewable 2019 41.1 MEUR energy Industrial Measurements Industrial Measurements business employees area serves a wide range of industrial 1,800+ customers. It offers a broad range of Weather and Environment accurate and reliable measurement 65% business area instruments that help our customers 261.3 MEUR optimize their processes, improve efficiency, minimize energy consumption, 35% Industrial Measurements offices and ensure the high quality of their end business area 30+ 142.3 MEUR products. Main markets: high-end humidity and carbon dioxide measurements, continuous monitoring systems, power, and high-end liquid measurements 18 countries 4 OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS Our year 6 Chairman and CEO’s message 8 Highlights of the year 5 OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS Chairman and CEO’s message A year of sustainable innovations and growth Creating observations for a better world through science-based and sustainable innovations has always been at the core of Vaisala. In 2019, we continued our work addressing the most pressing environmental and societal challenges of our time. Climate change is undeniably a key global challenge today, making Vaisala’s science-based innovations ever more relevant. Operating since 1936, we are committed to creating solutions that help tackle many of the most crucial challenges of our time. We do this by providing reliable, accurate, and high-quality means to observe and act on weather and environmental phenomena and their impacts as well as developing more sustainable industrial processes. Visible outcomes of the changing climate are the increasing extreme weather events, Hurricane Dorian being one key example from the past year. In 2016, the Bahamas decided to invest in a new meteorology network by Vaisala to improve its weather forecasting capabilities. As Dorian struck in September 2019, Vaisala’s solutions aided the island nation in sending out accurate and timely alerts. Thanks to these alerts, thousands of people were able to seek shelter in time. Vaisala has similar capacity building projects ongoing in Vietnam and soon also in Ethiopia. In October, we signed a new and important Raimo Voipio, Chairman of the Board of Directors, and Kjell Forsén, President and CEO contract for a project that will bring better weather services to the 6 OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS Chairman and CEO’s message Ethiopian people and accelerate local economic growth in important During the year, the construction work of our new R&D building weather-sensitive sectors. The project is estimated to start in 2020 proceeded well, and we look forward to finalizing the new premises and run for two years. towards the end of 2020. Through our work, we address also several other global megatrends, such as urbanization, digitalization, well-being and With the increasing requirements Increasing demand for reliable measurements health, as well as resource efficiency and circular economy. Here our for transparency and thorough industrial measurement business plays a key role. With our industrial opens opportunities for growth solutions, customers gain better visibility into their processes and understanding of the world’s Throughout our history, Vaisala has been a key link in the chain for a thus are able to save energy and natural resources, improve quality pressing phenomena, it is becoming well-functioning and safe society. With the increasing requirements and productivity, and reduce waste. for transparency and thorough understanding of the world’s pressing more important than ever to base phenomena, it is becoming more important than ever to base decisions decisions of verifiable, comparable, on verifiable, comparable, and accurate data. Sustainability at the core of Vaisala’s business At Vaisala, we aim to build upon our position as the global market In addition to our commitment to the UN Global Compact, we and accurate data. leader providing the world’s most accurate and reliable measurements. have identified and committed ourselves to the UN Sustainable We are committed to keeping up our high investments into research Development Goals that hold the highest relevancy for Vaisala. Our and innovation and working actively with our partners and the business is entwined with most of the goals, as the contribution of scientific community to find new solutions to make our planet safe and our products and solutions reaches from incubators at hospitals Leosphere, supplying remote wind sensing lidar instruments, and the sustainable for generations to come. to optimizing processes, measuring air quality, and enabling safe Finnish K-Patents, a leader in liquid measurements, contributed to We would like to sincerely thank our employees, customers, transportation on the ground, at sea, and in the air. Going forward, we our growth and opened up many new business opportunities. partners, and other stakeholders for their valuable contribution and want to strengthen this linkage and work actively to reach the goals. Vaisala has been a pioneer in science-based innovations close collaboration in 2019. Already for 83 years, Vaisala has been Furthermore, our customers can develop the sustainability of their throughout its history, and we continued on this path in 2019, working towards its mission to create observations for a better world, own operations with the help of our products. bringing new products to the market. A key highlight of the year and we look forward to continuing this journey together with you in The UN Sustainable Development Goals are also important in our came in January, as we launched the world’s first in situ 3-in-1 biogas the year 2020 and beyond. own operations and business practices, where we aim to adhere measurement instrument for measuring methane, carbon dioxide, to the highest standards of sustainability. We monitor and address and humidity in demanding environments. The launch marked a topics ranging from energy efficiency to the environmental footprint new market entry for us and expands our expertise into the field of of our products. We are also committed to respecting human rights, biogas measurements. promoting diversity and equality, ensuring occupational health and In 2019, we also stepped up our efforts in the digital sphere. safety, and preventing corruption, both in our own operations and in In August, we