March 9, 2017

To our stakeholders:

As a member of the UN Global Compact the company is committed to global sustainable development. Sika does not compromise on integrity and apply high ethical standards to its work. Sika’s “Code of Conduct” defines the standards and rules of behavior for the company and all its employees.

In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact and its principles into our business ans sustainability strategy, in our culture and in daily operations. We also commit to share this information with our stakeholders using our primary channels of communication.

Kind regards,

Jan Jenisch
(CEO)

Sika supports and respects the protection of internationally proclaimed human rights and ensures that it is not complicit in human rights abuses. With operations in 97 countries, Sika is active in many regions ranking high on Human Rights Risks Indices and sees it therefore as its responsibility to assess its own operations with regard to potential human rights violations.

Sika’s Code of Conduct requires all employees to comply with applicable laws and regulations. At any location where Sika has operations this clearly excludes child labor and forced labor. For the reporting year, Sika has had no indication or reports about human rights violations within its own entities. This has been confirmed by the General Managers in a reporting system, the “Compliance Confirmation”. The 100% response rate and completeness of the details provided suggest no human rights violations to be reported. The new Compliance Checklist distributed to General Managers specifies the requirements pursuant to the Sika compliance system, including training and information to staff about human rights (freedom of association, if permitted by local laws, no discrimination, no child or forced labor). In line with Sika's holistic approach to compliance, this checklist is relevant to the operations of all functional units in the Sika companies in all Regions.

With a broad supplier base in many high-risk countries with regard to human rights violations as well as the sourcing from industries where in particular labor rights are potentially at risk, Sika considers the protection of human rights across its supplier base as an important issue that needs to be monitored and managed. Sika’s Supplier Code of Conduct focuses in particular on human rights and labor laws.

Sika regards protection of human rights as foundations of the business wherever it operates. Through mechanisms like audits and inspections, Sika plans to assure and monitor that Group companies protect human rights. Sika will implement a more coordinated management approach in 2017 with regard to human rights assessments.

Management Approach

General Managers and the local management team have the obligation to ensure, supervise, and monitor the protection of human rights for their area of responsibility in their companies. In the signed Compliance Confirmation, General Managers are asked to report yearly on human rights and confirm the following:
• to have implemented and communicated that child labor is strictly prohibited and confirm that child labor does not take place in their company,
• to have implemented and communicated the right of freedom of association in their company.
• to have implemented and communicated the non-discrimination principle as per Sika’s Code of Conduct in their company, and no apparent cases are unresolved.
• no apparent cases of forced labor exist in their company.

As clearly stated in the Compliance Confirmation, which is signed and acknowledged by each General Manager each year:
• Sika promotes equal opportunities and fair treatment in employment and occupation. Discrimination is the act and result of treating people unequally by imposing unequal burdens or denying benefits rather than treating each person fairly on the basis of individual merit.
• Sika ensures the right of workers and employers to establish and join organizations of their own choosing without the need for prior authorization.
• Sika prohibits “Forced or compulsory labor”, which refers to works and services which are exacted from any person under the menace of any penalty and for which the said person has not offered herself or himself voluntarily. The most extreme examples are slave labor and bonded labor, but debts can also be used to maintain workers in a state of forced labor (for example: withholding identity papers or requiring compulsory deposits)
• Child labor is strictly prohibited at Sika. This term “child” refers to any person under the age of 15 years or under the age of completion of compulsory schooling (whichever is higher).

COMMITMENT
Sika is committed to aligning its operations and strategies with the universally accepted principles in the area of human rights and labor established by the United Nations Global Compact Initiative.

RESPONSIBILITIES
The regional and local line management is responsible for compliance with human rights principles and local regulations.

Assessment of Sika’s own operations:
Sika has assessed compliance with human rights through its internal Group auditing activities, and will continue to improve the audit agenda to achieve a broader coverage. General Managers have given account of the local human rights situation and their observations in this regard through the Compliance Confirmation 2016. (See also chapter compliance).

Sika’s suppliers
Sika’s management approach to Supplier Human Rights Assessments is intended to avoid negative impacts caused by Sika’s suppliers with regard to human rights.
As clearly stated in Sika’s Supplier Code of Conduct, Sika is committed to high ethical standards and to sustainability in its relationships with employees, shareholders, customers, suppliers, competitors, governments, communities, and to the environment. Sika follows the principles of the United Nations Global Compact. Therefore, Sika expects suppliers to observe equal standards of professional conduct and integrity in particular in their relationship with Sika, their employees, and their sub-contractors. Suppliers recognize that their compliance with this code of conduct is an essential element of Sika's vendor qualification. Suppliers’ conduct is governed by high ethical, safety & environment, and sustainability standards. The supplier has taken note of Sika's Code of Conduct and will in its dealing with Sika not support any conduct which constitutes a violation of that Code.
In particular, on social and working conditions, suppliers commit to respect the provisions of the UN Universal Declaration of Human Rights and the Conventions of the
International Labor Organization in regards to:
• Prohibition and elimination of child labor and forced labor
• Freedom of association and collective bargaining
• Promotion of equal opportunity and fair treatment in employment and occupation
• Safe and healthy working conditions
• Payment of living wages and regular employment entitlements
• Non-excessive working hours.

Suppliers commit to have systems in place to ensure the proper instruction, training, and auditing of their personnel and subcontractors to ensure compliance with these principles. To the extent Sika is directly concerned, suppliers will immediately inform Sika of any violations of Sika’s Supplier’s Code of Conduct detected.

Screening of new suppliers: Based on the requirements set out in the Supplier Code of Conduct, Sika requires its new suppliers to perform a self-assessment.
- Procurement identifies suppliers with a hazard based on the results of the self-assessments.
- Suppliers that show a high risk of human rights violations are screened using desktop research and supplier audits through Sika personnel.
- Compliance with the set of human rights included in the Supplier Code of Conduct will be part of the contracts requirements.
- In case human rights violations are found, termination of the relationship with supplier is the only option.
In addition to covering new suppliers, Sika also intends to monitor local suppliers specifically in “risk geographies”, where human rights violations are known or suspected and will include this in the scope of audit and evaluation of suppliers.

General Managers are obligated to strictly adhere to legal practices and to supervise the subsidiary accordingly. Also, they are responsible for taking preventive action and training. Human rights reviews are included in the annual Compliance Confirmation letters filled in and signed by the General Managers, the internal audit program and the legal audits which are performed regularly in subsidiaries. Around a total of 30 audits (internal and legal audits) are performed annually, corresponding to around 20% of Sika’s subsidiaries.

As part of the new Compliance Checklist 2017, General Managers are asked to implement and communicate in their companies the following Human Rights principles:
• non-discrimination (including sexual harassment)
• child labor is strictly prohibited
• freedom of association (without need of prior approval) – unless prohibited by local laws
• forced labor
This checklist provides also specific explanations about the above Human Rights:
• Discrimination: is the act and result of treating people unequally by imposing unequal burdens or denying benefits rather than treating each person fairly on the basis of individual merit.
• Child: refers to any person under the age of 15 years or under the age of completion of compulsory schooling (whichever is higher).

Sika has gained confidence through the verification by the management teams and the Compliance Confirmation letters that all companies adhere to the human rights charter as set out in the Code of Conduct and no violations or incidents gave been reported.

Sika’s worldwide presence makes the integration of widely differing cultures and the global exchange of knowledge and experience absolutely essential. Diversity is desired and seen as a key success factor for Sika. The company firmly believes that the diversity experienced by employees on a daily basis is one of the factors of its success, especially at senior management level.

Until now, diversity has not been actively measured and managed. Based on the outcomes of the measurements in 2015, Sika will introduce relevant management processes. Sika strives in particular to increase the proportion of women in managerial and commercial positions. Women account for 22.7% of total headcount (2015: 22.3%) and 17.4% of managers (2015: 16.6%). Sika is committed to provide equal opportunities for all our employees.

Sika introduced its five values and principles in 2014. The success of any company hinges not only on implementing the right strategy, but also on harnessing the trust and commitment of its employees. Sika’s rise to its leading global position is driven by the five values and principles that define its corporate culture. These are:
1. Customer First: Sika designs all its new products and solutions with its customers' success in mind. The company looks to build long-lasting and mutually beneficial relationships rather than focus on short-term successes. This mindset is reflected in Sika’s Building Trust tagline.
2. Courage for Innovation: Innovation management is at the core of the company’s business. Sika has institutionalized its Product Creation Process with a strong focus on consistently developing new products, systems, and solutions.
3. Sustainability & Integrity: Sustainability is a key component of Sika’s drive for innovation. For buildings and industrial applications alike, Sika aims to enhance durability and improve both energy and material efficiency. Sika’s aim is to reduce resource consumption within its own company as well as for its partners, who trust in Sika products. The well-being and health of employees and partners is a prerequisite to the company’s success.
4. Empowerment & Respect: Sika fosters a working environment based on trust and respect. The company focuses consistently on working in close partnership with each other and with customers, suppliers, and stakeholders. Sika believes in the competence and the entrepreneurial spirit of its employees. The company empowers its people to develop and propose new ideas, which is why decisions and responsibilities are delegated to the level of competence. Corporate units are structured to be as decentralized as possible, with flat hierarchies and broad spans of control.
5. Manage for Results: Sika is persistent in the pursuit of its vision and targets and has a long-term view, taking pride in continuously achieving outstanding results. Functions and projects are clearly assigned because giving people responsibility guarantees success. Sika has transparent remuneration benchmarks following a defined strategy. Performance evaluation is based on market share, sales growth, profitability, and capital efficiency.

Labor and Social Standards
Sika companies and their employees comply with global and local labor and social standards. Furthermore, all employees are
bound by the Sika Code of Conduct, regardless of where they work and in which function. The Sika Code of Conduct is binding
even in cases where local laws are less stringent. In addition, as a signatory of the UN Global Compact, Sika prepares its
reporting in accordance with the GRI standards. To ensure that the interests of all stakeholders are represented and to reaffirm
our commitment, Sika is also a member of the World Council for Sustainable Development.

The Sika Code of Conduct protects and ensures compliance with human rights. The company respects the right to freedom of association. However, it must be noted that Sika also operates in countries where the right to freedom of assembly and collective bargaining are restricted by national legislation.

Sika tolerates neither child labor nor any type of slavery and observes all laws and guidelines in respect of discrimination in
any form. Sika actively promotes a recruitment policy aimed at achieving a diversified workforce. Chapter 9 of Sika’s Code of
Conduct establishes a zero tolerance approach to harassment and discrimination in the workplace. In the reporting year, the
compliance system was again strengthened in order to further promote the Sika Group’s culture of trust, transparency and
openness.

Collective Bargaining
In 2016, no data was available regarding the percentage of total employees covered by collective bargaining agreements. Sika is present in 97 countries with both small and large subsidiaries. In many of the smaller companies the number of employees is small and no collective bargaining agreements exist. However, in many big countries e.g. USA, Germany, France etc., collective bargaining agreements for workers are the rule, and the majority of workers is covered in these geographies.

Diversity
Sika’s global presence and associated proximity to customers make it extremely important to integrate different cultures and
share experience and know-how across national boundaries. The company firmly believes that the diversity experienced
by employees on a daily basis is one of the factors in its success, especially at senior management level. At courses and
seminars, Sika managers are encouraged to give high priority to diversity in team and project planning. Sika counts more than 49 nationalities among its senior managers.

Women account for 22.7% of the total headcount (previous year: 22.3%) and 17.4% of managers (previous year: 16.6%). Sika
is constantly working to increase these figures.

Labor and Social Standards
Every year around 20 internal audits and 10 external audits are conducted, corresponding to some 20% of all Sika national subsidiaries. Among other things, these audits ensure compliance with the applicable labor and social standards.

Inspections and Audits
Inspections and audits are core elements of Sika’s comprehensive management system. They provide management at Group,
regional, and local company level with a regular, independent assessment as to whether all activities comply with official requirements as well as with Sika’s own internal guidelines, principles, and risk management specifications. The inspections
and audits thereby ensure the effectiveness of the relevant processes and controls at Sika. The process for internal audits
is centrally organized and is overseen by the Audit Committee of the Board of Directors. All audits are approved by Group Management and the results presented at the Audit Committee. In all, Sika conducted 138 audits of corporate functions in the reporting year and implemented associated improvements wherever necessary. The audits covered all aspects of Sika’s global
business activities: quality, environment, safety, health, risk, technology, compliance, IT security, suppliers, and products.

To ensure that suppliers also meet the official requirements and labor standards, Sika calls on them to perform self-assessments
and conducts supplier audits itself. In the year under review, all new suppliers were assessed according to the new vendor evaluation process. To improve supplier qualification, Sika trains sales teams in
planning and performing supplier audits themselves. Most of these inspections are overseen by safety, quality, or technology
experts. This makes it possible to work on improvements together with the suppliers, including improvements in sustainability.
As a supplier to major customers – particularly from the automotive and industrial sectors – Sika is itself often subject to external
audits. These audits are designed to ensure compliance with international labor standards and prescribed quality, environment,
safety, and health criteria.

More Value - Less Impact
Sika takes a long-term perspective on the development of its business, and acts with respect and responsibility toward all internal and external stakeholders. Sika maintains a strong focus on safety, quality, environment, fair treatment, social involvement, responsible growth, and value creation during all business activities.

Sustainability with reagrd to the environment has always been part of Sika’s identity. The company aims to continually measure and improve sustainable value creation and communicate activities and progress. “More Value – Less Impact” refers to Sika’s obligation to maximize the value of its solutions and contributions for all stakeholder groups, while simultaneously minimizing the risks and resource consumption associated with value generation.

The following details relate to all business operations of the Sika Group, including the activities of the newly acquired companies,
and focus on the core themes of energy, water/waste, occupational safety, and CO 2 emissions at the more than
190 Sika production sites. Sika is continually improving its environmental protection and safety performance through its routine investment planning and maintenance activities. During the year under review, Sika spent CHF 6.1 million on technical equipment to prevent accidents and illness. This corresponds to roughly 4% of total investments of CHF 155.1 million. Sika also implemented numerous further health, safety, environment, and sustainability measures during
the year under review. Expenditures in these areas came to CHF 24 million (previous year: CHF 22 million). The total worldwide
headcount in this field runs to over 100. Sika employs environment, safety, and sustainability specialists at all its major
sites.

Sika Group, including the activities of the newly acquired companies, and focus on the core themes of energy, water/waste,
occupational safety, and CO 2 emissions at the more than 190 Sika production sites.

Sika is continually improving its environmental protection and safety performance through its routine investment planning and maintenance activities. During the year under review, Sika spent CHF 6.1 million on technical equipment to prevent accidents and illness. This corresponds to roughly 4% of total investments of CHF 155.1 million. Sika also implemented numerous further
health, safety, environment, and sustainability measures during the year under review. Expenditures in these areas came to
CHF 24 million (previous year: CHF 22 million). The total worldwide headcount in this field runs to over 100. Sika employs environment, safety, and sustainability specialists at all its major sites.

Energy
Global megatrends, such as energy and raw materials shortages, urbanization, and population growth are confronting
companies and communities with major economic, social, and ecological challenges. Availability and efficient use of energy
and resources are crucial to sustainable development and poverty reduction. Sika sees it as its responsibility to minimize the
impact on climate change by reducing energy consumption from nonrenewable sources with the positive effect of lowering costs
and increasing competitiveness. The Group goal is:

Target: 3% less energy consumption per ton and year. This includes the total energy produced and consumed
by all Sika operating companies and units, both industrial and nonindustrial sites. In 2016, this target has been achieved.
Implementation: Sika consumed 1,779 terajoules in 2016 (previous year: 1,833 terajoules) of energy. Approximately 56%
of Sika’s energy requirements were met by electrical power from the local grid. The remaining demand was mainly covered by
natural gas and liquid fuels.

Energy consumption per ton sold came to 428 megajoules (previous year: 455 megajoules). Apart from energy-efficiency projects, this significant drop of 5.9% is primarily due to the change in product mix and strong growth in less energy-intensive product technologies.

To maintain the positive trend, the following energy projects have been initiated: At several Sika production sites (e.g., Zurich, Cerano), the company has improved the adhesive production process. Better energy consumption, time efficiency, and output have been achieved for the drying of fillers. Optimizations based on knowledge of filler characteristics yielded energy savings of around 35%, equivalent to an annual total of 828 gigajoules.

Significant energy savings were also achieved in mortar production at the Guangzhou factory in China by replacing wet-washed
sand with dry sand. This substitution will allow 84,000 liters of diesel to be saved each year.

CO2 emissions
CO2 is a consequence of fossil energy consumption, and can only be limited within Sika by increasing energy efficiency. This is
why Sika controls its CO 2 emissions via its energy target and has not set a specific reduction target at Group level.
CO2 emissions (direct): CO2 emissions from energy consumed directly by all Sika operating companies and units, both
industrial and nonindustrial sites, and by its own vehicles are calculated based on the reported fuel quantities. In 2016, CO 2
emissions from the use of primary energy sources ran to around 45,000 tons (previous year: 53,000 tons). Two factories in China still rely on locally sourced coal as a fuel. Overall, however, coal consumption was cut by approximately 50%. Coal has a low gross calorific value and entails higher CO 2 emissions than natural gas.

Emissions were reduced at two plants by adjusting the product mix, partially replacing a coal-intensive process with a
coal-free process.

CO2 emissions (indirect): CO2 emissions from indirect energy consumption, i.e., emissions not due to Sika’s own primary energy usage, including leased vehicles and business travel, are derived from the reported energy quantities. CO 2 emissions
caused by purchased electricity are calculated using current emission factors from the Greenhouse Gas protocol (GHG),
applying average values for electric power production in each particular country. In 2016, CO 2 emissions caused by electricity
consumption were calculated at 109,000 tons (previous year: 107,000 tons), i.e., more than twice as high as direct CO 2 emissions.

Leased vehicles and business travel caused additional CO 2 emissions of 20,000 and 13,800 tons, respectively (previous
year: 21,000 and 13,800 tons). Sika’s total CO 2 emissions run to around 187,000 tons. Project case studies from around the globe detailing how Sika was able to reduce water consumption, save energy, and thereby
reduce CO 2 emissions at its plants can be found at www.sika.com/sustainability.

Water
Sika aims to boost the sustainability performance of its production sites by reducing water consumption and treating water
locally. The company implements measures to reduce consumption or to use lower-grade water qualities, especially in
geographic regions where water is scarce. Efficient production means closed loop cooling and switching from public to surface
and ground water, reducing the amount of drinking water used in production. By reusing wastewater, Sika aims to reduce its
water consumption on a larger scale. The Group goal is:

Target: 3% less water consumption per ton and year.
This includes water consumed by all Sika operating companies and units, both industrial and nonindustrial sites, whether from
public utilities or from ground or surface water sources. In 2016, this target has been achieved.

Implementation: In 2016, Sika used approximately 1.3 million cubic meters of water (previous year: 1.7 million cubic meters).
With water consumption per ton sold down by around 22% to 0.32 cubic meters (previous year: 0.41 cubic meters), Sika significantly exceeded its target. Sika invested in various water efficiency projects at its plants worldwide during the year under
review. To reduce wastewater discharge at the Alcobendas plant in Spain, the existing wastewater treatment facility was upgraded with ceramic ultra- and nanofiltration membranes. This reduced tap water consumption by 200 m³ per month (-25%)
and achieved savings of EUR 6,000 per year. The quality of the treated water allows its reuse for cleaning the loading bulk station and in the water treatment plant.

Sika Colombia’s large plant at Tocancipá implemented a completely closed water circulation that ranges from rainwater harvesting for production to the reuse of wastewater as sanitary water or, after cleaning, for crop irrigation. In addition, all organic materials are composted and used to fertilize the garden crops.

Waste
Efficient use of input materials is extremely important to all Sika companies, as production processes are material-intensive and use high volumes of nonrenewable resources. Efficient production in this context means reducing and reusing production scrap, reducing and reusing packaging materials, and improving packaging design, leading to higher productivity and lower material use. The Group goal is:

Target: 3% less waste per ton and year. This includes all waste material sent to external contractors for disposal – except for materials returned to suppliers – and covers all Sika operating companies and units, including industrial and nonindustrial sites. In 2016, this target has not been achieved.

Implementation: With an increased production volume, the company generated some 74,000 tons of waste (previous year: 70,000 tons). This corresponds to 17.8 kilograms of waste per ton sold (previous year: 17.3 kilograms per ton sold) or an increase of 2.9%. Various factories producing concrete additives had to dispose of the rinsing water as waste due to a change in the local sewage treatment plants acceptance conditions. Rinsing water, which contains even the smallest amounts of concrete additives, was thus recently declared as waste. Nevertheless, the total waste volume has decreased by -1.2% since 2013.

However, since 2013 the amount of waste has been reduced overall by -1.1%. Material efficiency will continue to be a priority in 2017. A large part of the waste – particularly from polymer and adhesive production – is recycled by external companies. Extensive measures such as the efficient and economical use of raw materials, process optimizations, improved waste sorting, and the recycling of packaging materials have contributed to global waste efficiency. These measures and the reduction of waste in mortar production through recycling are set to further boost efficiency.

Reducing and reusing adhesive waste is one of the keys to efficient production. A mobile recycling machine was developed by Sika at the Düdingen plant in Switzerland for recycling adhesive residues from Unipacks and cartridges. The reduction in the manual workload and annual adhesive waste savings of 27 tons are likely to translate into savings of around CHF 90,000 per year.

Sika Thailand had already won a Silver Award in 2014 for its continuous improvements in waste management. In 2016, further refinements to its waste-handling system earned Sika Thailand a Gold Level Award. Project case studies from around the globe detailing how Sika managed to reduce waste at its plants can be found at www.sika.com/sustainability.

One key activity in the year under review was the development and launch of the Sustainability Academy program within the framework of the Sika Business School. This program sets out to train employees from national subsidiaries as sustainability experts to enable them to press ahead with implementing the “More Value – Less Impact” strategy at a local level. The first course was attended by employees from various business segments from 15 countries in the EMEA , North America, Latin America and Asia/Pacific regions. The interaction between trainer, experts and participants as well as the discussion of key elements of Sika’s strategy, best-practice examples, group work, presentations, and sharing of project and technical experience were viewed as positive by all involved. The Sustainability Academy will be repeated in 2017 and is set to become an integral part of the Sika Business School’s training program. The aim is to initiate even more activities in the sustainability focus areas and achieve further progress.

Anti-Corruption is of considerable importance to Sika, as the company operates and is growing more and more in countries with elevated levels of corruption and is active in the construction industry, known for its exposure to corruption. For the same reasons, corruption is also an important issue in Sika’s supplier relationships.

Sika’s management approach for anti-corruption is intended to avoid negative impacts. In order to provide a clear message to all employees, Sika’s Code of Conduct strictly prohibits any form of active or passive bribery and provides guidance on gift, entertainment, and donations:
No Bribery, no Corruption
• Avoid any form of either active or passive bribery or corruption.
• Do not offer or accept any favor of any kind (cash, trip, gifts, etc.) for any improper advantage (offer, permit, order, project award, etc.).

Bribery and corruption can take many forms: It may be cash, but also any other favor, like trips or gifts of any kind, which is intended to influence the receiving person’s decision to obtain an improper advantage for the person or entity offering the favor. Except for ordinary gifts and entertainment which do not aim at an improper advantage, it does not matter how big or small the favor or the advantage is, it still is bribery or corruption and is strictly forbidden.

Gifts, Entertainment and Donations Policy
• Only give or accept gifts and entertainment which are lawful, reasonable, and in compliance with the local Sika company’s written rules.
• Sponsoring and charitable contributions are permitted in compliance with the local Sika company’s written rules.
• Sika does not contribute to any political party or for a political cause unless approved by Group Management.

In almost all countries reasonable gifts and entertainment (meals, sports, or cultural events, etc.) are an inherent part of business. They become bribery and corruption when they are intended to influence the receiving person’s decision. Trips or multiple day events as well as gifts and entertainment for public officials are especially critical. All Sika companies have implemented written rules based on the corporate model rules to further specify which gifts and entertainment as well as which sponsoring and charitable contributions are permissible in the framework of the Code of Conduct. The rules must also provide for authorization from management depending on the amount involved. Contributions to political parties or a political cause are subject to the approval of Group Management.

Sika does not tolerate any incident of corruption.

In 2016, the adoption in all Sika’s companies of a localized Gift & Entertainment Policy has been fully accomplished. This policy, which integrates and reinforces the Code of Conduct principles, provides employees with a clear and detailed framework on how to give and accept gifts and entertainment in their daily business and defines - for each company/country - different levels of authorization depending on the gift value. Training for employees on practical cases has improved in 2016 and will become more important in 2017, also through the Regional Compliance Officers. Role modelling by management, integrity, and continuous reminders of Sika’s principles are important.

Sika has a zero-tolerance approach concerning bribery and corruption within its own operations and with its suppliers.

RESPONSIBILITIES
Compliance will continue to be a line management responsibility at Sika and the General Manager of the country organization is responsible for compliance with Sika’s Code of Conduct, the local Gift & Entertainment Policy, the Supplier Code of Conduct implementation, the Procurement Manual, and setting of local rules and training. Corporate Functions, including the Compliance Team, provide tools and methods – at different levels of the organization – to support management and monitor the effectiveness of the compliance system, proposing corrective actions where needed.

POLICIES
- Code of Conduct (PDF) – translated into more than 30 languages,
- Localized Gift & Entertainment Policies,
- Supplier Code of Conduct,
- Procurement Manual (Ethics Reports)

SPECIFIC ACTIONS
- Compliance Confirmation: As part of their duties and responsibilities, General Managers at Sika ensure that their companies operate in compliance with applicable laws and Sika’s internal regulations. For the second year, each General Manager at Sika has signed and submitted the annual “Compliance Confirmation" to Group Compliance, which allows Sika to monitor and get assurance that business throughout the organization has been conducted in compliance with the law and the Code of Conduct, with a particular focus on anti-corruption. The Compliance Confirmation provides a brief definition of Corruption as “the abuse of entrusted power for private gain". Corruption includes practices such as bribery, facilitation payments, fraud, extortion, collusion, and money laundering. It also includes an offer or receipt of any gift, loan, fee, reward, or other advantage to or from any person as an inducement to do something that is dishonest, illegal, or a breach of trust in the conduct of the enterprise’s business or provides an improper advantage or that may result in moral pressure to receive such an advantage”. No corruption cases have been reported in any of the more than 100 Confirmations submitted which comprise all of Sika’s legal entities.

- Compliance Commitment/pledge 2016-2017: To further improve Sika’s compliance processes and preserve Sika’s strong corporate culture, General Managers have been asked in 2016 for the first time to renew their commitment to lead with integrity by signing and submitting a "Compliance Commitment/pledge 2016-2017". This document explains in detail what leading with integrity implies for their daily business and demands to escalate and report any corruption case to Group Compliance.

- Compliance Checklist 2017: In order to support General Managers to fulfil their compliance duties, a "Compliance Checklist 2017" has been developed and distributed. The checklist contains minimum requirements and best practices to minimize compliance risks. It is a tool for General Managers to measure compliance of their companies with Sika’s Code of Conduct, monitor identified risks, prevent and detect misconduct, and plan corrective actions. The checklist will be regularly reviewed and improved to make it as effective as possible.

- Group Audits: Compliance with Sika’s Code of Conduct and other Corporate Policies and Manuals is monitored through regular Group audits (138 in 2016) and legal supervision of the local companies and General Managers.

- Supplier Management: Sika’s Supplier Code of Conduct requests suppliers to respect Sika’s zero-tolerance policy concerning bribery and corruption and avoid any active or passive corruption. Suppliers are required to have systems in place to ensure the proper instruction, training, and auditing of its personnel and sub-contractors to ensure compliance with these principles. Sika performs supplier audits and evaluations to monitor and assess their compliance with Sika’s requirements and the Code of Conduct. Suppliers are obliged to immediately inform Sika of any known violation of the Code of Conduct.

- Training/new e-learning: Anti-corruption is part of the Code of Conduct training for all employees and General Manager briefings. Employees are regularly reminded, at least once a year, of these rules. Corporate functions regularly conduct training sessions and audits. To preserve Sika’s strong compliance culture and to ensure that the Code of Conduct’s principles are understood and adhered to by all employees, Sika has developed an animated e-learning program in addition to regular class training events. The program includes a specific section on Gifts & Entertainment and bribery risk. It will be rolled-out in 10 languages throughout the organization as part of the Awareness Raising Campaign on Compliance (see below).

- Internal Reporting Tool: To preserve and foster Sika’s strong culture of trust, integrity and transparency, Sika has developed a new web-based reporting platform, the Sika TrustLine (available in more than 20 languages). It will be rolled-out throughout the organization as part of an Awareness Raising Campaign on Compliance (see below) together with the new e-learning program. The Sika TrustLine is an externally hosted reporting channel where Sika’s employees may raise legitimate complaints regarding serious misconduct, such as corruption incidents, and/or breaches of Sika’s Code of Conduct, in a safe and confidential environment, whenever reporting to other most immediate existing resources, like line management or other superiors, is not feasible or adequate. As part of the roll-out of the Sika TrustLine, an ad hoc policy (“Sika Trust Policy”) will be made available to Sika’s employees in order to provide clear rules and appropriate training on rights and obligations with regard to internal misconduct reporting.

- Awareness Campaign on Compliance: In 2016, Sika started the internal Global Awareness Raising Campaign on Compliance for the joint launch of (i) the new animated e-learning course on the Code of Conduct and (ii) the internal web-based reporting system for serious misconducts (the Sika TrustLine). The Campaign has been successfully completed in four selected pilot countries in different Regions: UK, South Africa, Singapore, and New Zealand. More than 1,100 employees have been trained in applying the Code of Conduct’s principles and introduced to the new reporting platform Sika TrustLine and the new Speak-up policy, the Sika Trust Policy. Overall, employee feedback received through ad hoc post-campaign questionnaires was extremely positive. The initiative and the new e-learning program have been perceived as engaging and easy to understand – all in all a positive, practical, and realistic approach tailored to Sika’s business. In 2016, no report has been submitted through the Sika TrustLine. Since the completion of the roll-out, the dropout statistics automatically generated by the platform registered more than 400 accesses (page visits) to the Sika TrustLine, which represents more than 1/3 of the trained employees, and 81 clicks on the Make a Report button. This highlights the interest of trained employees to access and explore the new reporting tool. Countries to start the campaign in 2017 include Switzerland (more than 2,000 employees) and Colombia (330 employees) as a pilot for the LATAM Region.

- A defined procedure on reporting and an aligned communication campaign throughout the organization about the the Sika TrustLine support a speak-up culture and deter misconduct.

- Support of Transparency International: Sika financially supports Transparency International in its global fight against corruption..

Sika evaluates its management approach through:
- Monitoring: Sika investigates reported cases of corruption and any corrective action to be taken according to a defined incident response process (see below). Confirmed cases and actions taken are followed up by the Compliance function and reported annually to the Audit Committee of the Board of Directors. Management approaches are adapted accordingly.

- Evaluation of results from audits: Group Audit results are implemented in the management system, and regular follow-up reports are presented to monitor improvements.

- Investigations: Internal Audit conducts audits on a regular basis and in case of suspected corruption or fraud. All reports of potential corruption cases within Sika are investigated and properly followed up according to applicable laws. A standard incident reporting and response process has been developed to provide guidance to Sika’s management on the procedures to be followed in case a criminal act or a material misconduct is suspected or detected. Highly sensitive incidents and criminal acts, such as corruption cases, must be reported and escalated to the Group Compliance Officer irrespective of the source. Corruption reports generated via the Sika TrustLine are automatically forwarded to the Group Compliance Officer who shall conduct and/or supervise the investigation process.

- Overview of compliance cases: Sika’s Group Compliance Officer regularly reports to the Audit Committee of the Board of Directors about known compliance cases and corrective action taken.

- General Managers’ briefings: General Managers are regularly instructed and briefed about anti-corruption requirements in the companies. The latest briefing took place at the Area Meeting Africa in October 2016 attended by 18 General Managers responsible for national subsidiaries operating on the African Continent.
Sika monitors and evaluates the effectiveness of its management approach according to target achievement. The management approach has been reviewed and adapted accordingly.

Operations assessed for risks related to corruption

All legal entities have been assessed by their management teams regarding the implementation of anti-corruption practices and incidents of corruption.

All new suppliers have signed the Supplier Code of Conduct to commit to respect Sika’s zero-tolerance policy concerning bribery and corruption. Suppliers must have systems in place to ensure the proper instruction, training, and auditing of its personnel and sub-contractors to ensure compliance. Sika performs supplier audits and evaluations to monitor and assess their compliance with Sika’s requirements and the Code of Conduct. Suppliers are obliged to immediately inform Sika of any known violations of the Code of Conduct.

Communication and training on anti-corruption policies and procedures
Our approach to anti-corruption is based on Sika’s Code of Conduct, which clearly prohibits bribery and corruption. Compliance with the Code of Conduct as an integral part of the employment contract and the onboarding program is the personal responsibility of each Sika employee. In addition, they are trained at least once a year. Corporate Legal, Internal Audit and Corporate Compliance team functions regularly conduct training sessions and audits. General Managers are responsible for the compliance of their companies with applicable laws, internal regulation, including the Code of Conduct, and for the information and training of their staff.

Adoption of and compliance with the Code of Conduct by the General Managers and their management teams was reviewed at the end of 2016, and conformity confirmed in a reporting system, the “Compliance Confirmation”. The 100% response rate and completeness of the details provided suggest absolute compliance.

No incidences of corruption or other misconduct were reported via the Sika TrustLine in 2016.