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.

Operations

The company is organised into ten divisions with each led by an Executive Vice President (EVP), and has ten geographic regions 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. Each division provides services to a specific industry:

• Agricultural Services - 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, green building certification services, 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 - 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.

• 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.

Criticisms

The World Bank 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 company's involvement was furthering corruption instead of fighting it due to the alleged payment of millions of dollars to government members and their families. Most often alleged is a payment to the husband of then Pakistani Prime Minister Benazir Bhutto, Asif Ali Zardari.^[2] Further suspected irregularities were published about contracts with Paraguay,^[3] and the Philippines.^[b][4][5]

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 corrupt people. 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.

Notes