2017 Sustainability Report

Business Performance

Strategy

Xylem is a world leader in water technology, providing equipment and services for water and wastewater applications along with a broad portfolio of products and services that addresses the full cycle of water with sustainable solutions.

In addition, we provide sustainable solutions for certain critical energy resource infrastructure. We expect global macro trends to fuel demand for our solutions. Strengthening global environmental and water quality regulations are increasing the need for more efficient solutions. Population growth, urbanization and a growing middle class in emerging markets are boosting demand for clean water while putting strains on aging infrastructure. At the same time, the impacts of climate change are disrupting water supplies with intensifying water scarcity in many parts of the world, as well as flooding from a growing number of extreme weather events.

These factors combine to produce a growing need for water and critical energy infrastructure solutions that are modern, efficient and resilient. Xylem is well-positioned to fulfill these long-term needs as our business strategy is built around creating technology-enabled solutions to increase water productivity, water quality and resilience – ultimately creating a more positive handprint in the world. We are optimizing the potential of our business and creating a sustainable enterprise through the following strategies:

  • Accelerating Growth by prioritizing investments in key emerging markets, focused innovation and technology to enable smart infrastructure, and by strengthening customer relationships to drive commercial leadership and disciplined M&A. We focus on investments that will generate long-term, sustainable growth for the benefit of our stakeholders.
  • Driving a Continuous Improvement culture and simplifying our organization to make the company more agile and generate cost savings to reinvest for growth. We are strengthening our Lean Six Sigma and global procurement capabilities and continue to optimize our cost structure through business simplification by eliminating structural, process and product complexity.
  • Developing Leadership and Talent by focusing on employee development programs at various levels throughout the company. We also will continue to align individual performance to the objectives of the company and our shareholders.
  • Focusing on Execution and Accountability by holding our colleagues accountable and streamlining our performance management and goal deployment systems.

Xylem also takes a balanced approach to capital deployment, managing leverage with investments in growth. We return capital to shareholders via dividend growth in line with earnings and opportunistic share repurchases. In 2017, we continued to focus on pushing our portfolio of solutions up the technology curve. We invested heavily in our core businesses and through acquisitions, which led to the creation of our Advanced Infrastructure Analytics (AIA) platform in early 2018. The collective capabilities of these businesses help utility customers identify problem areas across their water and critical energy resource networks, prioritize them based on condition assessments, and allocate resources to get the most return on investment and extend the life of their assets.

Pure Technologies, acquired in early 2018, serves as the foundation of the AIA platform and expands Xylem’s disruptive platform of diagnostic, analytics and optimization solutions for clean and wastewater networks. Pure’s leadership position in intelligent condition assessment and leak detection solutions, along with previously acquired businesses such as Sensus and Visenti, brings Xylem to the forefront of expertise in addressing the problems that come from aging infrastructure, such as non-revenue water, and eliminating inefficiencies in infrastructure capital and operating budgets.

Following our acquisition of EmNet and Valor Water Analytics, these businesses were added to our AIA platform. EmNet provides network modeling and optimization solutions that enable municipalities to manage their urban water cycle, including their wastewater and stormwater systems. EmNet’s open architecture platform – BLU-X – provides big data analytics in real time, helping solve cities’ wastewater and watershed challenges. EmNet’s solution can indicate when to open and close valves in the wastewater system, enabling flow to be directed into pipes where capacity is available to prevent polluting of waterways or even buildings.

Valor’s core technology is its Hidden Revenue Locator, an automated software designed to locate forms of revenue loss occurring on a utility’s system of meters from inaccurate meters to theft. Valor’s software-enabled solutions are another example of how we are leveraging advancements in technology and data analytics to help utility customers address the growing challenge of non-revenue water and more effectively allocate their constrained budgets.

These advanced solutions, collectively, help utility operators to allocate their capital resources more effectively and efficiently, which in turn enables them to better address the issue of water affordability.

Given that EmNet was acquired in December 2017, and Pure Technologies and Valor Water Analytics were acquired in early 2018, the contents of this report do not include results from these businesses. We plan to include our newly acquired businesses in our Sustainability Report in future years.