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SGS S.A.

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SGS S.A.
Company typeSociété Anonyme
SIX: SGSN
IndustryQuality
Founded1878
HeadquartersGeneva, Switzerland
Key people
Sergio Marchionne (Chairman), Chris Kirk (CEO), Geraldine Matchett (CFO)
ProductsTesting, inspection, certification
RevenueCHF 4.757 billion (2010)[1]
CHF 836 million (2010)[1]
CHF 588 million (2010)[1]
Total assetsCHF 3.981 billion (end 2010)[1]
Total equityCHF 2.108 billion (end 2010)[1]
Number of employees
64,000 (end 2010)[1]
Websitewww.sgs.com

SGS S.A. (formerly Société Générale de Surveillance) provides inspection, verification, testing and certification services. With more than 70,000 employees, SGS operates of over 1,350 offices and laboratories around the world.

The core services offered by SGS include Inspection Services for the inspection and verification of the quantity, weight and quality of traded goods, Testing Services for testing product quality and performance against various health, safety and regulatory standards, Certification Services to ensure that products, systems or services meet the requirements of standards set by governments, standardization bodies or by SGS customers, and Verification Services to ensure that products and services comply with global standards and local regulations.[2]

Its main competitors are the companies Bureau Veritas, Intertek, TÜV, Germanischer Lloyd (GL) and Cotecna[3] (in sphere of verification and certification services) and Core Laboratories, Inc. (in sphere of the goods quality and quantity inspection).

History

International traders in London, including those from France, Germany and the Low Countries, the Baltic, Hungary, the Mediterranean and the United States, founded the London Corn Trade Association in 1878 in order to standardize shipping documents for exporting nations and to clarify procedures and disputes relating to the quality of imported grain.

In the same year, SGS was founded in Rouen, France, by a young Latvian immigrant who, having seen the opportunities at one of the country’s largest ports, began to inspect French grain shipments. With the aid of Captain Maxwell Shafftington he borrowed money from an Austrian friend in order to start inspecting the shipments arriving in Rouen as, during transit, losses showed in the volume of grain as a result of shrinkage and theft. The service defended the rights of exporters by inspecting and verifying the quantity and quality of the grain on arrival with the importer.

Business grew rapidly; the two entrepreneurs went into business together in December 1878 and, within a year, had opened offices in Le Havre, Dunkirk and Marseilles. An early innovation, still offered by the company today, was the Full Outturn Guarantee (FOG) which is a service that reimburses the exporter for any loss or gain during shipping as long as SGS can inspect the cargo during both the loading and unloading processes.

By 1913 the company had grown considerably into a leading grain inspection business and was inspecting 21 million tonnes of grain per year from a network of 45 offices across Europe. In 1915, during the First World War, the company moved its Headquarters from Paris to Geneva, Switzerland, in order to continue its operations in a neutral country and on July 19, 1919 the company adopted the name it carries today, Société Générale de Surveillance.

During the mid-20th century, SGS began to diversify and started offering inspection, testing and verification services across a variety of sectors, including industrial, minerals and oil, gas and chemicals, among others. In 1981, the company went public and the current structure of SGS, consisting of ten business segments operating across ten geographical regions, was formed in 2001.

Services

SGS is divided into ten divisions, each of which provides services to a specific industry:

  • Agriculture - Agricultural services offered include crop services to support production efficiency, services to the commodities trade for risk mitigation, inspection & testing, supply chain services to enable control and traceability of food and collateral management services for a range of agencies, organizations and companies.
  • Automotive - Automotive services include design, construction and operation of motor vehicle inspection services provided for governments, manufacturers, traders, financial institutions and insurance companies.
  • Consumer Testing Services - This division provides quality, compliance and consumer product safety services for textiles, appliances, furniture, food and electronics including product evaluation, factory assessment, product inspection and shipment control.
  • Environment - This division provides impact assessments, auditing, training, air and water quality testing, climate change services and the development of sustainable solutions for governments and industry.
  • Governments and Institutions - Governments and Institutions services are offered to ensure compliance with regulatory requirements, stimulate economic growth, facilitate trade and support efficiency, good governance and sustainable development for governments and international institutions.
  • Industrial - Industrial services by SGS include quality and performance testing services for customers’ installations, materials, equipment, facilities and projects to enable customers to meet regulatory, voluntary and customer based requirements in industries including oil & gas, power generation & transmission, wind energy, construction and manufacturing.

Under construction also providing 'consultancy services' - Project Management and Architectural Design.

  • Life Science - This division covers clinical research, safety and quality control testing services for drug ingredients for the pharmaceutical and bio-pharmaceutical industries.
  • Minerals - The minerals division offers testing services for coal and coke, precious and base metals, steel and steelmaking raw materials, bio-fuels, fertilizers, cement, industrial minerals and diamonds for the purposes of exploration, feasibility testing, production, trading, commercial applications, recycling, mine closure and collateral management services.
  • Oil, Gas and Chemicals - This division helps to locate, analyze and extract oil and natural gas from onshore and offshore fields in the exploration, appraisal, development, production and logistics phases. OGC services include also services related to processing, storage and transportation of crude oil and natural gas, refining, distribution, retail services and collateral management services.
  • Systems and Services Certification - This division covers auditing, certification, training and advisory services for management systems in quality, environment, health & safety, social accountability, security and business continuity in order to ensure that international, local or client standards are met.

Management

SGS Management: SGS is organised into ten lines of business and operates across ten geographic regions. Each business is led by an Executive Vice President (EVP), and each region is led by a Chief Operating Officer (COO). The EVPs and the COOs, in conjunction with the functional Senior Vice Presidents (SVPs) and the Group’s Chief Executive Officer, Chief Financial Officer and General Counsel make up the Operations Council

  • The CEO is Christopher Kirk.
  • The Chief Operating Officers are Pauline Earl (Western Europe), Duilio Giacomelli (South East Europe), Dirk Hellemans (Central & North West Europe), Teymur Abasov (Eastern Europe & Middle East), Fred Herren (Africa), Jeffrey McDonald (North America), Alejandro Gomez de la Torre (South America), Helmut Chik (China & Hong Kong), Anthony Hall (South East Asia & Pacific), Dennis Yang (Eastern Asia).
  • The Senior Vice Presidents are Geraldine Matchett (CFO), Chris Kirk (IT), Jean-Luc de Buman (Corporate Communications & IR Corporate Development), Olivier Merkt (Legal & Compliance), Dominique Ben Dhaou (Human Resources), Francois Marti (Strategic Transformation).
  • The Executive Vice Presidents are Michael Belton (Minerals Services), Beat In-Albon (Industrial Services), Frederic Herren (Automotive & GIS), Anne Hays (Life Science Services), Jeffrey Newell (Agricultural Services), Frankie Ng (Consumer Testing Services), Malcolm Reid (Systems & Services Certification), Alim Saidov (Oil, Gas & Chemicals Services & Environmental Services).

Acquisitions in 2010 and 2011

  • November 2011 - PfiNDE Inc., Connecticut, USA.
  • August 2011 - Environmental Testing Corporation (ETC), Aurora, Colorado, USA
  • August 2011 - Acumax (Proprietary) Limited, Gauteng, South Africa
  • July 2011 - Simmonds & Bristow Pty Ltd, Brisbane/Queensland, AU
  • June 2011 - Correl Rail Limited, Birmingham, UK
  • May 2011 - AG Research Associates LLC (ARA), Georgia, USA
  • April 2011 - Sertec S.r.l., Livorno, Italy
  • March 2011 - Agri-Food Laboratories Inc. (AFL), Guelph, Ontario, Canada
  • February 2011 - Auto Contrôle Evaluation Services (ACE), Bonneuil sur Marne, France
  • January 2011 - Lippens Geotechniek, Zulte, Belgium
  • January 2011 - NviroCrop Group, Potchefstroom, South Africa
  • January 2011 - chemical characterisation business in the UK
  • January 2011 - Tianjin Tianbao Construction Materials testing Co, Ltd., Tianjin
  • January 2011 - International Electrical Certification Centre Ltd., Hong Kong
  • November 2010 - M-Scan group, Wokingham (UK), West Chester (PA,USA), Geneva (Switzerland), Freiburg (Ger)
  • August 2010 - Am'Tech Medical, Sèvres, France.
  • July 2010 - Assayers Canada (also known as Mineral Environments Laboratories Ltd.), Vancouver, Canada.
  • March 2010 - Verilab SA, Antofagasta, Chile.
  • January 2010 - Intron Group, Sittard, Netherlands.
  • January 2010 - Joint Cooperation Agreement with Halliburton combining formation fluid sample acquisition and analysis services.

All SGS acquisitions since 2005.

Criticisms

The Worldbank recommends pre-shipment inspections (PSI) as a means to fight corruption especially in developing countries. As the SGS is one of the market leaders in PSI, it profits well from these means. In the 90's international charges claimed that the companies involvement was furthering corruption instead of fighting it due to the alleged payment of millions of dollars to government members and their families. Most claimed is a payment to the husband of then Pakistani Prime Minister Benazir Bhutto, Asif Ali Zardari.[4][5] Further suspected irregularities were published about the contracts with Paraguay[6] and the Philippines.[7][8][9] SGS was accused in 1998 of bribing government officials to win contracts in Pakistan. SGS SA was dropped from the bid and responded by suing the Pakistan government over the allegations. In 2004, SGS SA and the government of Pakistan reached a settlement where both parties withdrew their civil claims and counterclaims. A former employee was indeed indicted in relation with commissions paid to a Geneva lawyer who appeared to be connected with Ms. Benazir Buttho and her family. The case was subsequently dropped. However, an internal investigation revealed weaknesses in internal controls. As a consequence a "Code of Integrity and Professional Conduct" and a full compliance program were instituted to make sure the company was in line the FCPA or any similar legislation. More information on the SGS integrity program is available at http://www.sgs.com/about_sgs/compliance_integrity.htm

Notes

  1. ^ a b c d e f "Annual Report 2010" (PDF). SGS. Retrieved 5 February 2011.
  2. ^ Hermann Simon mentioned this company in his correspondent book as an example of a "Hidden Champion" (Simon, Hermann: Hidden Champions of the 21st Century : Success Strategies of unknown World Market Leaders. London: Springer, 2009. - ISBN 978-0-387-98147-5. P. 10)
  3. ^ Cotecna website
  4. ^ Court order against Zardari. http://www.pakistani.org/pakistan/benazir_conviction_short_order.html Retrieved 09.Feb.10
  5. ^ ICSID Case No. ARB/01/13http://icsid.worldbank.org/ICSID/FrontServlet requestType=CasesRH&actionVal=showDoc&docId=DC620&caseId=C205 retrieved Feb.10th 2010
  6. ^ ICSID Case No. ARB/07/29. SGS is currently suing the government of the Paraguay at ICSID to obtain payment of its outstanding fees. The proceedings are pending. http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&reqFrom=ListCases&caseId=C258&actionVal=viewCase
  7. ^ In 2000-2001, SGS and the government of the Philippines failed to reach agreement on the renewal of the 1991 worldwide comprehensive import supervision services contract that had expired. A dispute arose over the existence and the extent of the Philippines’ obligation to pay for part of the services that had been provided by SGS before the contract expiration and thereafter during the contract renewal negotiations. Unable to obtain payment of its fees, SGS filed proceedings at the ICSID (http://icsid.worldbank.org/ICSID/FrontServlet) and claimed compensation in an amount of up to USD 205 millions. However, exhausted by 6 years of litigation and endless discussions over the tribunal’s jurisdiction, the existence and the extent of the debt, SGS and the Republic of the Philippines finally settled their dispute in 2008 by an agreement ratified by the Arbitral Tribunal. SGS was paid USD 150 millions in two equal installments made in 2008 and 2009 respectively.
  8. ^ ICSID Case No. ARB/02/6
  9. ^ Researchpaper about PSI-industry and corruption in developing countries http://bloodbankers.typepad.com/submerging_markets/transnational_criminals_part_iv_final_final_final_1222003.pdf retrieved 09th Feb.2010
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