2016 Sustainability Report

2016 Sustainability Report

Sustainability Approach

CEO Message

Growing Smarter
About Solving Water

Patrick K. Decker
President and
Chief Executive Officer
Xylem Inc.

Solving the planet’s water challenges has never been more urgent. The global population is growing — and with it, the need for fresh water. Migration to cities is increasing demand for reliable urban water infrastructure. And climate change poses threats to already stressed water resources.

The need to solve water is recognized directly through U.N. Sustainable Development Goal (SDG) number 6: ensure availability and sustainable management of water and sanitation for all. But solving water and sanitation issues can be viewed as a foundational challenge that can help accelerate progress on other SDGs. Few sectors have such broad impact on environmental, economic and social dimensions as water.

Consider these facts. One in three people experiences water scarcity at least one month per year. Children worldwide miss more than 440 million days of school each year due to water-related illnesses. Furthermore, the burden of acquiring water falls disproportionately to women and children, exacerbating gender inequality and preventing those children from attending school. In some communities, nearly a third of treated water is lost before it reaches users due to faltering infrastructure. Meanwhile, the economic costs of water-related disasters are rising steeply as storm severity increases and the need for more resilient infrastructure grows.

Using Water, Smarter
At Xylem, we believe that technology is a key link in how the world can solve water. We have a long history of innovation, but today, we’re focusing more than ever on the powerful capabilities of smart technology, integrated management and big data. These solutions will allow us to transport, treat, test and use water smarter — and more sustainably — than in the past. The “Internet of Things” has arrived in the water sector, and Xylem is ready to use it to help our customers work more efficiently, reduce their own environmental impact and together build more resilient communities.

That’s why we’re investing in research and development at our highest levels ever, and committing to more innovation in the years ahead. We also upped the goal of our Vitality Index — the percentage of our revenues from products released in the past five years — from 25 percent to 30 percent by 2020. These commitments are paying off with new products like Flygt Concertor™, the world’s first intelligent wastewater pumping system. While other pumps routinely get sidelined by clogs, the Flygt Concertor automatically senses and adapts to its environment, using only as much energy as necessary to keep water moving.

Xylem is at the forefront of helping to solve some of the world’s most pressing water issues. Hear from Patrick Decker on how we are doing this.

We’re also acquiring smarter solutions, building a broader portfolio of offerings that address our customers’ most significant challenges across many different industries. In October of 2016, we acquired Sensus, a leader in smart metering, network communications and advanced data analytics. With 80 million meters installed globally, the addition of Sensus’ capabilities is a major step forward in enabling us to provide customers with greater intelligence about their operations in the water, electric and natural gas utility sectors.

We also acquired Visenti, a relatively smaller but highly strategic acquisition that provides services for intelligently managing water networks. Both Sensus and Visenti help address the challenge of “non-revenue water” — that is, treated water that is lost or not paid for due to leaks, theft or lack of effective metering. Sensus’ smart metering and remote monitoring capabilities help customers track this valuable resource more effectively. And Visenti solutions enable real-time monitoring of changes in water pressure in utilities’ networks, which allows them to address leaks or other potential issues in real time. In this way, customers can optimize their capital expenditures by avoiding major losses or catastrophic failure, and extending asset life. Innovations like these are helping our customers — and in turn, their communities —become more sustainable.

Finally, we have expanded our capabilities in ocean and coastal monitoring with the additions of our Tideland and Hypack businesses. They provide an array of smart analytics solutions and software that enable a variety of marine and environmental monitoring capabilities. With these businesses, we have brought together distinct products and services to build intelligent systems capability and significantly expand the market we serve.

Recognition

External recognition provides useful progress markers on our sustainability journey. In 2016, Xylem’s commitment to sustainability and our progress-to-date was recognized in a number of areas.

MSCI Global Sustainability Index Series

The FTSE4Good Index Series

The NASDAQ OM CRD Global Sustainability Index

Euronext Vigeo Index: US 50

CDP Climate Change 2016 Disclosure
— B Rating Climate Change

CDP Water 2016 Disclosure
— B Rating

2016 Pinnacle Award
Carolina’s Associated General Contractors (CAGC) convention for work on the Northeast Interceptor (NEI) Rehabilitation Phase Two project, Wilmington, North Carolina

2016 RIONED Innovation Award
RIONED Foundation
Flygt SmartRun®

Most Innovative and Groundbreaking Product VandTek Fair, Denmark
Flygt Concertor™

Best Product
iWater International Integrated Water
Cycle Show, Spain
Flygt Concertor™

Best Product
Accadueo International Exhibition, Italy
Flygt Concertor™

2016 100 Excellence Employer of China
For outstanding human resource management, including employee training, talent recruitment and retention, and corporate social responsibility

Doing Our Part
Solving water takes all of us, which is why Xylem is also practicing what we preach. We have set a goal of reducing our water intensity by 25 percent by 2019 relative to 2014 levels. Thanks to improvements in water collection and reuse at our facilities, with a special focus on high-consumption sites and those in extreme water scarcity areas, we have already decreased water intensity by nearly 10 percent.

Xylem has also set goals for reducing our greenhouse gas emissions and waste sent to landfills. Employee-driven improvements, upgrades to our fleet, increased recycling efforts and recommendations identified through our proprietary Eco-Efficiency Easy Tool are helping us make meaningful progress toward our goals.

We have also committed to the 10 principles of the U.N. Global Compact, which calls on companies to align their strategies and operations with universal principals on human rights, labor, environment and anti-corruption, and to advance societal goals.

An Engaged Workforce
We believe that a responsible business is one in which employees are proud to work and have the tools and opportunities to reach their full potential. Our employees serve customers facing a wide assortment of water challenges, from communities in emerging markets delivering clean drinking water for the first time, to modern cities expanding their infrastructure to meet the needs of a growing population to businesses and industrial operations that need the most efficient solutions to use and treat water sustainably. With such a varied customer base, it makes sense that our workforce is diverse too. The Xylem team includes 16,000 individuals who understand that while water is universal, applications and solutions are often highly local. In our training and development efforts, we make sure that we’re growing leaders from all backgrounds to meet the needs of our global customer base.

Creating a safe environment, both within the walls of our facilities and out on job sites, is a core imperative at Xylem. In the past three years, we’ve made safety a top priority, and in that time, have reduced accidents almost by half. Through initiatives like our Safety Scorecard and Get Well program, we’re making progress toward becoming a sustainably safe workplace. But there’s plenty more to do. Safety knows no calendar. It doesn’t matter how well we did yesterday; it’s what we do today and tomorrow that counts.

I’m immensely proud of all the work that our colleagues do every day. But it has been particularly inspiring to witness their growing commitment to solving water through Xylem Watermark, our signature corporate citizenship initiative. Watermark began as a program focused on community development in emerging regions of the world, with projects completed in cooperation with our global, nonprofit partners. In 2016, we significantly expanded Watermark to encompass volunteering and local engagement opportunities in our local communities, providing an avenue for more of our colleagues across Xylem to get directly involved in Watermark activities. Those local opportunities include water source cleanups, walks for water and water education programs. To kick off this initiative, we pledged to deliver 100,000 volunteer hours in water-related activities over three years. In the first year of this effort, Xylem employees logged 21,000 volunteer hours and have shared feedback on ways they’d like to get even more involved.

Our journey is in the early days. Despite our significant progress, intractable water challenges remain. For a company with sustainability at its core, I’m pleased — but not surprised — that Xylem is constantly finding ways to improve. By exploring energy- and water-saving innovations, optimizing our own operations and harnessing the talents of our people, we’ll continue to help our customers and communities worldwide make smarter, better use of our world’s most precious resource.

Patrick K. Decker
President and Chief Executive Officer
Xylem Inc.