Internal governance and control in operations

Peab’s Board of Directors is responsible for ensuring that there are efficient procedures and systems for Group governance and control of financial and non-financial reporting. Executive management is responsible for implementing and monitoring the internal governance mechanisms. The principles of this process are established by the Board of Directors in the Policy for Internal Governance and Control and are based on COSO’s (Committee of Sponsoring Organizations of the Treadway Commission) framework for internal control. The process is structured according to the principle of three defense lines with responsibility delegation from operations to external auditing.

Control environment

The control environment is founded on Peab’s core values and comprises our organization’s structure, internal regulations and governing documents, delegation and limitation of responsibility, talent recruitment and monitoring internal governance and control.

The Board of Directors is ultimately responsible for the general governance of Peab and control over the risks that accompany the business as well as its sustainability work. Management is responsible for developing and implementing Peab’s internal governance and control structure in operations, including our organization’s structure, responsibility delegation and mandates, talent recruitment and monitoring.

Risk analysis

Risk analyses are carried out based on the established targets in Peab’s various operations. Risk analysis on an operational and project level is performed according to the process described in Peab’s business management system. An overriding risk analysis that includes risk management of every identified material risk is performed annually in each business area and thereafter by executive management, after which it is reported to the Board of Directors. A detailed description of risks and risk management in Peab is found in the section Risks and risk management.

Control activities

Control activities are an integrated part of daily work at Peab aimed at achieving targets and handling risks efficiently. These activities are based on each individual employee’s responsibility to follow the established work methods, processes, and governance documents in Peab’s business management system.

Special control mechanisms such as “the four eyes principle” for financial transactions and IT systems, for instance, with authorization controls and attest functions are key to maintaining this control.

Further, executive management has established executive management forums to focus on specific areas in the Group. These forums, consisting of representatives for different group functions, adhere to defined procedures and governance documents to ensure efficiency and compliancy in their areas of responsibility. They also monitor impacts, risks and opportunities and report their observations to executive management. The work in these forums is regularly reported to the Board of Directors.

Peab’s executive management forums:

Tender Council: Is the decision-making organ intended to, based on project size and complexity, ensure that tenders are built on thoroughly processed calculations with optimized opportunities and reduced risks. The council is led by the COO.

Remuneration Council: Handles and decides on remuneration matters and prepares material for the Board’s Remuneration Committee. The council ensures that Peab’s remuneration structures are fair, on market terms and in line with Peab’s overarching strategy and policies. The council is led by the CFO.

Ethics Council: Handles matters concerning business ethics, corruption and financial irregularities as well as ensures impartial investigations of cases concerning harassment and discrimination. The Ethics Council handles serious breaches of Peab’s Code of Conduct, policies and some guidelines and makes sure cases are investigated impartially, in order to contribute to a healthy company culture. The Whistleblowing Council is a sub-function of the Ethics Council and is responsible for the whistleblower instrument along with handling whistleblowing/complaints that arrive in between Ethics Council meetings. The Whistleblowing Council works according to the guidelines for whistleblowing with the linked description of how personal information is handled. The whistleblowing service also provides the company with information from directly involved persons about whether or not the process of due diligence is effective. The Chairman of the Ethics Council annually reports to the Board of Directors and executive management on serious breaches of the Code of Conduct or other irregularities. A compilation of corruption cases is made and comprises economic crime in a broader sense. The Council is led by the head lawyer for Corporate Governance and Compliance.

Sustainability Council: Monitors, coordinates, and develops sustainability work at Peab and ensures that the business follows internal and external regulations, standards, and laws. The council has broad expertise and competence in the area of corporate governance, the environment and climate, communication, risk management, strategy, the value chain’s impact and the work environment. The council reports regularly to executive management, the Audit Committee, and the Board of Directors, at least six times a year, focusing on sustainability-related impacts, risks, and opportunities as well as on the process of due diligence. The council has a central function for integrating sustainability matters in Peab’s overarching strategy and operations. The council is led by the CSO.

Investment group: The Group’s decision-making forum for investments and divestments regarding machines, inventory, and project development. The Investment group is responsible for governance of Peab’s use of capital with the goal of achieving anticipated returns on invested capital. The group is led by the CFO.

Business committee: Not a separate forum but part of executive management. The Business committee prepares and decides on acquisitions or divestments of businesses or operations. The committee is led by the CEO.

Development Council: Responsible for governance of, and decision-making on, implementing development projects, both within the framework of the business plan and Peab’s digital strategy. The Development Council is responsible for ensuring development projects are cost efficient and stay within established cost frameworks. The council is led by the CSO.

Trademark Council: Responsible for Peab’s brands. The Sponsoring Council is part of the Trademark Council that ensures that Peab’s sponsoring guidelines are complied with and that sponsoring collaborations are developed, implemented and assessed. The council ensures that sponsoring activities are in line with Peab’s values and guidelines as well as generate added value for both Peab and society. No political contributions are made. The council is led by the CCO.

These forums form part of Peab’s comprehensive control environment. The Board of Directors regularly monitors and evaluates the efficiency in Peab’s internal governance and control structures. The evaluation is based on the information provided by executive management, its various forums, and the Board’s committees. Through this process efficient governance is ensured throughout the organization.