We deliver sustainable value to our customers and shareholders.

1. Halma's carbon policy was first approved by the Board in 2007. In 2010 the policy target was reviewed and continues to call for a 10% reduction in the carbon footprint every three years.
2. Halma conducts an annual survey of its employees to assess how well the Group's values are aligned with its employees and how well the Group communicates its values to employees.
3. The Halma Executive Development Programme (HEDP) and the Halma Management Development Programme (HMDP) provide executives and middle managers with the necessary skills they need in their current and future roles.

Non-financial Key Performance Indicators (KPIs) are used by the Board to monitor progress on Group initiatives.

CO₂ emissions: tonnes/£m of revenue*

Good progress with new initiatives now launched particularly in the UK.
*Prior year figures restated to reflect current carbon conversion rates.

Values Alignment

Survey of senior managers matched the target of five of their desired values being present in our business culture.

Subsidiary directors/managers who had completed HEDP/HMDP by March 2011

Continued commitment to training our people.

We have an excellent long-term record and a clear strategy for addressing environmental issues that affect our businesses and for developing products that protect the environment and improve safety at work and in public places.

Our products
Many of our innovative products play a very positive role in monitoring and improving the environment. Halma brands lead the world in a number of technologies which help to minimise environmental damage.

Our principal environmental technologies are water leakage detection, gas emissions monitoring, water and effluent analysis, UV water treatment and optical sensing. We tirelessly promote the use of UV water sterilisation which eliminates the need to use dangerous chemicals, as well as products that minimise the waste of clean water.

Our commitment to the development of equipment for measuring environmental changes and controlling the damaging impact of industrial activities is long term.

We make safety equipment for use at work, in public places and in transportation systems that contribute to increased personal safety by ensuring safe practice at work, protecting people from fire and making elevators and automatic doors safe and effective. We are the major world supplier in several of these areas.

Carbon policy
The Group’s policy on carbon is published below and has been distributed and explained to all Halma business units.

A senior executive in each of our higher-impact business units is responsible for implementing the carbon policy at local level. Our Finance Director, Kevin Thompson, has principal responsibility for coordinating and monitoring the policy.

Environmental management system
We are committed to developing and implementing an environmental management system (EMS) throughout the Group to measure, control and, where practical, reduce our environmental impacts. We have developed performance indicators that assist local management in implementing the policy and ultimately developing an EMS. The requirement for an EMS and the related reporting has been rolled out to all UK business units, which represent approximately 43% of Group production facilities in terms of external turnover. All Group companies are encouraged to undertake ISO 14001, the international environmental accreditation, where warranted. The requirement to implement an EMS will be extended to the rest of the Group in the medium term. In terms of revenue, currently 19% of the Group has ISO 14001 approval.

Our impact
The environmental effect of our operations is relatively low compared to manufacturers in other sectors. Our manufacturing model is decentralised permitting our operations to be located close to their customers. Manufacturing operations are established across the world for this very reason rather than to save labour costs. The ethos of being close to our customers reflects the importance we place on the quality of our products and the service levels we provide to our customers. It also makes our operations more flexible and responsive to their markets and customers. With operations spread around the globe, our supplier base is understandably fragmented. Therefore, responsibility for vetting and managing suppliers is devolved to local management whilst meeting the Group’s ethical standards.

FTSE4Good has assessed Halma as having a low impact on the environment. Nevertheless, Group companies are encouraged to improve energy efficiency, reduce waste and emissions and reduce the use of materials in order to minimise their environmental impact. The Group established baseline data in 2004/05 on emissions to air and water, water and energy consumption, and waste production, the results of which are updated on the Halma website each year. The data collected for the past five years has enabled the Group to set comprehensive and quantifiable objectives for reducing its environmental impacts in those areas and to set and monitor targets for reduction in key areas. The collected data confirms that the main area of impact on the environment is energy consumption. The Group does not operate a fleet of distribution vehicles although we do own a number of company cars. From May 2007, we implemented a cap on permissible CO₂ emissions of all UK company vehicles and will extend this requirement to the rest of the world in due course. This limit is reduced each year so as to consistently reduce our vehicles’ environmental impact. We have also set a fuel consumption standard for company vehicles in the USA which is reviewed annually.

Due to revisions to best practice in conversion of energy usage into carbon tonnes we have restated prior year carbon figures to enable comparability.

We are committed to reducing our carbon footprint. We set a target in 2007 to reduce the Group’s total carbon emissions relative to revenues by 10% over three years. Following a total reduction of 7% in the first two years, 2009/10 showed an increase following the acquisition of a high energy usage facility in the USA. We are working hard to reduce the energy impact of that facility and excluding that operation we would have achieved our target reduction.

We renewed our target in 2010 and in the first year achieved a useful reduction. We have initiated a number of carbon reduction actions, particularly in the UK, which are designed to help us meet our targets.

From April 2010, we have worked with a provider of energy efficiency and carbon reduction solutions to ensure compliance with the new Carbon Reduction Commitment Energy Efficiency Scheme (CRC), which is the UK’s mandatory climate change and energy saving scheme, and administered by the Environment Agency. We are well on track to be in full compliance with the CRC requirements. Already we have rolled out Automatic Meter Reading (AMR) technology to the majority of UK sites. In 2010/11 all major UK sites received an energy survey and set an action plan for improved energy usage. This initiative is backed up by specialist carbon management software and comprehensive training on its use.

Our carbon policy can be found below. The Group’s environmental performance will continue to be reported both in the Annual report and on this website.

The Group is committed to examining the establishment of ‘green’ procurement policies and increasing our use of recycled materials.

Board statement of commitment
The use of energy is essential in the production of Group products; products which are valuable in preserving life, health and the environment. We recognise that our activities have both favourable and unfavourable environmental effects, especially on the global atmosphere. Therefore, this policy is designed to reduce our carbon impact by continually improving our business efficiency in terms of the products we offer, our production methods and the wider office environment. It is also consistent with our core vision and values:

Vision
Our vision is to protect lives and improve the quality of life worldwide.

Core values

• Achievement
• Innovation
• Empowerment
• Customer satisfaction

The Board fully recognises that sound carbon management is vital to the continued success of our business and that of our customers and stakeholders. As such it must be fully integrated into our business so that it is an every day part of what we all do. This approach will deliver many benefits and the Board commits to ensuring that it is implemented, maintained and reported against.

Kevin Thompson is the Board member responsible for environmental issues.

Objectives
Our policy objectives are to:

• Reduce our carbon emissions by 10% by 2012/13 relative to 2009/10; these emissions will be measured in terms of tonnes of CO₂ per £million of revenue
• Promote energy efficiency and awareness throughout the Group
• Identify and implement opportunities for re-use and recycling
• Continue to develop products that have lower carbon impacts
• Continue to offer products that give our customers the opportunity to reduce or eliminate their own environmental impact

The latter three will be included in our carbon measurement statistics in the medium-term.

Achieving our objectives
To ensure that we meet our stated objectives we have developed a Carbon Strategy for the business. At the operating company level Action Plans will be developed and maintained. These provide a detailed schedule of actions and improvements that are designed to achieve the policy objectives.

Policy review
The Group's policy on carbon has been distributed and explained to all Halma business units. This policy will be reviewed at least every 12 months and revised as directed by the Board.

A senior executive in each of our higher-impact business units is responsible for implementing the carbon policy at local level. The Finance Director, Kevin Thompson, has principal responsibility for coordinating and monitoring the policy.

The Group has a policy of equal opportunities and preventing harassment, which applies in relation to recruitment of all new employees and to the management of existing personnel. This gives us access to the widest labour market and enables us to secure the best employees for our needs. We offer all of our staff training relevant to their roles and we believe that this contributes to an increase in employee motivation and job satisfaction. The culture alignment survey results mentioned below support this trend.

Periodically we complete a survey of employees to determine whether our core values are authentic in our organisation.
The survey establishes the values individual employees wish to see in our operating culture and to what extent they exist in our current culture.
In 2006, our survey of senior managers showed that five of the values they wanted to see in our business were actually present. Again in 2011, our survey of senior managers showed that five desired values were still present in our business. This indicates that there is a healthy level of alignment between the culture we aspire to have and the culture we have today.

No survey is capable of capturing all the appropriate sentiments, but our executives, who regularly visit all Group companies, agree that observable and valuable improvements in the Group culture have occurred over recent years.

The Group will continue to monitor the survey results to enable us to better support our people bringing these values and strengths to work so that they and we may derive further benefit from them.

Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Employee consultation
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through formal and informal meetings, the Group intranet and the annual financial statements. Employee representatives are consulted routinely on a wide range of matters affecting their current and future interests. An employee share plan has been running successfully since 1980. It is open to all UK employees and aligns the interests of all UK employees to those of shareholders.

Health and safety
The Group manages its activities to avoid causing any unnecessary or unacceptable risks to health and safety to our employees in the work place or to the public as a result of our activities. The policy is understood by all Group companies and was reinforced during the year through improved guidance and reporting following a comprehensive review led by an external expert. The reporting of Health and Safety incidents and corrective action where needed has been give an even higher profile. Given the autonomous structure of the Group, operational responsibility for compliance with relevant local health and safety regulations is delegated to the board of directors of each Group company. We believe health and safety training is important and it is carried out within companies as appropriate. Adequate internal reporting exists in order that the Group’s Finance Director may monitor each company’s compliance with this policy.

The Group has collected details of its worldwide reported health and safety incidents which are available below. We are pleased to report that there were no fatalities during 2010/11, 2009/10 or 2008/09.

People development
The Halma Executive Development Programme (HEDP), which is based on our recognition of the fundamental part our people play in the success of the Group, continued to strengthen in 2010/11. HEDP is an integrated development plan for our senior people – including the next generation of Managing Directors and Divisional Chief Executives. Our objective is to provide these individuals with the tools and training to achieve more in their existing role and potentially to advance through the organisation if their achievements merit it.

HEDP is aimed squarely at employees already serving on subsidiary boards but we also encourage applications from senior functional managers who can demonstrate they already have equivalent responsibilities and will benefit from the programme. There are approximately 200 such eligible employees in total.

The programme has been developed from a proven course structure and is specifically and continuously tailored to suit Halma’s needs, aligning the content to the Group’s four core values of Achievement, Innovation, Empowerment and Customer Satisfaction. It focuses strongly on strategic and leadership capabilities and developing personal attributes - commitment, determination and resilience. There is an emphasis on performance management and team development. It includes skill-based elements such as sales and marketing management, project leadership, corporate governance, finance and innovation, but all are presented in a strategic context.

12 programmes have now been completed and the success of the programme can be measured by the enthusiasm of the participants upon their return to their businesses, the achievements of a number of participants and their eagerness to coordinate further sessions to explore topics of particular interest to their programme Group.

Now that a significant proportion of executives have completed HEDP, a follow up programme, HEDP+, has been developed to provide updated training and to reinforce the original course contents.

Complementing the HEDP is a programme for subsidiary managers and supervisors – the Halma Management Development Programme (HMDP). During the year, three programmes were completed giving a cumulative total of 319 employees who have completed HMDP. Programmes were held in the USA, Europe and Asia.

In 2011, we introduced a new programme targeted at our technical engineers to equip them with a broader understanding of Halma’s technology, improve their productivity and provide specific skills training in areas such as project management. One such programme with 20 participants has been completed with great success.

In line with our decentralised structure, social and community activities are sponsored and undertaken at the direction of subsidiary management. Each subsidiary has the freedom to implement its own initiatives. This approach recognises that priorities will vary from business to business.

Responsible investment

Investing in Halma shares meets the criteria of many professional and private investors who base their decisions on environmental, ethical and social considerations. The Group is a world leader in several key environmental technologies and has a reputation for honesty and integrity in its relationships with employees, customers, business partners and shareholders.

Social conditions can be improved for all through the creation of wealth. Halma creates wealth responsibly allowing our employees, customers, business partners and shareholders to determine where this wealth is best distributed.

Halma’s policies reflect the core requirements of the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work. We do not tolerate practices which contravene these international standards.

Regulatory demands upon us vary considerably around the world, so Halma establishes the core structure to ensure that Group companies fully comply with legislative and regulatory requirements while permitting them to tailor the solutions to their particular needs.

Ethics
The Group culture is one of openness, integrity and accountability. Halma encourages its employees to act fairly in their dealings with fellow employees, customers, suppliers and business partners. We aim to have suppliers of high quality and operate to accepted international standards. Halma operates a confidential whistleblowing policy, which enables all Group employees to raise any concerns they may have.

Halma has a zero-tolerance policy on bribery and corruption which extends to all business dealings and transactions in which we are involved. This includes a prohibition on making political donations, offering or receiving inappropriate gifts or making undue payments to influence the outcome of business dealings. Policy and guidance in this area continues to be updated in line with best practice.

Energy consumption Kwh per £1000 sales

Waste per £1000 sales

*Prior year figures restated to reflect current carbon conversion rates

Transport statistics per £1000 sales

Health and Safety incidents per 1000 employees