Dr. Michael Prochaska and Prof. Dr. Andreas Rigling discuss the importance of forests and approaches to sustainable forestry
Local roots, global growth
At the STIHL Group, we associate roots with growth. In our nearly 100-year history, we have gone from being a Swabian family business to being a global player. What has always remained the same is that everything we do is focused on people, nature, and their power to grow. That is something we want to continue fostering in the future.
The STIHL Group is the world’s leading manufacturer of chainsaws and outdoor power equipment. Since 1971, we have been the world’s top-selling chainsaw brand. The business founded by Andreas Stihl in Bad Cannstatt, Germany, in 1926 has grown into a group of companies with branches and activities all around the world.
Today, our production network alone is made up of plants in seven countries. Cast-magnesium components, saw chains, and carburetors are among the products we make in-house. The most recent addition to the STIHL Group is the American muffler manufacturer COSMOS, which we acquired at the end of 2022.¹ Having already worked together for several decades, the new production company in the U.S. state of Illinois will allow us to strengthen our supply chain even further in times of global uncertainty and ensure our impressive depth of production.
¹ Data pertaining to COSMOS has not been included in this Sustainability Report.
Our area of activity
Our main area of expertise is the development, manufacture, and sale of handheld power equipment for forestry, agriculture, landscape maintenance, construction, and private consumers. In addition to chainsaws, our portfolio includes a wide range of power equipment such as brushcutters, hedge trimmers, blowers, mistblowers, cleaning systems, cut-off machines, earth augers, lawn mowers, and robotic mowers.
With a rising volume of investment in the digitalization of our products and services, STIHL is currently transforming itself from an engineering company to a provider of mechatronic and software solutions. Since 2009, the STIHL Group has been increasingly focused on battery technology. While we aim to make the business with gasoline-powered products environmentally friendly and intend to continue pursuing it for as long as possible going forward, the battery-powered product business is our main driver of growth. As a result, our focus is squarely on the associated customer demands. By 2027, we plan to increase the share of total sales accounted for by batteries and battery-operated tools to at least 35 percent, with a goal of 80 percent for 2035. In 2022, that figure stood at 20 percent. In our domestic market of Germany, we have already sold more battery-operated products than gasoline-powered products over the past two years. Our battery strategy is also associated with major decisions regarding our production sites. Starting in 2024, we will manufacture battery-operated products at our founding company in Waiblingen as well. In addition, we are building a new plant for battery-operated and electric tools in Romania, which is likewise scheduled to open in 2024.
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. Our magnesium diecasting plant in Weinsheim, the Asian carburetor manufacturer ZAMA, and the U.S.-based company COSMOS also serve customers outside our Group, in industries such as the automotive sector.
Sustainable business
As an independent, family-owned business, we have always acted with sustainability in mind. We focus on more than just short-term profit. Instead, we do business with a view to the long term and with present and future generations in mind – in the interest of the Group, its customers, employees, nature, 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. All of those things together ensure our long-term success.
Our capital structure is very solid, with an equity ratio of roughly 62 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 and maintain jobs, even in times of crisis.
We are increasing our targeted, sustainability-led investments, among other things to expand our business model. Through our corporate venture unit STIHL Ventures GmbH (formerly STIHL Digital GmbH), we support and partner with start-ups whose innovations are helping us develop sustainable products and services for our customers.
Fiscal year 2022
Due to the effects of multiple crises, sales at the STIHL Group fell slightly in 2022 compared to 2021, which saw strong growth, but remained high overall. In combination with each other, the consequences of the war in Ukraine (particularly the sanctions and the embargo against Russia), persistent material shortages, and disrupted supply chains all led to tremendous backlogs in production across the STIHL Group, preventing us from being able to fully meet the continued high demand at all times. We also felt the effects of the energy crisis and cost increases, as well as the shortage of skilled labor.
Despite all those factors, we recorded an increase in revenue thanks to positive currency effects and price increases that allowed STIHL to compensate for some of the additional costs. More than 20,500 employees Group-wide helped us achieve revenue of 5.5 billion euros (previous year: 5.06 billion euros), an increase of 8.6 percent.
At the STIHL Group, good corporate governance means taking responsibility and acting based on principles of sustainability. All STIHL 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 responsibilities of the individual Executive Board members are defined in the Executive Board rules of procedure and in the bylaws. The Executive Board is appointed by the Supervisory Board of STIHL AG.
In accordance with the articles of association of STIHL Holding AG & Co. KG and the corporate charter of STIHL AG, the Advisory Board of STIHL Holding AG & Co. KG makes nearly all of the significant strategic decisions prepared and proposed by the Executive Board. The Advisory Board has eight members, half of whom are representatives of the individual shareholder families. The other half consists of external representatives who are appointed by the partners. The Supervisory Board has twelve members. The duties of the STIHL AG Supervisory Board are defined by law. Pursuant to German codetermination statutes, the Supervisory Board consists of six shareholder representatives and six employee representatives. The shareholder representatives are nominated by the partners and elected at the STIHL AG Stockholders Meeting. The workforce at the German locations elects four of the employee representatives every five years. Two employee representatives are appointed by the trade union IG Metall. Both the Supervisory Board and the Advisory Board have formed a personnel committee. In doing so, the Supervisory Board meets the requirements under Section 27 Subsection 3 of the German Co-Determination Act (Mitbestimmungsgesetz).
When appointing their representatives to the boards, the partners mainly look at whether their candidates have the appropriate qualifications. In particular, the external representatives should be capable of leveraging their expertise, experience, and skills to advise the Group. There are no cross-shareholdings with suppliers. Likewise, any transactions with related parties are conducted under arm’s length conditions.
The members of the Advisory Board and the Supervisory Board each receive fixed monetary compensation and attendance fees. Executive Board compensation consists of a fixed component and a variable component that is based on the Group’s success. Sustainability aspects are not taken into separate consideration. Market comparisons by external remuneration experts are consulted to determine Advisory Board, Supervisory Board, and Executive Board compensation.
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.
The shareholder structure of the STIHL Group has changed as a result of Eva Mayr-Stihl’s death last year. While she was alive, she held 25 percent of the limited partner shares in STIHL Holding AG & Co. KG. After the passing of Eva Mayr-Stihl, the Eva Mayr-Stihl Foundation, which she helped to establish, succeeded her as a STIHL shareholder, albeit with a reduced stake. As a result, the Group is able to maintain its high level of financial stability.
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. 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. Findings and outcomes 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
The term “compliance” refers to the Group’s adherence to both statutory and internal rules and regulations. All employees are obliged to comply with guidance on how to act internally within the Group and in dealings with third parties outside the Group. Every action we take is guided by our fundamental values of honesty, fairness, and abiding by the law. We obey the law in the countries in which we operate. Any failure to act in accordance with the law and with our own standards may damage the Group’s reputation in the public eye or lead to financial losses, regulatory action, or criminal prosecution. It is our shared responsibility to ensure the lasting success of the business and protect the reputation of the STIHL Group.
We take a clear stance against corruption and bribery. Our values are firmly rooted in our corporate culture. Since 2022, they have additionally been reflected in our new Code of Conduct. They offer employees guidance on how to act internally within the Group and in dealings with business partners.
Every STIHL company has local guidelines for ensuring compliance with applicable law both internally and externally. 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 continuous monitoring and consult on them with outside experts. We train our employees regularly in line with their individual responsibilities. To keep the risk of corruption as low as possible, STIHL has rules on the separation of functions, approval processes, and the principle of dual control.
All operational compliance issues are coordinated by a Corporate Compliance Officer who reports to the Executive Board member for Human Resources and Legal Affairs, is the first point of contact for employees when 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 its business operations with the law and its corporate values, STIHL is constantly working to enhance its compliance management system with avoidance, early detection, and response in mind. To this end, we launched a compliance risk analysis in 2021 at the founding company’s offices in Waiblingen, Germany, which we expanded to the entire Group in the reporting year. The conclusion of the analysis is scheduled for 2023. We have so far not identified any material risks requiring immediate action.
In 2022, we developed a new code of conduct based on the principles of the International Labour Organization (ILO) of the United Nations, in which we affirm our aim of complying with internationally recognized human rights standards. The STIHL code of conduct has been adopted by the Executive Board and the Advisory Board and will act as an important tool for preventing compliance violations. It was published in German and English on various platforms, initially internally, in late 2022 and has been undergoing a successive Group-wide rollout ever since. Additional language versions are planned to ensure an optimal flow of information for all STIHL employees around the world.
Our training concept has undergone further enhancement, with a focus on the code of conduct as well as anticorruption and antitrust issues. Such training is mandatory for all STIHL employees and is being expanded further for staff from divisions and departments that are exposed to particularly high risks. As a further preventive measure, STIHL has set up a whistleblower system. After initially being available only in Germany, the program was rolled out across the Group in late 2022, giving employees, business partners, and third parties alike the opportunity to report well-founded suspicions, anonymously if preferred. In 2022, the system received 19 reports, which STIHL investigated in accordance with a predefined review process. Only in one case, involving a violation of an internal guideline, were the concerns that were raised upheld. STIHL also incorporates the German Act on Corporate Due Diligence in Supply Chains (Lieferkettensorgfaltspflichtengesetz, LkSG) into its compliance work. The law entered into force on January 1, 2023, and was at the center of a project that was launched in the reporting year to perform a risk analysis of all internal operations as concerns the LkSG and documentation in our internal system (see “Supplier management,” p. 62). We also plan to adapt our whistleblower system in line with the provisions of the LkSG on dealing with complaints.
The STIHL Group has been cooperating with the Bundeskartellamt, the German market competition authority, in an information procedure that has been ongoing since 2020. The matter relates to a clause in some contracts between the STIHL sales company responsible for the German market and STIHL dealers. The authorities believe that the clause in question violated antitrust law. STIHL disagrees and has therefore filed a complaint with the Higher Regional Court (Oberlandesgericht) in Düsseldorf.
STIHL Group companies and their employees are involved in a variety of associations and initiatives (selection):
BDG – Bundesverband der Deutschen Gießerei-Industrie (Düsseldorf, Germany)
eFuel Alliance – Interest group (Hamburg, Germany)
EUROMOT – European Association of Internal Combustion Engine Manufacturers (Brussels, Belgium)
European Power Tool Association (Brussels, Belgium)
DIHK – Association of German Chambers of Commerce and Industry (Berlin, Germany)
CCI – Chamber of Commerce and Industry for the Stuttgart Region (Germany)
IMA – International Magnesium Association (Saint Paul, Minnesota, USA)
Südwestmetall – Metal and electrical industry employer association (Baden-Württemberg, Germany)
VDMA – German Engineering Federation (Frankfurt am Main, Germany)
vem.die arbeitgeber – Rhineland-Palatinate employers’ association (Koblenz, Germany)
Sustainability as a strategy
Sustainability remains our compass, even in difficult times. As the key to solutions to the most pressing challenges worldwide, it has to. That is why the STIHL Group is consistently taking steps to incorporate sustainability into corporate decisions and management systems.
In 2022, the Russian war in Ukraine may have dominated the headlines and overshadowed many other developments. Yet the challenges we faced before the war remain. As important as peace is to sustainable development, it is also essential to recognize that the world cannot continue doing business as it has in the past: in a manner that consumes resources and emits greenhouse gases on a massive scale. The same goes for human rights violations around the globe, which have no place in an economically, ecologically, and socially sustainable world. STIHL is dedicated to actively promoting greater sustainability within its sphere of influence. We want to be part of the solution. That is why we decided in 2021 to do business in a way that allows us to continuously reduce negative ecological impact while consistently meeting our due diligence obligations in terms of human rights in the supply chain and so much more.
Major steps in this process – such as appointing a Group-wide Sustainability Officer, setting up a sustainability steering group, developing a materiality analysis, and defining Group-wide targets – were taken in 2021 to give the topic of sustainable corporate strategy at STIHL a direction that is realistic and to define the issues that we need to work on. As a result, the STIHL sustainability policy that has been in place since 2016 has been transformed into a sustainability strategy that is relevant for our business.
Material topics
The aim of the strategy is to consolidate the many existing sustainability activities within the Group and give them more momentum. 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. At the same time, we aim to position ourselves in the public eye with selected topics. Ultimately, the measures are also designed to help us meet new legal requirements, such as the German Act on Corporate Due Diligence in Supply Chains (LkSG) and the European Corporate Sustainability Reporting Directive (CSRD), which will become binding for us in fiscal year 2025. 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. The strategy was developed 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.
Our findings have revealed eleven material topics for STIHL, including four environmental aspects: climate change mitigation, circular economy and materials management, avoiding environmental pollution, and protecting biodiversity. We allocated the eleven topics (with overlaps) to three strategic focal areas – ecosystems, circularity, and care – which form the basis for sustainability management (see materiality matrix, page 18).
Materiality matrix
Each of the three 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
The Sustainability Officer and the sustainability steering group work together to advance the strategic focal areas in day-to-day operations. 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. The Executive Board approves and releases reports on sustainability, which are also submitted to the Advisory Board.
The reporting year, 2022, saw the launch of numerous initiatives that will be continued in the years ahead. The initiatives focus on energy management, among other topics, with the goal of quickly achieving measurable savings. By 2030, for example, we aim to reduce the consumption of fossil fuels (i.e., natural gas and oil) by 40 percent Group-wide compared to 2019. To help us achieve these and other targets, standards and guidelines for the production and sales companies within the STIHL Group were developed and discussed with the organizations. All departments that will play a role in working toward the targets are to be involved, culminating in a participatory path to implementation that stipulates a goal while still providing substantial freedom. Due to the large number of stakeholders, the process was initiated in the reporting year, but has yet to be completed. Training will also play an important role in enabling managers and ordinary staff members alike to meet the expectations they face.
STIHL GROUP sustainability organization
Sustainability targets
The targets for the three focal areas – ecosystems, circularity, and care – have been defined for a short-term horizon of one to two years and for a long-term horizon of three years or more.
Ecosystems
Climate change mitigation:
From 2022
Scope 1 and 2 climate neutrality at all production companies
Achieved in 2022 through carbon offsets
To section
0%100%
From 2023
Scope 1 and 2 climate neutrality at all sales companies
2022
Defining measures and targets for more transparency and strengthening diversity and inclusion in the workforce
In planning for 2023
0%100%
Human rights:
From 2022
Supply chain management in compliance with new legislation and three annual in-depth risk analyses for high-risk supply chains
Supply chain management geared toward new law. Risk analysis launched in 2022
To section
0%100%
Governance and compliance:
By 2023
Developing derived sustainability targets for each STIHL company
Inclusion of “sustainability” in corporate target system and definition of key performance indicators
Guidance developed and discussed with the organizations and enhanced on an ongoing basis
Incorporating sustainability criteria into all key decision processes
Ongoing process
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
STIHL group and strategy
Natural talent forest
Dr. Michael Prochaska, STIHL Executive Board member for Human Resources and Legal Affairs and Executive Board sponsor for sustainability, and Dr. Andreas Rigling, Professor of Forest Growth and Global Change at ETH Zurich, discuss the importance of forests and approaches to sustainable forestry.
Dr. Michael Prochaska The STIHL Group has its roots in forestry. That’s why we feel a particular sense of obligation to the forests of this earth. But we’re also aware that forests face major challenges. Where do the biggest problems lie?
Dr. Andreas Rigling One of them is climate change. Heat and dryness have a particularly strong impact by weakening trees and reducing their ability to fight off pests. What’s more, deforestation continues unabated in many parts of the world. Those factors are dramatic in many ways: Forests are a habitat for around 80 percent of all land-based species on earth, plus they’re the largest carbon sink in the world. Every year, they absorb around 2 billion metric tons of CO₂.
2
billion metric tons of carbon is taken from the atmosphere and the soil and absorbed by forests every year
»We feel a particular sense of obligation to the forests of this earth.«
Dr. Michael Prochaska
STIHL Executive Board member for Human Resources and Legal Affairs
Dr. Michael Prochaska And that CO₂ remains sequestered in wood, as long as it isn’t used to generate energy.
Dr. Andreas Rigling That’s right. Ideally, wood should be kept in the system for as long as possible after harvesting and used in the construction or furniture industry, for example. But sustainability starts well before that, with things like wood harvesting techniques that protect the soil. Roughly 50 percent of the carbon is stored in the biomass in the forest soil. That carbon escapes into the atmosphere when you clear forests by fire, clear-cut them, or work the soil using heavy equipment.
Dr. Michael Prochaska What would a potentially sustainable approach to forestry look like? We participate in projects run by Fairventures Worldwide, for example. The nonprofit organization helps small farmers in the tropics cultivate degraded and deforested rain forest areas with local tree species and various crops that ensure sources of income for the people who live there.
Dr. Andreas Rigling That’s a good approach, since it’s important to actively involve the local population and make sure the concept generates jobs and educational opportunities. The project also has an effect on the carbon side of the equation, because the trees being planted and the forests being safeguarded in the long term bind CO₂. Still, it’s absolutely essential to protect old-growth forests and stop further deforestation, since the destruction of forests has a serious impact on the climate, biodiversity, and water cycle.
Dr. Michael Prochaska STIHL also provides financing and support for research and aid projects that develop concepts for sustainable forestry. For many years now, we’ve additionally been shifting our focus to battery-operated tools that don’t produce emissions locally. In 2022, for example, we brought out the MSA 300, the first battery-powered chainsaw specifically designed for professional applications, which people can use to fell, trim, and cut medium-sized trees.
Dr. Andreas Rigling is a forest ecologist and Professor of Forest Growth and Global Change at ETH Zurich in Switzerland. A forester by training, he spent 29 years at the Swiss Federal Institute for Forest, Snow and Landscape Research (WSL) before joining the school. At the institute, he headed the forest dynamics research unit and served on the board of directors. Rigling’s research focuses on a variety of topics, including the impact of environmental changes on forests and how forestry can be adapted.
»Sustainability starts with wood harvesting in the forest.«
Dr. Andreas Rigling
Professor of Forest Growth and Global Change
Dr. Andreas Rigling STIHL is headed in the right direction. The electrification of forestry technology needs to continue. It offers great potential, especially when it comes to reducing harmful emissions.
Dr. Michael Prochaska Circling back to climate change, what needs to be done today to make forests more resilient to the weather and the climate in the future?
Dr. Andreas Rigling It’s going to take rapid yet gentle forest restructuring. We need to create structurally and biologically diverse forests with a mix of trees of different ages and genetic abundance. Diversity makes it possible to spread the risks that result from climate change. Natural regeneration – the natural mixing of older trees with younger plants for the future in order to achieve the necessary diversity – also plays a crucial role in self-regulation in times of climate change. What matters is that we act now and start selectively restructuring the forest, while letting nature take its course in other places.
Our goal is to make it easier for people to work in and with nature. To do so, we develop products and technologies that combine innovation, quality, and durability.
