CORPORATE GOVERNANCE

SAGT’s Corporate Governance framework supports its five core values of Safety, Trust & Integrity, Excellence, Teamwork, and Customer centricity, which in turn guide SAGT’s vision and are embedded across the organizational mission, purpose, code of conduct and its other sustainability related commitments.

SAGT’s corporate governance structure ensures that the Company remains in compliance with all Sri Lankan laws and regulations pertaining to its operations, including environmental, labour and human rights requirements, at a minimum, as well as relevant international governance frameworks. The Company further adheres to regulations of the Sri Lanka Ports Authority, Sri Lanka Customs, the Board of Investment of Sri Lanka, the Central Bank of Sri Lanka, the Central Environmental Authority and the Marine Pollution Prevention Authority and the Telecommunications Regulatory Commission of Sri Lanka, among others.

Governance policies such as the Employee Code of Conduct, Supplier Code of Conduct, and other Environmental and Labour practices related policies of SAGT outline the responsibilities of each stakeholder group. The policies are clearly articulated for the benefit of employees and all stakeholders with whom they engage. SAGT was also the pioneering entity within the Port of Colombo to introduce and enforce a whistleblowing policy and a policy against sexual harassment, while adhering to the precautionary principle in operational and investment decisionmaking. Disclosures pertaining to the Company’s management approach and the processes utilised to embed these ESG policies within the organisation are available on the Company website at www.sagt.com. lk.These policies together with SAGT’s Sustainability Management Framework seek to embed SAGT’s commitments into day-to-day business operations and decision making.

Grievances raised by the Company’s significant stakeholders or other parties may be addressed directly to the management via the Company website or email. A brief description of the Company’s grievance handling mechanisms with respect to each material topic is further outlined in the disclosures on SAGT’s management approach.

The Company has sought to increase the entrenchment of sustainability within the supply chain through the introduction of a supplier portal, a Supplier Code of Conduct and sustainability-related assessments.

THE CHAIRMAN OF THE BOARD AND THE CEO

The CEO of SAGT reports to the Board of Directors which comprises an Independent Chairman. The roles of the Chairman and the CEO are clearly defined. This facilitates a clear segregation of powers which ensures that no authoritative decisions are taken by the CEO or Chairman.

THE BOARD OF DIRECTORS

Oversees the conduct of the Company and is responsible for:

  • Providing direction and guidance for the formulation of high-level, medium-term and long-term strategies to spearhead the Company’s sustainable growth.
  • Approving annual plans and long-term business plans as recommended by the Executive Committee.
  • Assessing and evaluating the Board performance and the performance of SAGT holistically from a financial, non-financial and risk management perspective, and decisions undertaken in this regard, including risks arising from climate change
  • Ensuring that key sustainability topics that are material to the organisation, including the risks posed by climate change is integrated across management systems, internal control mechanisms, and risk management frameworks.

GOVERNANCE STRUCTURE AND SUSTAINABILITY OVERSIGHT

The Board of Directors exercises oversight of sustainability-related risks and opportunities through structured reporting mechanisms established within SAGT’s governance framework.

Sustainability performance indicators aligned to SAGT’s material topics are presented to the Board on a quarterly basis through the Senior Management Team (SMT). These include environmental, social and governance (ESG) metrics, climate-related risks and progress on mitigation initiatives.

Climate-related physical and transition risks are incorporated into SAGT’s Enterprise Risk Management (ERM) framework and are reviewed periodically by the Senior Management Team (SMT) as part of its risk oversight function.

The Board collectively possesses expertise in shipping, logistics, finance, risk management and sustainability governance. Where required, external advisors are engaged to strengthen oversight on evolving sustainability reporting requirements, including GRI Standards and IFRS Sustainability Disclosure Standards.

COMPOSITION

The Board composition is formulated based on the shareholding structure of John Keells Holdings PLC, Maersk B.V., APM Terminals B.V., Sri Lanka Ports Authority and Peony Investment S.A. The Board is composed entirely of Non-Executive Directors, including one female representative and are nominees of the shareholders. As they do not participate in daily operations, this structure effectively minimises potential conflicts of interest and upholds strong governance principles.

SAGT’s senior decision-making bodies keep themselves consistently in level with the sustainability reporting landscape and help bring in profound knowledge on sustainability aspects pertaining to shipping, logistics and the reporting, both from a local and global perspective.

In addition, key management personnel work closely with an external consultant to create awareness on sustainability, along with additional reporting requirements of IFRS, GRI Standards, and the recently launched European Sustainability Reporting Standards (ESRS).

The Executive Committee (ExCom)

Under the delegated authority of the Board, the ExCom is responsible for:

  • Reviewing annual and long-term business plans and recommending the same to the Board.
  • Tracking actual progress against plans.
  • Ensuring operations are carried out within the scope of the Enterprise Risk Management (ERM) framework, including risks arising from climate change.
  • Monitoring governance and compliance systems and ESG performance metrics on a quarterly basis.
  • Taking necessary action and decisions regarding minimising economic, environmental and social impacts arising from the Company’s operations.
  • Reviewing major acquisitions, disposals and capital expenditure of an operational nature.

Diversity of the Board

13

Non-Executive Directors

92%

Male

8%

Female

Age Diversity

Over 50 years of age

92%

Between 30-50 years of age

8%

Under 30 years of age

0%

COMPOSITION

The ExCom consists of three nominee Directors, including one female member representing John Keells Holdings, three nominee Directors representing A P Moller/ Maersk, the CEO, and the Chief Financial Officer (CFO) of SAGT.

The Audit Committee

The scope of functions and responsibilities of the Audit Committee is outlined within the Board-approved terms of reference, which are reviewed by the SAGT Board on an annual basis. The Committee’s responsibilities and duties pertain to the Company as a whole.

As per the Board-approved terms of reference, the role, duties and responsibilities of the Audit Committee broadly include-

COMPOSITION

The Audit Committee comprises three Non-Executive Directors, with at least one member having significant, recent and relevant financial management and accounting experience and a professional accounting qualification. The Head of the Internal Audit, Risk and Compliance Division serves as the Secretary of the Audit Committee, while SAGT’s CEO and Chief Financial Officer (CFO) are permanent invitees at all committee meetings.

Remuneration of Employees

The remuneration of non-executive employees is determined by means of the Collective Labour Agreement (CLA), which is signed with the employee unions every three years. The remuneration of employee grades of executive and above is reviewed annually by a career committee. It is assessed in line with market rates, in addition to taking employee performance, responsibilities, competence and skills into consideration, ensuring fair and equal treatment of all executive staff. This process ensures that there is equal remuneration for all staff irrespective of an employees’ gender, race, sexual orientation, religion, cultural background or any other factor, with any changes thereafter solely based on aspects such as performance, level, experience and hours of overtime.

Governance of Remuneration and Sustainability Performance

The Board retains oversight of executive remuneration structures. The remuneration of senior management is periodically reviewed to ensure alignment with organisational objectives, including operational efficiency, risk management and sustainability priorities

Sustainability-related performance indicators, including health and safety performance, environmental performance and risk mitigation objectives, are incorporated into the performance evaluation criteria of senior management where applicable. This ensures that sustainability considerations are integrated into executive accountability structures.

The Senior Management Team (SMT) and Management Committee (MC)

The intention of forming the SMT and MC is to encourage responsibility and accountability at a more granular level by assigning clear objectives for specific roles. Their responsibilities include:

COMPOSITION AND MEETING FREQUENCY:

The Senior Management Team (SMT) consists of seven members, including the CEO, CFO,CCO and relevant departmental General Managers (HR, Operations, Commercial & Marketing, IT, and Engineering). The Management Committee consists of fifteen members including the CEO (who chairs the committee), the SMT and Senior Managers of the Company. Of the fifteen members, one is female.

The SMT and MC meet on a regular basis to table key areas for discussion and ensure continuous improvement. The Senior Management Team (SMT) meets on a weekly basis while the Management Committee (MC) meets monthly. Attendance is mandatory for the respective Committee members, unless a compelling reason can be submitted to justify their absence. Meeting schedules are communicated to participants well in advance.

The agenda of the SMT and the MC is structured to avoid replication of effort, while ensuring all discussions and debates are complementary and driving a seamless bottom-up and top-down flow of information and accountability

A detailed overview of the Sustainability Management Framework is provided in the ‘Sustainability Integration’ section of this report, found on pages 32-33.

Operations Assessed for Risks Related to Corruption

SAGT generates enhanced stakeholder value through its sustainable economic performance, which is achieved by incorporating the highest standards of corporate governance, environmental stewardship, and social responsibility across the Company’s operations.

SAGT’s activities are underscored by the belief that ethical business practices are an organisational norm that cascades down from the toplevel management to each individual employee.

The Company’s Code of Conduct is the key tool used in reinforcing ethics and integrity organisation-wide. All new recruits are apprised of any remedial and disciplinary actions that may arise from violating the terms in the Code of Conduct and must read and acknowledge their acceptance of the same in conjunction with receiving their letter of appointment.

The Company’s Whistleblowing Policy enables employees to report any breaches of the said code, with the assurance of non-disclosure and anonymity. Alternately, employees are empowered to report any breaches or concerns directly to the CEO via email.

SAGT’s Anti-Corruption Policy is outlined within the Company’s Code of Conduct and contains the requisite guidelines and frameworks to enact disciplinary action should the need arise, thereby enforcing a zero-tolerance approach towards corruption. As part of the Company’s risk management process, SAGT assesses the risk of corruption at the level of each business unit, and based on the results, has enforced preventative plans to mitigate such risks.

The risk management process is further complemented by SAGT’s internal audit process which monitors and measures the effectiveness of existing controls in place to avoid instances of corruption.

Furthermore, any findings unearthed by the internal audit team are reviewed by the Company’s Audit Committee, with any lapses in processes or controls identified for improvement. Incidents of corruption and corrective actions taken to address the same are measured and tracked in the form of a quarterly KPI.

During the year under review, no incidences of corruption took place.

There were also no fines or sanctions imposed on SAGT due to noncompliance with laws and regulations.

SAGT maintains a zero-tolerance approach towards bribery and corruption.

Corruption risk assessments are conducted annually and include evaluation of procurement processes, supplier engagement, financial controls, customs interactions and operational decision-making procedures. Identified risks are categorised based on likelihood and impact, and mitigation controls are implemented accordingly.

No significant risks of corruption were identified that required escalation beyond existing control mechanisms

The Company’s Code of Conduct and Anti-Corruption Policy apply to all employees, Directors and relevant third parties. All new recruits are required to formally acknowledge compliance with the Code of Conduct upon appointment.

The Whistleblowing Policy provides confidential and anonymous reporting channels for employees. The impartial reporting channel is an external ombudsperson. The ombudspersons contact details is available for employees to raise any concerns.

Internal audit reviews are conducted periodically to assess the effectiveness of anti-corruption controls. Findings are reported to the Audit Committee for oversight and corrective action.

During the year under review:

Communication and Training on AntiCorruption Policies and Procedures

SAGT communicates its anticorruption policies to all employees through the Code of Conduct and internal communication channels During the reporting year:

Where applicable, training programmes on ethical conduct and compliance are conducted for relevant employee categories to reinforce awareness and strengthen internal controls.

Stakeholder Engagement

SAGT has in place both formal and informal channels which encourage the Company to interact with its stakeholders and foster an engaging environment and is imperative due to the diverse nature of SAGT’s stakeholder base.

The Company maintains formal contracts with major global and regional shipping lines and at an operational level, daily interactions take place with their nominated representatives. Furthermore, SAGT fosters an ongoing engagement with its providers of capital including primary shareholders and financiers, with the respective disclosures therein transcending beyond statutory requirements.

The Company’s suppliers engage with SAGT’s Supply Chain Division daily. The division continuously seeks to raise awareness on sustainable practices through a focused engagement with its most significant suppliers and supplier assessments

Structured Stakeholder Engagement Process

SAGT identifies its stakeholders based on the degree of influence, dependency, responsibility and impact associated with its operations. Stakeholder engagement is conducted through structured and ongoing communication channels.

Key stakeholder groups include:

Stakeholder concerns and expectations are reviewed periodically and are considered in the identification and validation of SAGT’s material sustainability topics. Outcomes of stakeholder engagement are integrated into business planning, risk management processes and sustainability initiatives.

More information on stakeholder engagement can be found in the ‘Sustainability Integration’ section from pages 30-42 of this report.

SAGT has established comprehensive policies, processes, and systems formulated to support effective recruitment, development, empowerment and retention of employees, to facilitate their engagement.

SAGT’s employee engagement approach includes:

  1. Involving all levels of employees in the formulation of departmental plans, under the leadership of top management and other senior staff. Employees are empowered to contribute towards policy development through the adoption of this bottom-up approach.
  2. The committee structure provides all employees with access to every level of management.
  3. Employees are encouraged to express new ideas and innovations. The Company has nurtured an environment that enables employees to provide constructive criticism and feedback through its open-door policy, monthly Town Hall meetings and an annual employee opinion survey, all of which contribute towards more informed decision-making.
Memberships and Associations

To support overall engagement with industry stakeholders and peers, SAGT works in close partnership with trade associations and business chambers to drive common goals that would promote industry growth and create a culture of sustainable development and pose wide-ranging benefits to all stakeholders.

SAGT therefore actively participates as a member in the following trade industry organisations:

In addition, SAGT’s Senior Managers play an active role in supporting the industry in their respective roles as office-bearers in the following trade/ industry associations:

SAGT also maintains partnerships with the following organisations: