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Social

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016 (applicable to all social topics)

As part of the changing market environment, ZF is responding to megatrends, strong growth in the Asia‑Pacific region and North America, technological and demographic change, and worldwide population growth. At the same time, highly qualified personnel are key to the company’s long‑term success. Therefore, attracting and systematically further developing personnel is one of ZF’s major challenges. This is why ZF is positioning itself as a globally attractive employer.

Preparing for future challenges

Our Management System (ZF MS) was created to provide both theoretical guidance and practical instruction for effective cooperation. It aims at shaping our way of working in terms of speed, simplicity and target focus. As core elements of the ZF MS, the four equally important principles “Innovation Approach,” “Customer Focus,” Commitment to People” and “Result Orientation” form the ZF Charter. These principles provide direction and guidance to ZF employees regarding expected behavior and mindset. They also define what is important to us, how we do business and what makes us special:

  • Innovation Approach: We develop pioneering products and technologies that help us achieve our strategic goals – and are financially rewarding. Our employees and business units alike all strive to develop innovative and creative solutions. We think like entrepreneurs. This also means we take risks and learn from our successes and failures.
  • Customer Focus: We win over our customers with our quality and our passion, offering them clear added value. This applies to internal and external customers alike. At the same time, we always aim to be profitable – and act accordingly, in every part of our organization.
  • Commitment to People: We support and encourage our employees in the fulfillment of their duties and responsibilities. In return, we expect commitment and performance. We provide constructive feedback and foster a culture of trust.
  • Result Orientation: We set ourselves challenging goals and measure what we achieve. We deliver as promised, and value agility. By finding the right balance between quality and speed, we ensure that we succeed in what we set out to do.

GRI 401

EMPLOYMENT 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

Responsible, supportive and fair – that’s the kind of employer ZF aims to be. We want to create a corporate culture that strengthens collaboration and trust. And we are convinced that this approach also leads to better financial results. We provide support and make offers, but at the same time ask for our employees’ dedication and commitment. We want to create a work environment that rewards high performance. Fairness, as we see it, provides benefits for employees and employer alike.

ZF is looking for qualified experts in all markets. Once hired, they enjoy attractive working conditions and qualification opportunities at all our company locations worldwide. The varied cultural backgrounds of our employees, their competencies and their diligence and motivation shape our corporate culture and are the key to our success.

In order to develop and produce intelligent mechanical products, ZF still requires employees from traditional occupations. Due to changing mobility habits, however, employees and graduates in the software and IT fields are becoming increasingly relevant to the automotive industry. This is why the HR Department is stepping up its global activities in attracting such graduates or people who have completed vocational training in the respective fields. For further employer branding, the campaign “What’s next?”, which was rolled out in 2017, was extended in 2018 with testimonials in India and Eastern Europe. The intention was to strengthen our global visibility as an attractive employer. Good results have been achieved since the roll‑out, e.g. for China and Germany, by individual benchmarks and employer rankings.

GRI 401-1

New employee hires and employee turnover

ZF hires approximately 600 new apprentices in Germany per year. Other parameters are currently not reported on for the Group in total.

Eployee turnover for 2016 – 2018

as percent of headcount 2018 2017 2016
Europe 4.75 4.6 6
North America 37.93 35.4 22.2
South America 2.59 2.3 2.2
Asia‑Pacific¹ 14.74 15.3 10.3
India¹ 0.73
Africa 1.50 1.7 2.7
Total 13.91 13.3 9.2
1 As of 2018, India is not listed as part of Asia‑Pacific but as a separate region.

GRI 401-2

Benefits provided to full-time employees that are not provided to temporary or part-time employees

ZF employees with part‑time, full‑time, permanent or temporary employment contracts are provided access to the same benefit programs. Health and insurance benefits play a central role in ZF’s offering to employees. Of course, benefits vary according to local standards, regulations and market practice. Benefit programs for contractors and agency temps are treated according to the type of contractual engagement with ZF and according to local regulations.

Provisions for pensions are set up for obligations from vested benefits and current pensions for entitled current and former employees of the consolidated ZF Group and their surviving dependents. For details on the provisions for pensions see GRI 201-3.

Following the acquisition of TRW, ZF is in the process of analyzing the key benefit programs in the major countries and locations. The benefits analysis for the USA has been completed and benefits harmonization in the USA will be completed by 2018.

GRI 401-3

Parental leave

At the end of December 2018, a total of 671 employees took parental leave (up to three years) in Germany; of this number, 300 were male and 371 female. 170 female and 1,504 male employees took parental leave for a short period (up to one year) in 2018. Using parental leave for a short period, in most cases two months, is very popular among parents. A 12‑month retention after returning and data for other countries in which ZF is active cannot yet be reported. Reporting systems are currently being implemented.

GRI 402

LABOR/MANAGEMENT RELATIONS 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

The common interest of employees, employee representatives and company management is to sustain our international competitiveness and achieve sustainable commercial success. Confronting the challenges of globalization, we strive for collaboration at all levels based on mutual respect.

A trusting cooperation under the Works Constitution Act is a fundamental factor in our corporate culture. This applies to all employee representative committees such as the individual works councils and committees, including the General Works Council, the Group Works Council and the European Works Council as well as the individual contact persons on the employer’s side.

GRI 402-1

Minimum notice periods regarding operational changes

All legal obligations are respected. Employee and employer representatives regularly interact in an atmosphere of trust. Employee representatives are therefore comprehensively informed in a timely manner about changes in the company.

Fundamental questions concerning the company’s development are discussed in communications and at meetings. The discontinuation and relocation of companies or sub‑units, investments and other changes to the organization are significant topics of discussion.

GRI 403

OCCUPATIONAL HEALTH AND SAFETY 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

Our employees’ safety, health and well‑being are core values at ZF. They are therefore an integral part of the company’s culture and strategy. As we are aiming for appreciable value to our employees and other stakeholders, the vision is to manage our Environment, Health and Safety (EHS) performance to occupy a leading position in the automotive industry.

In March 2018 the Board of Management signed a new EHS Policy describing the mission, execution and responsibilities in fulfilling this vision. A new Group directive was issued in June to act as a bridging document between policy and the new EHS Management System in order to strengthen EHS processes throughout the company.

The new EHS management system was launched for the combined company as a result of our “best of both” approach, in which experienced specialists evaluated topic‑specific best practices, standards and opportunities for cost reduction and synergies. Procedures, specific requirements and guidelines were therefore defined. To measure the implementation and effectiveness of the management system, half‑yearly self‑assessments are to be performed at each location and audits carried out by members of the global EHS team approximately every three years.

The ZF Group has defined targets to further protect, preserve and promote health, well‑being and job satisfaction. Progress in target achievement is frequently measured, monitored and managed. The targets of ZF and the Active & Passive Safety Technology Division were harmonized during the course of 2018 and communicated in January 2019.

While compliance with legal and regulatory requirements is the foundation of all our activities, we have implemented our own Group‑wide EHS standards (ZF EHS Management System). We aim to meet or exceed customer requirements but also to prevent EHS risks.

In addition, ZF believes that safe behavior cannot be achieved by technical or organizational measures alone. Safety Excellence programs have therefore been implemented at all levels of the organization. These programs are constantly enhanced to build Safety Leadership and engage employees in the prevention of work‑related injuries and illnesses. They form the basis for the world‑class performance and the safety culture that we are striving for.

Organizational structure

The three‑dimensional Environment, Health & Safety (EHS) organization of the combined company comprises the following elements:

  • Centers of Excellence developing program elements,
  • Regional teams with focus on site service and legislation and
  • ZF internal business partners to coordinate all EHS aspects in the division or business unit.

The Health Committee and the Interdisciplinary Expert Group (IEG) were extended to the Active & Passive Safety Technology Division in 2018. Additionally, an International Health group is to be established in 2019.


Managing safety

Aiming for constant improvement, all ZF locations apply our new internal management system. Locations may grant certification on a voluntary basis within our Integrated Management System (IMS) for occupational health, safety, environment and energy, which conforms to the international standards OHSAS 18001/ ISO 45001. However, if stipulated by customer requirements or if locations fall significantly short of their accident reduction targets, they are expected to join the certification scheme. In 2018, 71 locations (in 2017: 60) were matrix‑certified.

First of all, the new EHS Management System focuses on the prevention and minimization of risks and impacts related to Health and Safety. Periodical risk assessments are performed calculating the level of risk based on the severity and probability of potential harm, applying methods similar to failure mode and effects analysis (FMEA). Work stations and all related activities, for example, are subject to these assessments. On the basis of the results, preventive measures are defined and implemented – applying the hierarchy of controls, which means first endeavoring to eliminate or substitute hazards, then devising technical control measures to contain hazards, and finally organizational measures or personal protective equipment. Re‑assessments are performed to confirm effectiveness.

Particular attention is given to non‑routine activities, where most severe accidents occur. Key criteria are considered for occupational health and safety protection in the planning and procurement of machinery and equipment. The ZF organization is supported by a Group‑wide machinery safety expert team.

All employees and their representatives are involved in the continuous improvement of health and safety in the workplace and are subject to regular qualification measures. Staff are motivated to report near misses and unsafe situations at the daily shop floor meetings and to participate in activities such as risk assessments, kaizen workshops and suggestion schemes. ZF has established a policy against reprisals and the employees receive feedback on how their reported information is handled. Also, ZF has established a trustline where issues reported by employees are treated strictly confidentially.

The locations have developed employee reward schemes as required by the EHS Management System, to recognize their contributions to improving safety. Implementation of employee involvement and employee reporting is subject to internal audits. At the sensing session (an interview of non‑supervisory employees with no presence of managers or supervisors), for example, which is performed during the Corporate EHS audits, employees can express how they are becoming involved in Health and Safety issues and if there are any concerns. The origin of employee statements is kept confidential. In case of unacceptable risk, employees have the right to stop activities and talk to their supervisor and/or Safety officer and/or Safety representative. As part of the Safety Leadership program, all leaders are made aware of this possibility and train appropriate responses.

Incidents causing injury and near misses with the potential to result in severe accidents or fatalities are deeply investigated using root cause analysis, the 5 Why or 8D method. To prevent accidents from occurring in the future, information is shared among the world‑wide locations using online Safety Alerts, with a summary of the event, the root causes and preventive measures taken; these are posted on the EHS intranet.

One of the focus areas for ZF in 2018 was to improve the EHS performance of the supply chain, especially in relation to suppliers providing onsite services at the locations (contractor activities). A process has been defined and is being implemented to better manage contractor qualification and performance. Selection criteria have been defined and Purchasing pointed out ZF’s expectations regarding health and safety to our contractors. Contractors are selected according to their proven ability to perform safety‑critical activities. To ensure contractor activities are safely performed, risk assessments are carried out and control measures defined and agreed upon, and supervision is provided in order to ensure implementation. Violations can lead to removal from the list of approved contractors. Work permit processes have been defined for safety‑critical activities.


Safety Excellence

The Safety Excellence program is ongoing and comprises three key areas: Safety Leadership, Employee Involvement and Continuous Improvement of Functional EHS Programs. This program aims to sustainably foster the same culture of shared values regarding health and safety for every employee and at every location. To build a culture in which safety is a value, ZF encourages and empowers employees to make a positive impact on their work environment.


Safety Leadership

The Safety Leadership (SL) Core Team continued to focus on the rollout of the Safety Leadership program. In 2018 the implementation continued in Germany focusing on site level. Outside Germany, the rollout continued in all regions. In the reporting year, 4,223 leaders participated in 346 workshops delivered by Safety Leadership Coaches – trained employees from EHS and production. Overall 6,646 leaders have now participated in 570 workshops since the start of the program.

Module 1 focuses on the transformation to a sustainable safety culture, presenting nine Safety Leadership Elements and introducing five Safety Basics. SL coaches received training to conduct workshops in Module 2 that focus on hazards, risk assessment, incident investigation and managing at‑risk behavior.

Safety basics were implemented to support the program and make it visible to the employees. These consist of rules related to the use of safety shoes, high‑visibility clothing and mobile devices, unique safety flyers for visitors and envisioning accident‑free days at the locations.


Employee Involvement

Behavior Based Safety (BBS) aims to increase employee involvement in safety by making employees more aware of how an individual’s behavior at work largely determines safety outcomes. About 100 (2017: 113) locations have implemented this process of safety coaching, with employees coaching their colleagues in working safely. While five sites from different divisions and regions were added in 2018, the overall number decreased compared to 2017 as a result of divestitures.


Continuous Improvement of Functional EHS Programs

The backbone of the Continuous Improvement program is our new EHS Management System which is currently being implemented. The status of implementation is being evaluated using self‑assessments and as part of the EHS Corporate Audit Program. The audit program also includes an evaluation of legal compliance, performed by a third party. Safety improvement programs are being developed and rolled out for the combined company based on the best‑of‑both approach. For example, since the ergonomics program plays a pivotal role at ZF, a software‑based ergonomics program was successfully launched. It includes features such as e‑learning, ergonomic risk assessment and best practice solutions.

Managing our wellbeing

In the new EHS Management system we have included a new standardized element concerning Occupational Health. The procedure is oriented towards ISO 45001 and covers Core Medical Issues as well as Health‑Related Interdisciplinary Issues.

Mandatory standards for training courses on leadership and health were rolled out in Germany, and measures for the rollout in the Active & Passive Safety Technology Division were prepared. The training on the basis of the defined curriculum is on track, and participation of all leaders (except for the Active & Passive Safety Technology Division) is planned to be completed by the end of 2019.

The integration of the Active & Passive Safety Technology Division into the Interdisciplinary Expert Group on Health Management (IEG) is being realized. An Occupational Medicine expert group on “Skin Protection” was constituted in 2018.

Various preventive activities were carried out at all locations. While the focus in 2018 was on “Skin Protection” diseases, the emphasis will lie on “Fit at Work” in 2019.

GRI 403-1

Workers representation in formal joint management – worker health and safety committees

The new EHS Management System stipulates that site Management Team shall consult with employees and their representatives and encourage them to participate in EHS initiatives and decision‑making processes. In some countries this is specified by law. Management shall define the scope of this involvement to satisfy the legal requirements (if any) and to make best use of the employees’ involvement. Employee involvement in EHS Programs shall be supported in activities, teams and initiatives, such as EHS Committees and Councils. All sites confirmed in their management reviews that they comply with this requirement.

The German Law of Occupational Health and Safety Act stipulates that occupational health and safety committees are to be organized at German locations. Members of the Works Councils are also represented on these committees. Prior to the occupational health and safety committee meetings, specialists in occupational health and safety, medical officers, representatives of the Works Council and responsible executive managers carry out inspections and audits to gain an insight into the current status and requirements for change.

GRI 403-2

Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

Work‑related accidents resulting in lost time are recorded and analyzed in order to monitor safety performance. In 2018, the data included agency workers (workers who are not employees but whose work is controlled by ZF) but due to the current database structure, injury rates and gender cannot be disclosed separately. A new database is currently being implemented. Due to confidentiality constraints, health‑related figures regarding absenteeism are not reported on.

In 2018, no employee or agency worker faced a fatal work‑related accident within the ZF Group. Unfortunately, one accident of a contractor employee resulted in a fatality while performing work at a site in Austria. As described before, a new contractor management process has been implemented.

With 1,329 work‑related accidents resulting in 23,137 lost working days, on the basis of nearly 3 million hours worked, the Lost Time Accident Rate (LTAR) – accidents per one million working hours – amounted to 4.5. This represents a reduction of 18 percent compared to the previous year. The number and rate of high-consequence work‑related injuries will be determined in our future reporting system. While the LTAR in the Active & Passive Safety Technology Division still shows an excellent performance rate of 1.7, other ZF divisions are also showing considerable improvements. For example, our locations in Germany were able to reduce the LTAR by 15 percent. This can be interpreted as the result of high management attention due to the Safety Leadership Program, along with monthly safety reviews. The Severity Rate (Lost Working Days per Lost Time Accident) was 17.4 (2017: 19.8).

The most frequent types of injury involved the fingers and hands; these were sustained in the areas of assembly and production.

Rate of accidents 2016 – 2018

(LTAR) Accidents with working days lost per one million working hours 2018 2017 2016
EMEA 7.5 8.8 10.5
of which Germany 9.8 11.5 14.2
of which Europe excl. Germany 4.6 5.8 5.9
North America incl. Mexico 1.7 2.2 2.6
South America 4.4 4.8 6.0
Asia-Pacific 1.0 1.0 1.1
ZF Group 4.5 5.5 6.5

GRI 403-3

GRI 403-4

Health and safety topics covered in formal agreements with trade unions

The system of codetermination in place at the German ZF locations also applies to health and safety at work. Close cooperation on these issues occurs between the Works Councils and the Group Works Council. Occupational health and safety issues are part of the Group Directives and guidelines applied at the various locations. In Germany, the approval process for these regulations includes the involvement of employee representatives regarding issues subject to codetermination. On a location level, there are various guidelines on hand that cover occupational health and safety.

GRI 404

TRAINING AND EDUCATION 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

Individual and organizational development, qualification and life‑long learning are decisive success factors when it comes to securing a company’s long‑term future. Our employees require the right skills in order to guarantee that we retain our power of innovation. ZF employees can choose from a wide range of advanced qualification opportunities.

ZF is committed to developing people, management and the organization by focusing on various layers and target groups and it invests accordingly. Talent management, learning and development, educational enhancement and enrichment, and competency management are supported and strategically developed. Applying this holistic approach to management enables us to systematically monitor and anticipate workforce issues in all corporate areas. This, in turn, allows us to respond to the challenges of demographic change.

All training programs are systematically evaluated. Participants and trainers submit an evaluation after every event as part of a continuous improvement process. These form the basis for regular reviews and appropriate revisions. We select external training providers and trainers according to defined criteria and a selection process carried out jointly by the specialist department and Purchasing.

The corporate HR Development and the HR Development departments in the individual divisions, regions and technical departments work closely together. By shifting to a new Human Resources target operating model between Centers of Expertise, HR Business Partners and HR Operations, we strengthen our customer, functional and operational excellence. We thereby ensure standardized operational processes in HR Development as well as innovation and business orientation.

Increasing digitalization and connectedness in production are making their way into companies under the moniker “Industry 4.0”. This is also changing the requirements for apprenticeship. As a result of the project “Apprenticeship 4.0”, ZF has integrated new content specifically focused on electronics, IT and hybrid qualifications into the internal apprenticeship program. The following job profiles will gain importance in the future: qualified IT specialists and productions technologists. In 2018, Lemförde, DüsseldorfandFriedrichshafen added the job profile “Qualified IT Specialist” to their current portfolios and Saarbrücken includes the job profile “Production Technologist” in its current offer. In addition, the qualification of vocational trainers has been identified as a main enabler to promote the implementation of “Apprenticeship 4.0” at ZF. For this reason, a ZF Vocational Trainer Day for all vocational trainers in Germany was held in early 2018. As a follow‑up activity, a design thinking workshop was conducted with trainers and apprentices in order to develop a platform for sharing and exchanging learning content as well as didactic and training materials. Furthermore, in April 2018 the new position “Vocational Training” was established, which aims to generate synergies between all ZF sites worldwide and strengthen cooperation regarding vocational training activities. The internationalization of apprenticeships is also becoming more important for the ZF Group as a whole, and there are several initiatives in place for expanding the apprenticeship model outside of Germany. One example is the ZF site in Mexico, Saltillo, which has been certified as a recognized training company (“anerkannter Ausbildungsbetrieb”) since 2018 and offers the job profiles “Toolmaker” and “Mechatronic Technician” in its dual education system.

ZF as a learning organization

The knowledge management approach is currently only in place at ZF sites in Germany and does not yet include locations of the Active & Passive Safety Technology Division. The objective is the conscious, responsible and systematic handling of knowledge as a resource. Collaboration rooms, wikis and virtual communication media support the virtual cooperation of employees. Best‑practice databases store valuable practical experience and make it available for reuse. Expert forums ensure the targeted exchange of knowledge and experience.

The suggestion and idea management schemes provide employees with a platform for submitting improvement suggestions and ideas. The ideas@ZF project has created the conditions for an idea management process across all locations. This allows ideas to circulate between the German locations. Thanks to the continuous improvement process, specific improvement potential has been identified and implemented.

Knowledge and idea management in the Corporate HR function creates awareness of the effective handling of knowledge and ideas; it provides advice and supports the professionalization of existing activities as well as building new activities in knowledge and idea management.

GRI 404-2

Programs for upgrading employee skills and transition assistance programs

ZF places great importance on education and training, resulting in improved qualifications. In the reporting year, about 618 young people started an apprenticeship or dual study program at ZF in Germany. By the end of 2018 our apprentices numbered around 2,800 worldwide, including students from the Active & Passive Safety Technology Division. Around 25 percent of these students are completing a dual study program at a university. This young target group can choose from 35 different apprenticeships and Dual University courses of study.

New ways of learning

The Global ZF Campus has been transformed to a global Center of Expertise – Global Learning and ZF Academies. This implies a stronger focus on global learning topics and the question of how we as an organization need to adapt to be ready for the future.

A new essential component of the global Learning portfolio is the extension of our learning mix and the integration of different elements into one common learning concept/architecture. The goal is to offer the right format for the respective learning needs and target groups and provide workplace‑integrated learning offers, such as videos, tutorials and social learning elements combined with instructor-led formats such as F2F training or live online training. Furthermore, it is essential to take a closer look at the effectiveness of the training offers provided. We therefore expanded our business model towards a higher prioritization on business needs and value‑based learning approaches. One of our first initiatives is the implementation of a global digital learning life cycle process, with greater focus on consultancy and support of subject matter experts in the creation of digital learning formats.

To support the digital transformation at ZF and the necessary cultural change, further specific initiatives and measures are being implemented to develop our learning culture with a view to being more open, connected and collaborative. This includes learning in communities, learning from mistakes and more self‑responsible learning elements. Another topic is that of providing the right offers to develop the competencies/skills needed in the future. Here the team expanded its internal and external network and intensified its collaboration with external partners such as universities and institutes.

The ZF Academies promote advanced specialized training opportunities for managers and employees in all corporate functions. The objective is to achieve systematic and global advanced training of employees with technical training programs derived from the Group strategy. Various internal ZF Academies offer an extensive range of advanced training opportunities for employees in Materials Management, Quality, Finance, IT, Sales, Production, Digital and other associated functions. We are currently expanding activities and setting up an R&D academy to ensure our readiness for future technologies as well as an HR Academy to focus on qualification and processes dedicated to HR. Target groups are cross‑divisional, cross‑location and international.

The course portfolio is tailored to functional and cross‑functional learning needs, thus establishing a globally consistent standard of knowledge and expertise.



Improving qualifications and developing leaders

We have again extended our international training capacities. For example, we have intensified our cooperation with colleges and universities in China, the USA and several European countries. Further successes have also been achieved in internationalizing our trainee program.

Since leadership excellence is a strategic target of the ZF Group, we continued our “ZF Global Leaders” program through 2018. This comprises level‑specific modules with a blend of in‑person sessions, virtual learning, self‑reflection tools and peer group coaching and work on real cases. The objective of ZF Global Leaders is to provide leadership with different development opportunities and to prepare candidates for transition to the next management level. The ZF Global Leaders landscape fosters a global mindset and strong collaboration. Over time it also aims at creating a uniform global leadership culture through cross‑divisional, cross‑functional and cross‑regional group composition. Further targets are strengthening the company’s leadership pipeline and providing consistent global leadership development throughout the various management levels. The goals and content of the program are based on the Group strategy and are linked to the ZF Management System with its ZF Charter and ZF’s leadership principles – thereby encouraging new ways of working together.

Almost 700 future managers from all over the world have participated in the programs since September 2017. For 2019 we are also planning a significant number of groups to ensure the development of our potential candidates.

Besides ZF Global Leaders we are increasing our international training portfolio for the entire management group and are currently developing global content training courses with a strong focus on virtual training elements. The most relevant topics are “Virtual Leadership”, “Leading in a Matrix”, “Agile Leadership” and “Artificial Intelligence in the Context of Digitalization”. The revised training offer will be available as of 2019.



Preserving Knowledge

In order to retain knowledge in the organization, ZF has created knowledge batons whereby employees who are leaving the company make their practical knowledge available to the organization. Existing expertise is documented on storage media so that knowledge can be shared and exchanged using search engines in which employees can enter specific queries.

In 2016, the ZF Group created a program to allow former employees to contribute their valuable experience and extensive knowledge. The “Senior Professionals” program enables participation in specific projects and matches specialist areas with senior experts. These temporary assignments can be managed with little administrative effort and provide ZF with a flexible and dedicated workforce. In the reporting year, the program included 247 registered experts with 32 work assignments.

In Germany, ZF is pursuing a comprehensive approach to deal with the challenges of an aging workforce. For example, workplaces are being designed to accommodate these requirements, and emphasis is placed on finding the right work‑life balance between career and family. ZF is also focusing on health management, flexible working time models and lifelong learning.

GRI 404-3

Percentage of employees receiving regular performance and career development reviews

ZF emphasizes the importance of personal and professional development for all employees. Individual performance and development opportunities are discussed and documented on an annual basis according to the HR process cycle for non‑managerial employees. Figures by gender and employee category are currently not available.

As part of the integration of the Active & Passive Safety Technology Division in 2017, a new potential and succession planning process applicable for managerial employees in the Group was defined. This new process was implemented for pilot groups in 2017 and was rolled out for all managerial employees in 2018. The process is supported by a cloud‑based IT solution. In 2019, it is planned to extend this process to employees in the pay scale who have potential for a managerial position.

A Short‑Term Incentive (STI) was rolled out Group‑wide for all managers in 2017. The system is intended to foster a culture of innovation and performance, resulting in a stronger target focus. The STI consists of key financial performance indicators and an individual component based on individual targets and personal performance. Assessing the company and individual components ensures a comprehensive evaluation of the results achieved throughout the year. The process is transparent and defines the framework for our actions and priorities, and for the behavior and attitudes we expect from the combined company’s managers. The Individual Target Agreement and Performance Process (iTaP) has been moved to a cloud‑based IT solution. The iTaP process includes an annual feedback meeting between managers and supervisors.

GRI 405

DIVERSITY AND EQUAL OPPORTUNITY 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

We believe that diversity and its appreciation have a positive impact on society and how people work together. That is why we signed up with the Diversity Charter and now belong to a group of approximately 3,000 signatories dedicated to a welcoming, prejudice‑free corporate culture. This voluntary commitment represents our pledge to actively promote diversity within our organization.

In 2018 we implemented a follow‑up mentoring program for women and men who are interested in pushing their careers forward and expanding their networks. We started in October with 20 participants. The structured mentoring will last one year and is open to all employees worldwide.

We have created Employee Resource Groups (ERGs) in “Zoom”, our new intranet, to give employees the opportunity to exchange knowledge and experience worldwide. An example of an ERG is our community Women@ZF with over 500 participants (status November 2018).

From a global perspective, demographic change comes in many different forms. While western industrialized countries are primarily confronted with the challenges of an aging population, people in developing and newly industrialized countries are much younger. Since ZF is a global player with approximately 230 locations in 40 countries, the age structure of the company’s workforce is very heterogeneous and is strongly dependent on the history of each particular ZF location.

Managing diversity

ZF understands diversity as the key to success, a driver of innovations and a factor in enhancing corporate value. Our HR strategy therefore highlights the issue of diversity as part of the Group strategy. ZF focuses on particular dimensions to meet strategic challenges and contribute to enhancing the Group’s future competitiveness. These dimensions include a balanced gender ratio, issues such as cultural background and internationality of the workforce, a wide range of experience and expertise as well as responses to demographic changes. All of these factors are systematically analyzed and processed on a regular basis, and results are reported to the Board of Management.

The introduction of ZF Career Elements for managers has enabled us to define a binding framework for job and career decisions. The modules determine criteria for promoting and supporting multidivisional, multidisciplinary experience and help to internationalize management. The ZF Career Elements were rolled out globally and are well implemented in the organization.

To increase the number of women in technical professions, ZF has become a partner company of the highly renowned Femtec Association, which was founded by the EAF Berlin and the Technical University of Berlin in 2001. Femtec is an international career platform for women in natural sciences and engineering. The organization recruits talented young female students for STEM (Science, Technology, Engineering, Math) professions, qualifies excellent candidates for a management career and offers distinguished career perspectives to focused female students in cooperation with the partner companies. Through its involvement in the Femtec.Network, ZF offers a glimpse into the working world at a technology company. ZF thus offers plant tours or specific projects, for example. During the Innovation Workshop (“Innovationswerkstatt”) 2018, carried out with and for ZF, the Femtec participants dealt with questions and ideas for automated driving.

ZF Employees by region and gender¹ 2016 - 2018

in percent Women Men
2018 2017 2016 2018 2017 2016
Europe 14.30 13.85 13.81 85.70
86.15 86.19
of which Germany 13.15 12.93 13.01 86.85
87.07 86.99
North America 27.46 26.62 26.02 72.54
73.38 73.98
South America 9.17 9.1 8.51 90.93
90.90 91.49
Asia- Pacific 16.63 16.91 18.89 83.37
83.09 81.11
Africa 16.25 14.73 15.07 83.75
85.24 84.93
Total 16.12 15.73 15.74 83.88 84.27 84.26
1Without the Active & Passive Safety Technology Division

ZF employees by gender¹ 2016 - 2018

2018 2017 2016
Men 65,680 64,071 61,768
Women 12,619 11,959 11,537
1Without the Active & Passive Safety Technology Division

The compatibility of work and family at ZF is still an important objective for promoting equal opportunities and employee satisfaction. This is why one of the ZF Career Elements is a “social career element”, which covers parental leave, leave to care for relatives and other types of community and family commitments.

Since 2006, the ZF location in Friedrichshafen has been certified as a family‑friendly company in Germany. As part of the “career and family” (“berufundfamilie”) audit, family‑related targets and measures have been firmly established.

In 2018, the existing audit was extended to other major locations of ZF in Germany: Besides Friedrichshafen, also Schweinfurt, MDS Lemförde, Passau and Saarbrücken have participated. The “audit berufundfamilie” is a widely recognized branding and an excellent instrument for increasing employer attractiveness and employees’ commitment. It provides our employees with a framework that allows them to reconcile their work, family and private life. A culture of cooperation and partnership on the part of all concerned is of great importance to us and will allow all parties involved to equally benefit from this certification. Our focus here is on a principle of give and take.

Furthermore, additional family‑friendly minimum standards were defined and consistently implemented by an expert body for work, family and private life. Having actively implemented the aspect of career and family care for many years, we have also extended childcare places and options for short‑term care throughout the Group. Another important element is providing daycare for about 700 employees’ children during school vacations in Germany. To name a few more exemplary measures, these include operating agreements on mobile work, contact points for work and family at all major German ZF locations, connection of employee partners in family‑related time out, well‑established counseling services for professional and private crisis situations, various childcare services, support services and information on the subject of care as well as care solutions.

GRI 405-1

Diversity of governance bodies and employees

In light of German legislation governing equal representation of women and men in managerial positions in the private and public sectors, targets for the relevant managerial levels have been discussed and set for ZF Friedrichshafen AG to be achieved by June 30, 2022.

At the first managerial level (executive vice president/senior vice president) and the second managerial level (vice president) below the Board of Management, the percentage of women is planned to increase to 15.0 percent in each case.

For vacancies regarding the Board of Management, a quota of 10.0 percent female Board of Management members is envisaged. The appointment of Sabine Jaskula as member of the Board of Management for the HR and Legal Corporate Function means that this target has already been met.

GRI 405-2

Ratio of basic salary and remuneration of women to men

Remuneration at ZF is based on compensation structures. While in the Active & Passive Safety Technology Division compensation structures are historically based on a global job classification system, in other ZF entities the compensation structure for managers is based on a global grading system. Compensation structures below management levels are based either on collective pay‑scale agreements or on local grading systems.

Job classification, grading systems and collective pay‑scale agreements are intended to minimize the risk of discriminating against women on compensation levels. Entities of the Active & Passive Safety Technology Division have been fully integrated into ZF’s grading process for management positions since mid‑2017. A global compensation database will be progressively introduced over a three‑year period. The planned compensation database will enable ZF – among other benefits – to report and monitor equal remuneration as well as potential gender gaps worldwide. ZF is an equal opportunity employer and appointed a global diversity manager to monitor equal treatment among employees.

GRI 406

NON-DISCRIMINATION 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

ZF is present in many countries of the world and embraces a wide diversity of cultures and people. We foster the exchange of thoughts, ideas and methods as well as understanding between cultures and people. Our ZF Charter and ZF Leadership Principles contain a definitive statement on the issue of diversity: Employees at ZF are not discriminated against on the basis of skin color, gender, age, nationality, religious denomination, social background, disability or sexual orientation. This applies to the recruitment of new employees, the existing employment relationship and professional advancement at ZF. The only traits that are important are performance, personality, skills and qualifications. For further details on our values see GRI 102-16 regarding managing compliance see GRI 205.

GRI 406-1

Incidents of discrimination and corrective actions taken

There were no confirmed incidents of discrimination in the reporting year.

GRI 414

SUPPLIER SOCIAL ASSESSMENT 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

ZF has an integrated approach regarding supplier environmental and social assessments; see GRI 204 for further details on our management approach with suppliers.

To meet the requirement following the provisions of the Dodd Frank Act, Sec. 1502, and to ensure a conflict‑free supply chain, ZF requested all relevant production material suppliers to disclose the origin of their resources. Gold, coltan, cassiterite, wolframite and its derivatives such as tantalum, tin or tungsten from the Democratic Republic of the Congo (DRC) and adjacent countries, as used in company products, are considered as conflict minerals since they finance conflicts.

ZF is using a web‑based solution for the reporting and identification of conflict minerals along the entire supply chain. As part of the tool‑assisted supplier inquiry program, a total feedback of 62 percent was recorded in the reporting year. We intend to increase the feedback rate from suppliers in 2019. The results of the inquiry indicate that the reviewed supply chains potentially source products that finance conflicts in DRC regions. A high‑risk smelter follow‑up is conducted for the suppliers whose feedback indicated potential high‑risk smelters, to constantly minimize any risks. We actively request the corresponding suppliers to eliminate critical smelters within their supply chains and ensure that new suppliers do not source from identified smelters. As these minerals are necessary for several functions and purposes of some of our products, ZF is clearly committed to further cleansing its supply chain.

GRI 414-1

New suppliers that were screened using social criteria

ZF is using a web‑based solution for the reporting and identification of conflict minerals along the entire supply chain. As part of the tool‑assisted supplier inquiry program, a total feedback of 62 percent was recorded in the reporting year. We intend to increase the feedback rate from suppliers in 2019. The results of the inquiry indicate that the reviewed supply chains potentially source products that finance conflicts in DRC regions. A high‑risk smelter follow‑up is conducted for the suppliers whose feedback indicated potential high‑risk smelters, to constantly minimize any risks. We actively request the corresponding suppliers to eliminate critical smelters within their supply chains and ensure that new suppliers do not source from identified smelters. As these minerals are necessary for several functions and purposes of some of our products, ZF is clearly committed to further cleansing its supply chain.

GRI 416

CUSTOMER HEALTH AND SAFETY 2016

GRI 103 (incl. 103-1, 103-2, 103-3) Management Approach 2016

In providing products and services for people, ZF works toward improving customer health and safety in many ways. This is founded on quality and reliability, which are of utmost importance as with other end customer products. Therefore, our ZF4Q quality strategy is derived from the Group strategy and the ZF Quality Management System is based on three elements:

  • Quality Planning for prevention,
  • Quality Assurance to secure the current volume production, and
  • Quality Management to shape processes and structures.

The goal is to implement all processes, both industrial and business‑related, at a high level of maturity and evaluate them with a view to ongoing improvements, in line with the ZF Production System.

With the advancement of complex programmable electronics, functional safety has become increasingly important in product safety, as overall safety depends on the correct functioning of safety‑related systems and other risk reduction measures. ZF is committed to promoting functional safety as a priority. Each division is responsible for training employees on this directive and developing an organization with clear areas of authority, responsibilities and functional safety processes.

Our new DG 06‑16 Functional Safety guideline was approved in 2018 and the deriving process is being applied in the Group worldwide, replacing former guidelines of ZF and the Active & Passive Safety Technology Division. The Functional Safety Directive establishes functional safety processes at ZF and

  • specifies functional safety as an objective,
  • creates awareness of the potential safety effects of errors, and
  • establishes responsibility for actions, consistent analysis and mitigation of problems on a sound technical basis.

See – Think – Act

In addition, our products allow for improving safety in mobility. With the updated Group strategy, ZF has chartered the course for the future. By adhering to the “See – Think – Act” principle and our Vision Zero, ZF intends to make a strong contribution to future mobility with its products and services – reducing emissions and accidents to zero.

ZF aims to meet the demands of the mobility megatrends of tomorrow, such as efficiency, integrated safety and automated driving. With its “See – Think – Act” guiding principle, the Group has set a clear technology focus. The company’s product and technology planning is based on market and product roadmaps which are continuously updated. Development has also focused on sensors for environment recognition, electronic control units, occupant safety systems and automated driving functions.

ZF’s “See – Think – Act” approach seeks to enhance the safety of its products.

See – Technology such as forward‑looking cameras and 360‑degree radar sensors monitor traffic situations and road conditions, seeking to reduce risks to drivers, occupants and pedestrians.

Think – The central control unit processes information and is capable of activating safety functions, such as automatic emergency braking or airbag deployment.

Act – Actuators turn electric commands from the control units into mechanical movements, such as braking maneuvers. Recuperation makes it possible to convert part of the kinetic energy back to electrical energy, which can be used to charge the battery of a hybrid or electric vehicle.

GRI 416-1

Assessment of the health and safety impacts of product and service categories

ZF’s Global Development and Product Evolution Process (GD PEP) establishes quality and safety management procedures for ZF’s products and services. Group directives implement processes for adapting specifications to specific products. Appropriate testing is done at different points in the course of the project. In the development process, service concepts are also designed and then implemented by trained customer service personnel.

ZF’s commitment to product quality continues in manufacturing. ZF then has processes in place to monitor products in the field and work with customers when potential issues arise. These efforts promote stable processes in production at ZF manufacturing locations worldwide.