STIHL GROUP AND STRATEGY

From Waiblingen to the world

The STIHL Group is an international, family-owned business with roots in forestry that stretch back nearly 100 years. Everything we do has always been focused on people, nature, and their power to grow. That is what drives us – and what we want to keep driving forward.

The STIHL Group is a globally leading manufacturer of chainsaws and outdoor power equipment. Innovation, expertise, and premium quality have formed the foundation on which our wide and constantly expanding range of products is built ever since our founding by Andreas Stihl. Since 1971, STIHL has been the world’s top-selling chainsaw brand.

The STIHL Group is based in Waiblingen, in the German state of Baden-Württemberg. From there, we oversee activities around the globe in our international manufacturing and sales network. STIHL is active in over 160 countries through 42 sales and marketing companies, roughly 120 importers, and more than 55,000 authorized dealers. The STIHL production companies in our network manufacture a variety of components for other plants. Our international production network is made up of plants in seven countries (Germany, Brazil, Switzerland, Austria, China, the U.S., and the Philippines), including a magnesium foundry in Germany’s Eifel region, a saw chain plant in Switzerland, and the carburetor manufacturer ZAMA in Asia. This network allows us to achieve a vertically integrated depth of production of over 50 percent.

Business model

Our main area of expertise is the development, manufacturing, and sale of handheld power equipment for forestry, agriculture, landscape maintenance, construction, and private consumers. In addition to chainsaws, our line of products includes a wide range of other power equipment, such as brushcutters, hedge trimmers, blowers, mistblowers, cleaning systems, cut-off machines, earth augers, lawn mowers, and robotic mowers. Since 2009, STIHL has been increasingly focused on battery technology to complement its selection of gasoline and electric-powered equipment. In 2021, batteries and battery-operated tools accounted for roughly 19 percent of our overall sales. Fuels and lubricants, accessories, and personal protective equipment round out our product range. We provide our customers with additional support through digital solutions and services. STIHL Magnesium Diecasting (Weinsheim, Germany) and ZAMA are the only companies that serve customers outside our Group, in industries such as the automotive sector.

STIHL is also involved in developing sustainability-oriented business models. Through our corporate venture unit STIHL Digital GmbH, we invest in start-ups and enter into partnerships with companies such as Dryad and Fairown. Their innovations have the potential to support the development of forward-thinking solutions for our customers.

Investing in innovative start-ups

DRYAD – a start-up based in Eberswalde, Germany – is developing a system for the early detection of forest fires based on solar-powered sensors and wireless technology. The system is capable of covering expansive wooded areas beyond conventional mobile data networks.

FAIROWN – a start-up based in Tallinn, Estonia – makes software to support a sustainable circular economy. STIHL uses Fairown’s product-as-a-service solution to provide all-inclusive offers for certain products online that allow customers to use tools for a monthly fee instead of buying them.

Sustainable business

We are an independent, family-owned business with a long-term focus that acts with present and future generations in mind – in the interest of the company, our customers, our employees, and society. Our actions have always been guided by a keen sense of responsibility toward our staff, society, and the environment, as well as a consistent customer focus.

The superior quality of our products and services is designed to both satisfy and excite our customers. Today, we generate the lion’s share of our revenue (roughly 90 percent) outside Germany. Our capital structure is very solid, with an equity ratio of 70 percent. We can generally finance investments without the need for borrowing, allowing us to preserve our independence. We plan to increase our value creation in the long term and strengthen our competitive position so that we can stand firm and create secure jobs, even in times of crisis.

Fiscal year 2021

The sustained high demand for STIHL products, on the heels of strong growth in 2020, led to a significant rise in sales in both the gasoline-powered and battery-operated segments in 2021. Despite disruptions in supply chains around the world due to shortages of raw materials, production bottlenecks at suppliers, and limited transport capacities, STIHL was largely able to continue manufacturing across the Group. More than 20,000 employees Group-wide helped us achieve revenue of 5.06 billion euros (previous year: 4.58 billion euros), an increase of 10.4 percent year on year.

Corporate structure and governance

Our culture is based on values such as a consistent customer focus, respect for people and the environment, and a strong innovative drive. Our approach to corporate governance is guided by responsibility and sustainability. All STIHL companies – including the German founding company and its eight plants, as well as all international production and sales companies – are part of STIHL Holding AG & Co. KG. Since 2002, the STIHL Group’s business operations have been overseen by an independent Executive Board made up of six members. The owners make strategic decisions through the Advisory Board of STIHL Holding AG & Co. KG and the Supervisory Board of STIHL AG.

The Advisory Board is made up of eight members. The Supervisory Board is made up of twelve members, six of whom represent employer interests, and six of whom represent employee interests. The Chairman of the Advisory Board and the Supervisory Board is Dr. Nikolas Stihl, who took over the position from his father, Hans Peter Stihl, in 2012. Hans Peter Stihl is the Honorary Chairman of both boards and is the general partner of STIHL Holding AG & Co. KG.

RISK MANAGEMENT

In forward-looking businesses like ours, proactive risk management plays an integral role in decision-making and business processes. It is one of the many governance systems that the STIHL Group uses to measure, monitor, and manage risks. Each segment of the business tailors its risk management approach to its functional responsibilities. Group-level risks are regularly discussed, evaluated, and reported. In addition, the potential risk areas are reviewed and adapted annually so as to identify, evaluate, and counteract new and evolving risks in real time. Examples include climate change and IT security. The risk management process involves the use of globally standardized assessment principles and processes that are laid out in guidelines and directives. In organizational terms, the STIHL Group’s risk management system is overseen by the Group Audit department, which reports directly to the Chairman of the Executive Board. Risk management activities are the responsibility of the Executive Board and are communicated regularly to the Advisory Board. Together, they define further risks, which are then tracked by the individual departments and members of staff that are responsible for them. Every risk identified in the risk assessment is monitored and mitigated by taking appropriate measures.

Compliance

Compliance with legal requirements in every country in which STIHL Group companies operate is a baseline requirement for our business. STIHL takes a clear stance against corruption and bribery. Our values are firmly rooted in our corporate culture. They offer employees guidance on how to act internally within the Group and in dealings with third parties outside the Group.

Every STIHL company has local guidelines for ensuring compliance with applicable law both internally and in their dealings with business partners. The primary aim of these guidelines is to effectively prevent corruption and conflicts of interest while avoiding violations of antitrust law. We keep an eye on new legal requirements through constant monitoring and are in regular contact with outside experts. Employees receive regular training in line with their individual responsibilities. To minimize the risk of corruption, STIHL has rules on the separation of functions, approval processes, and the principle of dual control.

All operative compliance issues are coordinated by a Corporate Compliance Officer. The Corporate Compliance Officer reports to the Executive Board member for Human Resources and Legal Affairs, is the first point of contact for employees if they have questions about compliance, and works closely with the Group Audit, Risk Management, and Legal departments.

In order to continue ensuring the compliance of our business operations with the law and our corporate values, we are constantly working to enhance our compliance management system, which consists of three core elements: avoidance, early detection, and response. With this goal in mind, for example, a compliance risk analysis was performed at the founding company in 2021. The initial findings have been translated into specific measures that are now being implemented. The entire STIHL Group is scheduled to undergo a compliance risk analysis in 2022. Compliance risk analyses will be performed regularly going forward.

One key component of our efforts to avoid compliance violations is a comprehensive code of conduct that was developed for employees across the Group in 2021 and introduced in 2022. The code of conduct sets out detailed rules related to compliance. The training concept – which focuses on anticorruption and antitrust issues, as well as the new STIHL code of conduct – has undergone further enhancement as an additional preventive measure. The training program will be mandatory for all employees and will be expanded further for staff from divisions and departments that are exposed to particularly high risks. In Germany, a whistleblower system has also been introduced and is scheduled for a Group-wide rollout in 2022. The whistleblower system allows employees, business partners, and third parties alike to report well-founded suspicions, even anonymously. During the reporting period, the STIHL Group has been cooperating with the Bundeskartellamt, the German market competition authority, in an information procedure. The matter relates to a clause used in the past in some contracts between the STIHL sales company responsible for the German market and STIHL dealers.

Sustainability as a strategy

Over the past few years, serious issues such as climate change, extinction of plant and animal species, the proliferation of plastic waste, and immigration have been all over the headlines. Experts are also predicting an increase in zoonoses, infectious diseases like Covid-19 that jump from an animal to a human due to factors such as inproper and irresponsible handling of endangered species.

Problems like these show that we cannot continue living and doing business as we have in the past. Left unresolved, these problems will eventually have an impact on people and may cause damage that is difficult or impossible to undo.

As a business with a deep connection to the natural world and whose business model depends on nature, these developments affect us deeply. That is why STIHL has decided to intensify our existing commitment to sustainability and give it an even more strategic focus. In 2021, a Sustainability Officer was appointed and a sustainability steering group was set up to help it achieve this goal (see “Sustainability management”). Since then, we have been dedicating our efforts to transforming the STIHL sustainability policy that has been in place since 2016 into a sustainability strategy that is relevant for society as a whole.

The strategy was developed over a period of several months with the involvement of internal and external stakeholders. In October 2021, it was discussed by the Executive Board before being adopted by the Advisory Board in December 2021.

Material topics

The aim of the strategy is to consolidate the many existing sustainability activities and provide them with significant additional impetus. We want to make a measurable contribution to achieving the United Nations Sustainable Development Goals (SDGs). The 17 goals were adopted by the global community in 2015 as part of the 2030 Agenda for Sustainable Development. By 2030, they are intended to make a tangible difference in key matters related to sustainable development.

As an organization, we feel it is important for us to make a difference in areas where we have expertise and can assert our influence. To identify these areas, we analyzed our specific challenges and options for taking action in a dialogue lasting several months. At the same time, we aim to position ourselves in the public eye with strategically selected focal points. The identified measures will also help us meet new legal requirements, such as Germany’s Act on Corporate Due Diligence in Supply Chains and the European Commission’s planned Corporate Sustainability Reporting Directive. It was important to us that the analyses lead to viable strategic approaches for the development of our business at STIHL. From our perspective, the sustainability strategy is not an end in itself. Instead, it is an essential component of our corporate strategy that focuses it on a sustainable future.

Materiality Matrix

These internal objectives and external requirements combine to form the range of topics covered by the materiality analysis. As part of our discussions, we assessed our influence on these topics (inside-out perspective) and their materiality for our future business development (outside-in perspective). The inside-out perspective looked at our impact on selected sustainability topics. Among other things, interviews were conducted with some 20 business partners and external experts from a variety of fields, including research, public policy, and nongovernmental organizations. To support the outside-in assessment, we launched a customer survey in Germany, France, the U.S., and New Zealand that generated nearly 1,600 responses. We also set up an internal project team to examine opportunities and risks.

Our findings have revealed eleven material topics for STIHL. An in-depth evaluation process resulted in four environmental aspects that play a leading role: climate change mitigation, circular economy/materials management, avoiding environmental pollution, and protecting biodiversity (see materiality matrix).

We allocated the eleven topics (with overlaps) to three strategic focal areas, which we refer to as ecosystems, circularity, and care. They form the basis for the future implementation of the sustainability strategy as part of our sustainability management approach. Each of our focal areas corresponds to two SDGs: Ecosystems corresponds to SDG 13 (climate action) and SDG 15 (life on land), circularity corresponds to SDG 12 (responsible consumption and production) and SDG 9 (industry, innovation, and infrastructure), and care corresponds to SDG 8 (decent work and economic growth) and SDG 3 (good health and well-being).

Strategic focal areas

Sustainability management

We have started defining specific targets in the three focal areas and will continue refining our definitions going forward. They will be linked to performance indicators that we intend to use to gauge our success in the future. We have set short and medium-term targets, as well as targets with a longer-term horizon. The sustainability management team – specifically, the Sustainability Officer and the sustainability steering group – is responsible for implementing the targets.

In organizational terms, the Sustainability Officer is responsible for overseeing the work of the sustainability steering group, which meets on a quarterly basis, prepares Executive Board decisions, and offers recommendations. The steering group provides information and reports on all sustainability projects and initiates new projects as needed. The Executive Board members in charge of Human Resources and Legal Affairs, Manufacturing and Materials, and Research and Development attend all steering group meetings, with the first two acting as sponsors. Each Executive Board unit is represented in the steering group by a second-level executive and backed by additional experts from throughout the Group. The Sustainability Officer is part of the area overseen by the Executive Board member for Human Resources and Legal Affairs, and advises the overall Executive Board and Advisory Board on all strategically relevant sustainability topics on both a regular and ad hoc basis.

STIHL GROUP SUSTAINABILITY ORGANIZATION

Sustainability targets

The following targets were defined in the three focal areas – ecosystems, circularity, and care – over the course of 2021. They are slated for further enhancement over the coming reporting period. The three targets are divided into short-term targets (one to two years) and long-term targets (three years or more).

In dialogue with stakeholders

The STIHL Group maintains links with a wide variety of stakeholders as part of its business activities. Through surveys and active participation in workshops, we involved some of them directly in the development of the sustainability strategy. Others were involved indirectly by taking into account their public positions.

The expectations and requirements that STIHL faces are regularly collected and assessed as part of the ISO certification process for quality, environmental, occupational safety, and energy management systems. Relevant findings are included in the design of products and processes. In addition, we employ a wide range of tools in order to remain in continuous contact with our stakeholders. For employees, these tools include internal communication channels such as the intranet, company meetings, video messages, notices, performance reviews, employee surveys, and the in-house suggestion system. We communicate with private and commercial customers, as well as authorized dealers, through surveys, trade fairs, congresses, the customer service team, our hotline, social media, the website, and other channels. Suppliers are consulted through face-to-face meetings, negotiations, disclosures, and audits. Personal contact and project partnerships are the methods of choice for government authorities, while the research community is involved through targeted alliances with universities and collaboration on projects. We work directly with nongovernmental organizations on local and regional projects and provide them with support in a variety of ways. Our active media relations work, along with our website and the opportunities for dialogue offered there, allows us to be in contact with an even wider range of stakeholders, such as the media and the general public. We are interested in active exchange and feedback. Moreover, we make every effort to respond appropriately to all serious inquiries and use the resulting inspiration for our own development.

Stakeholders at STIHL