2022 Integrated Report

We are SGS

Our leading testing, inspection and certification services add measurable value to business and society. They reduce risk, improve efficiency, safety, quality, productivity and sustainability, advance speed to market and create trust.

Together we are building a thriving and sustainable business

These are challenging times. Pandemics, global supply chain decoupling, inflation and social disconnection have all become part of the new normal but there is one challenge that, if left unchecked, will be catastrophic for everyone – our impact on the environment and the climate crisis.

SGS is fully engaged in finding solutions to these problems, answering the challenges of the modern world while enhancing sustainability and building prosperity. To be truly successful, the changes we need to make must impact every aspect of our daily lives, both at home and work. All across the network, we are making decisive improvements by focusing on people, planet and performance.

We have set very ambitious targets and to meet them we must concentrate on what is at the heart of our business – our people. Better performance is not just about technology, it is led by our expertise. Together, we are building a network of highly trained, passionate and committed employees, who operate in a work environment that emphasizes safety, efficiency and excellence.

View the full Letter to stakeholders

Calvin Grieder Signature
Calvin Grieder
Chairman of the Board

140+

Years of adding value to society

97,000+

Employees around the world

2,650+

Offices and laboratories

We are passionate about our purpose

SGS brings together global teams of highly qualified experts providing specialized solutions across our industries. We enable a better, safer and more interconnected world, making business faster, simpler and more efficient. Watch our case studies from around the business.

People

Planet

Performance

¹ Constant currency (CCY)*.
² Percentage points.
* Alternative Performance Measures (APM) – refer to the ‘2022 Full Year APM’ document.

Our corporate sustainability leadership

We have demonstrated our leadership in ESG through a range of external ranking and ratings.

Smart Phone Scanning QR Code for Product Information

We are focusing investment in Connectivity to increase our competitive advantage.

Strategic objectives 2023 and beyond
- Consolidate our leading market position
- Leverage market growth supported by the proliferation of 5G technology and loT devices
- Continue to build cybersecurity expertise as an integral part of our 'total solution'
- Focus on automotive and semiconductor industries as key opportunities
- Continue to lead the expansion of the domestic Chinese market
- New data services to generate first revenue by 2023
Progress during the year
- We are solid leaders in Softlines and already ahead of target for Connectivity in Top 3
- Significant capex has been approved for East Asia and the USA
- New cybersecurity laboratories have been opened in East Asia
- Supply chain challenges temporarily slowed progress but expect the eMobility development and semiconductor global demand to boost this end of the year
- Invested in a program called 'China Import' providing support to exporters from North America and Western Europe who want to sell goods on China's domestic markets
- First European retailers have committed to use our new digital solution Truum™

Capex intensity	Net working capital intensity	Last 12 months return profile	M&A appetite
Higher	Lower	+++	High in Connectivity

Our growing portfolio of sustainability solutions

During 2022, we launched various SGS product marks (sustainability, certification and performance) addressing current demand from our customers across all product categories.

Woman Reading Food Facts in a Supermarket

We are expanding our global footprint through the organic development of our network and acquisitions.

Strategic objectives 2023 and beyond
- Achieve CHF 1 billion of divisional revenue by 2023
- Health Science to become the largest business unit of Health & Nutrition, with investment focusing on Biopharma and health services
- Consolidate our leadership position in Cosmetics supported by increasing regulatory requirements
- Consolidate our market leadership position in Food in Asia and expand our global network and portfolio in the Americas and Europe
- Enhance Al-enabled regulatory and compliance solutions in key Health & Nutrition sectors
Progress during the year
- H&N has delivered solid organic growth of 4.1% in 2022, complemented by the acquisition of proderm to achieve a total growth of 7.6%
- Continued investments in Biopharma including lab expansions in Belgium and Switzerland have Health Science well on track to become the largest H&N division in 2023
- Acquisition of proderm cements our leadership position
- Well on track with geographical and portfolio expansions including: capacity and scope expansions in Thailand, Vietnam and China, new lab capacity in Latin America, acquisition of Industry Lab in Romania expanding our footprint in Eastern Europe and the ramp up of our laboratory hub and spoke model in Europe to gain economies of scale and improve efficiency
- Launch of SGS Digicomply Nutriwise, an AI-powered solution to perform composition assessment of food supplements and guide companies on compliance questions when entering new markets
- Expansion of SGS Digicomply Regulatory Watch to the cosmetics business segment

Capex intensity	Net working capital intensity	Last 12 months return profile	M&A appetite
Higher	Average	=	High

Our growing portfolio of sustainability solutions

Services in our portfolio help to address our pillars of Sustainable Living as well as Sustainable Use of Resources. New initiatives are underway to broaden our offerings around verification of product and supply chain sustainability including product marks and automated emerging risks monitoring on our Al-assisted platform.

Using our expertise to provide integrated solutions, while accelerating our transition to a high-volume hub and spoke testing model in our Environmental testing business.

Strategic objectives 2023 and beyond
- Reach a market leadership position in Environment Health & Safety in 2025
- Reassess portfolio focusing on TIC megatrends and complement our expertise related to energy transition through M&A in renewables and specialty fields
- Increase footprint and competences in sustainability services through organic growth and acquisitions
- Leverage the acquisition of SGS Analytics to transition to a hub and spoke laboratory model
- Leverage digital and data to enhance our existing and create new ones
Progress during the year
- I&E Health and Safety strengthened its footprint providing a H&S Management Service in customer data centers with several bluechip customers (Amazon, Microsoft etc.)
- We continued to work with customers and build expertise in the development of energy transition markets despite delays due to geopolitical factors
- I&E Auditing and Compliance has achieved double-digit organic growth in 2022 with focus on mandatory and voluntary carbon verifications and other industry specific schemes, as well as with waste management-related products
- Development of a common Target Operation Model (TOM) for environmental lab activities
- New I&E Zengine product has been piloted in the USA for B2C and B2B markets and we continue to work on improvements"

Capex intensity	Net working capital intensity	Last 12 months return profile	M&A appetite
Average	Average	=	Selective

Our growing portfolio of sustainability solutions

SGS is expanding its capacity globally in response to increased demand for emissions verification and accounting under multiple schemes.

We are building on our wide-ranging expertise across the mining industry and optimizing our processes to help customers use fewer resources.

Strategic objectives 2023 and beyond
- Consolidate our leading market position
- Trade activities to remain core, with a supportive outlook for mining and agriculture, and oil and gas currently under pressure
- Develop new sustainability services for mid¬term transformation of portfolio
- Optimize field and lab resources to generate network synergies
- More than 50% of trade back-office activities to operate on digital platforms (i.e. blockchain) by 2023 to enhance security and efficiency
Progress during the year
- Further enhanced our biofuels testing capability. This includes providing services to the agri market for used cooking oil analyses
- Smart warehouse scaling underway: 18 warehouses in four countries
- Identified ESG diagnostic solution to scale across all NR customers in collaboration with the Kn and I&E divisions who will execute these services for our customers
- Economic and production-related sustainability services to the mining industry have been developed within the metallurgical consulting group and focusing on three key areas – increased optimization in operating plants, improved energy and water utilization and waste reduction
- SGS and VAKT (blockchain developer) have launched a digital products database for the oil, gas and chemicals market. This will allow all users of the VAKT block chain platform to have a single database to conduct transactions

Capex intensity	Net working capital intensity	Last 12 months return profile	M&A appetite
Lower	Average	+++	Low

Our growing portfolio of sustainability solutions

Our acquisition of Sulphur Experts in late 2021 has expanded our sustainability services in supporting refineries and gas plants with reduced air pollution.

Technical Financial Graph on Technology Background

We provide business assurance and operational efficiency solutions across supply chains that deliver sustainable value for the organization, the environment, society and shareholders.

Strategic objectives 2023 and beyond
- Consolidate our leading market position
- Certification remains core with new schemes driving demand
- Business enhancement to represent >50% of divisional revenue by 2023, including expanding our technical consulting network in Europe and Asia
- ESG and sustainability services to increasingly become a material part of the portfolio
- Focus on digital solutions in supplier risk management, with 20% revenue delivered by digital services and remote by 2023
Progress during the year
- With organic growth at 8.7%, we are exceeding industry performance across all business segments highlighted by Certification, Responsible Business Services from social and environmental audits, and our consulting business, Maine Pointe in the USA
- Despite a challenging environment from a post transition year, investment in the information security segment and medical device industry has allowed us to deliver above industry organic growth in Certification
- Replication of consulting activities in Europe and in Asia, combined with a very strong performance of Maine Pointe, has further increased the proportion of revenue generated outside our traditional certification activity
- The addition of new ESG and sustainability solutions has enabled us to enter new markets, including the financial services sector. We have also seen significant growth in existing solutions, particularly Sustainability Report Assurance

Capex intensity	Net working capital intensity	Last 12 months return profile	M&A appetite
Lower	Lower	+++	Selective

Our growing portfolio of sustainability solutions

Our new ESG and Sustainability Assurance solutions have enabled us to enter new markets, including the financial sector where we have seen significant growth, particularly in Sustainability Report Assurance.