Overview:

XP recognises that all its activities interact with the environment. Environmental and Sustainability issues have become increasingly important to our customers, investors and employees. Many XP locations have policies and practices in place to reduce energy and material consumption and to recycle where practicable. XP Power has also established a corporate Environmental Committee chaired by a Non Executive member of the Board of Directors with the aim of making XP Power a leader on environmental issues in the Power Conversion industry.  Corporate Environmental Procedures have also been published which guide all XP sites in meeting our Environmental objectives.

Environmental Policy:

Our Environmental Policy is to:

• Comply with all relevant environmental legislation and regulations and stay abreast of new and pending legislation and initiatives affecting our facilities and the communities in which we operate.

• Regularly review and report on the environmental impacts of our facilities and activities.

• Strive for continuous improvement in environmental performance through identifying objectives and setting measurable goals.

• Employ best practices to maximize the efficient use of resources and minimize pollution and waste.

• Consider and respond to environmental issues through all phases of our product life-cycles including: research; design; development; manufacture; customer use; and end of life disposal.

• Involve and educate employees, contractors and customers in our environmental programs.

• Engage with suppliers and distributors to encourage their participation in environmental best practices.

• Disengage with any suppliers or distributors who may be found to be Environmentally negligent or non-compliant and who do not aggressively implement corrective actions.

Environmental Reporting:

XP Power has not had any instances of environmental non-compliance, prosecutions, fines, or accidents.

Environmental Report

Protecting the Environment

In 2009, XP set itself the bold goal of becoming the leader in environmental performance within the power converter industry. I am pleased to report further significant progress towards this objective during 2011. In particular we have been accepted as full members of the Electronic Industry Citizenship Coalition (EICC) and our overall performance has been recognised both by admission to the FTSE4Good Index and by further positive feedback from our customers.

Environmental Considerations

We have engrained environmental and sustainability awareness into our culture so that the environmental impact of our activities is a consideration at every stage of the product lifecycle. This awareness starts with design of the product, sourcing components to ensure they do not contain non-permitted harmful substances or conflict minerals, through manufacture, transportation, operation and finally to its recycling.

Uniquely Positioned

XP Power plays an interesting and pivotal role in the energy chain. The power conversion products we design and manufacture are the “bridge” between the electricity utility companies and the consumer, converting the energy from the grid and providing it in a form that can be used by electronic equipment. XP Power is therefore uniquely positioned to make a real contribution to energy efficiency and emission reduction and is leading the power conversion industry in terms of product efficiency.

Historically, electronic power conversion has been a notoriously inefficient process. The original linear transformers still in use today in some sectors are typically less than 50% efficient, with more than half the energy they convert being wasted as heat. XP Power does not operate in this area, specialising instead in modern “switching” techniques, enabled by semiconductor technology. This allows power converters to be much smaller and more efficient. Modern power converters have typical efficiencies of 80%. While this is a major improvement over legacy products, XP Power is committed to developing technologies that further reduce energy wastage.

Continuing to improve the efficiency of our products and educating our customers in the benefits of solutions that consume and waste less resource is the biggest positive impact we can have on the environment.

"Improving the efficiency of our products and educating our customers in the benefits of solutions that consume and waste less resource is the biggest impact we can have on the environment."

We have created our own "Green Power" logo to highlight these products to our customers

XP Power and Efficient Energy Conversion

XP has consistently raised the bar in terms of power converter efficiency and, as the chart below illustrates, has increased the number of high efficiency and low stand-by power products in its ranges significantly in recent years. (Stand-by power is the energy consumed by the power converter when the equipment it powers is idle and not operating.) We now offer a range of class leading products which are up to 95% efficient.

Environmental concerns, reliability and legislation drive demand for high efficiency products.

The XP Power Environmental Committee, from left to right Duncan Penny, Adeline Teh, David Hempleman-Adams, Lynne Summers, Hiren Shah

Employee relations

Our people are our most important asset and we make great efforts to ensure an environment of open communication with frequent employee meetings providing opportunities for two way communication between our management and staff. In addition, our factories have employee committees which provide a more formal mechanism for staff to feedback issues and ideas to management.

Our workforce is also free to join unions and we have formal policies in place to ensure staff are treated fairly and have equal opportunities. These meetings have proved to be excellent forums for promoting environmental awareness, with employees suggesting many excellent ideas to improve our environmental performance.

All our main sites have environmental representatives who champion environmental awareness and share best practices and ideas across the Company. They meet regularly to assess progress and these meetings are chaired by the Chief Executive. Feedback from these meetings is also shared with the Environmental Committee.

Manufacturing

Our manufacturing operations have continued to make great strides in reducing their environmental impact per unit of production. Our ISO14001 certified manufacturing facility in Kunshan, China is equipped with the latest low energy lighting using efficient electronic ballasts and has developed a novel way to recycle 50% of the power used in the burn-in testing of our products. Computer control and capture of data from this equipment has allowed us to reduce our burn-in times saving even more energy and therefore reducing CO2 emissions.

We were pleased to have the environmental performance of our Kunshan facility recognised by the recent award of an “A” rating on an environmental audit from a new blue chip Japanese customer.

Waste from our soldering processes is now recycled on site, again reducing our impact on the environmental and reducing our costs. The performance and achievements of our Kunshan facility have been built on and developed further in the design of our new manufacturing facility in Vietnam.

On site recycling of solder waste reduces our impact on the environment and lowers our costs. From top, Solder dross discarded from the wave soldering process, solder recycling machine and, finally, a recovered solder bar.

Electronic loads allow 50% of the power used during burn-in testing of the product to be recycled.

Vietnam Facility – The Most Environmentally Friendly in the Industry

The construction of our new Vietnamese manufacturing facility which started in December 2010 is now complete. This facility is the most environmentally friendly power converter manufacturing facility in the world and will meet the Gold Plus rating of the BCA Green Mark requirements which are the leading standards set by the Singapore Building and Construction Authority for non-residential buildings in tropical climates. This covers not only the energy efficiency of the building but also water efficiency, environmental protection, indoor environmental quality and other green features and innovations. We are proud that this is not only the most environmentally friendly building in our industry but will be the first BCA Green Mark certified facility in Vietnam.

A photovoltaic solar panel array helps provide power to the facility and rain water is collected for use within “grey water” systems in the building.

High efficiency air conditioning systems have been deployed and energy saved through an efficient building envelope.

"Our Vietnam factory is the most environmentally friendly manufacturing facility in our industry"

Targets and performance

We have set ourselves a target of reducing our CO2 emissions per unit of revenue by 5% per annum over the next five years. This aim aligns us with the Chinese Government’s target of reducing carbon emissions per unit of GDP by 40% to 45% between 2005 and 2020. The attached graph shows the three month moving average of CO2 emissions per unit of revenue at our Kunshan facility. We consider that we are currently ahead of our CO2 reduction targets and the features that we have built into our new Vietnamese facility will allow us to continue to improve.

Although we do not use water within our manufacturing processes and are therefore a low level water user, we recognise that we operate in geographies where water availability is scarce. For that reason we operate practices around the world to help reduce the amount of water our facilities consume. Again, our new facility in Vietnam leads the way with an on site water capture and recycling system supplying “grey water” to the building’s plumbing systems.

Harmful Substances

European legislation on the Reduction of Hazardous Substances (RoHS) came into effect in 2005. This legislation limited the levels of certain substances in products, including lead. Although the legislation is applicable only to products sold in Europe, XP Power took the decision that all of the products we design and manufacture should be compliant. This was not only good for the environment but also good for our business.

All key sites covered by ISO14001

We made excellent progress in respect of our outstanding ISO14001 certifications during the year. The Group’s key sites have long maintained policies and practices to reduce energy and material consumption whilst also recycling wherever practicable. During the year, both our German and Singaporean organisations gained their ISO14001 certifications, meaning all of our key sites are now covered by this standard, demonstrating our commitment to environmental responsibility clearly to customers and suppliers alike.

Electronic Industry Citizenship Coalition (EICC)

The Electronic Industry Citizenship Coalition (EICC) is an industry organisation of leading electronics manufacturers which promotes an industry code of conduct for global electronics supply chains to improve working and environmental conditions. It represents the highest recognised standard for our industry dealing with environmental and corporate social responsibility issues. The code of conduct not only addresses environmental issues but also the treatment of employees and their well being, health and safety and business ethics.

In our 2009 report we set out the objective of achieving EICC Applicant Membership in 2010. We achieved this in June 2010 and in March 2011 we achieved Full Membership status. We have adopted the EICC Code of Conduct and have been working with our key suppliers to ensure they too are compliant with the Code.

We have been actively engaged with the EICC and have representation on the EICC’s Environmental Sustainability Working Group and associated Water and Training subgroups.

 

We have electric car charging stations installed at two of our North America facilities.

FSTE4Good

XP Power is now included in the FTSE4Good Index

In September 2011 the progress XP Power is making on environmental matters was recognised when the Company was selected for inclusion in the FTSE4Good Index.

The FTSE4Good Index is a tool to help responsible investors to identify and objectively measure the performance of companies that meet globally recognised corporate responsibility standards.

For inclusion eligible companies must meet criteria in the following categories:

• Working towards environmental sustainability;
• Up-holding and supporting universal human rights;
• Ensuring good supply chain labour standards;
• Countering bribery; and
• Mitigating and adapting to climate change.

XP Power is on a mission to develop smaller products that waste less energy, consume less physical material and avoid the use of hazardous substances.

Next Steps

XP Power will continue to lead the industry in addressing the effect its activities have on the environment. We will achieve this by:

• Continuing to lead the field in the development of high efficiency power conversion technology and encouraging more of our customers to select these types of converters for their projects; and

• Challenging, encouraging and helping to educate our work force, customers and suppliers to adopt practices that reduce energy and resource consumption and protect our planet from pollution and its people from exploitation.

I am confident that these initiatives will not only benefit the environment but will help us and our customers to grow our respective businesses and increase the value of our Group.

David Hempleman-Adams

Chairman
Environmental Committee