SUSTAINABLE MANAGEMENT AND CONTROL

Regularly verify strategic targets. The Internal Control System (ICS) of SolarWorld includes organizational safety measures (carried out through the management systems mentioned below), control (by the departments, group-wide through Controlling) as well as examination (internal audit).

The group strategy, which is directly derived from our Vision, as well as the resulting group targets are determined by the SolarWorld Management Board. The verification, control and further development of these strategic targets are implemented in the course of the year in regular strategy meetings attended by the Management Board as well as the Managing Directors and Board Members of the subsidiaries. The divisional targets are derived from the decisions of the management bodies.

Steering and control take place via Group Controlling, which coordinates the alignment and activities of all divisions in the SolarWorld Group and reports them to the Management Board. The success factor of corporate transparency takes on strategic importance in view of the growing challenges faced by a group operating in the international market.

The operating units of the SolarWorld Group that are defined for control purposes coincide with the reportable operating segments of “Production Germany”, “Production USA”, “Trade” and “Other”.   Segment structure adjusted

The target/actual check and reporting of the primary group indicators such as revenue and EBIT Selected corporate indicators to the Management Board within the time stipulated ensure that developments are identified early, appropriate measures are initiated, and targets are adjusted to the changing market and company developments. The control indicator “Revenue” initially reflects sales and price development while EBIT indicates the development of profitability. In 2009 the control process was determined by these indicators in the sense that price and marketing measures constituted the strategic response to market and sales developments. We achieved stabilization of EBIT by way of economies of scale and volume effects as well as through constant improvement of cost structures in terms of production, trade and procurement. While revenue is the most important indicator in the “Trade” segment, production output is the most important control variable in the “Production” segment.

Including ecological and social aspects. In the year under review the indicator-based control instrument, the SolarWorld  Scorecard, was further developed and the combining of data from the various group divisions was pushed ahead. The SolarWorld Scorecard belongs to the category of Sustainability Balanced Scorecards (SBSC); this type of scorecard includes not only economic objectives (such as the financial control indicators of revenues, EBIT) but also ecological and social aspects (such as the non-financial control indicators of customer satisfaction, employee identification, CO_2eq, etc.). We decided in favor of this approach because sustainability is an integral component of the SolarWorld group strategy. To this end, group-wide top level objectives, performance drivers, measures and indicators were defined in close coordination with the functional departments.

The framework for our sustainable group control is provided by the SolarWorld  values as well as by our guidelines.  www.solarworld.de/sustainability They are designed to provide all employees of the SolarWorld  Group with guidance. The group-wide Code of Conduct, which still was subject to internal examination by the works council at the end of 2009, shall additionally provide actual behavioral recommendations after 2010.

The SolarWorld Scorecard contains five perspectives that build directly upon one another: Finance, Customers, Processes, Employees and Society. The cascade-type interlinking of these perspectives guarantees that the causal effects of the individual factors on long-term success will be taken into consideration. In the transition between the perspectives, it is shown how the identified strategic targets and performance drivers of the respective top-level perspectives can be attained. Thus, in the future after the complete implementation of the SolarWorld Scorecard we will include all the factors mentioned in our economic corporate management by way of cause-and-effect chains.

Core indicators cannot always be unmistakably assigned to a particular segment. There are cross-segment aspects such as employee satisfaction, financial performance, resources consumption and social commitment. On the other hand, many indicators such as the satisfaction of module and systems customers can be clearly assigned to a particular segment (“Trade”).

The SolarWorld Scorecard brings together indicators of the various management instruments. This makes possible a target/actual comparison of financial and non-financial control indicators. In some parts we already managed the company in 2009 according to the goals and indicators of the Scorecard. Target achievement 2009 and targets 2010+

Early operating indicators – metrics with an early warning character. The definition of early indicators depends on the timeframe of the top-level objective under consideration. If we have long-term corporate success in mind, the performance drivers of the SolarWorld  Scorecard are our early indicators. In general, internally we speak of early indicators in the case of parameters that are promptly and regularly recorded in the context of the following management systems, and which therefore form the basis for the short-term social policy decisions concerning the control of future developments. There is a large range of these. In the following, we present examples of selected early indicators for the segments, “Production Germany”, “Production USA” and “Trade”.

“Production Germany” and “Production USA” segments:

1. In production we continuously record the average output of production (MW/day) and use this as an early indicator for productivity.
   
   
2. The reject rate must be viewed in direct connection with the previously mentioned indicator. It is also checked continuously in order to enable immediate action if deviating values are observed.

“Trade” segment:

1. Product quality benchmarks are early indicators of our competitiveness, i.e. comparative tests, also together with customers. Thus, tests are conducted in an FMEA (Fault Possibility and Influence Analysis) mode with pilot customers and measures are being tested in practice.
   
   
2. As a medium-term early indicator for our quality claim as well as for the quality of our logistics, we use the rate of customer complaints. As a result of the continuous recording of these data we can correct any deviations and take appropriate counter-measures. Thus, the rate of customer complaints increased slightly in 2009 compared to the previous year. External demand peaks in the fourth quarter led to short-term bottlenecks both in logistics processes and in the availability of some components: We immediately initiated an analysis in the quality assurance area.
   
   
3. Early indicators concerning customer satisfaction that are measured annually among wholesalers and specialist partners are explicit customer statements and implicit moods that are reflected after talks and/or special events (meetings, discussion rounds).
   
   
4. Early indicators for market trends are also generated on the one hand by personal contacts with specialist partners – for example on the occasion of the annual training of partners – or on the other hand by systematic surveys (interviews). These refer, for example, to product lifecycles or new product versions such as the black module.