Sustainability affects us all

Dear Ladies and Gentlemen,

We can look back on a very dynamic past year. The understanding of sustainability is changing and this affects us all. On the one hand, there were significant uncertainties and high volatility due to the war in Ukraine, ongoing disruptions in supply chains and regional sharply rising energy costs, interest rates and inflation affected the entire reporting period. On the other hand, there is increasing pressure from politicians, legislators and our stakeholders to meet the extensive regulatory requirements. It is clear that the transformation to net zero must take place. Only in this way can we live up to our responsibilities to today’s society, future generations, the environment and biodiversity, and so lead our company successfully into the future. This societal rethink is a first step in the right direction. For us as a company, an accurate assessment of the current situation is the next step – which is also essential for developing a strategy with objectives that extend to decarbonization. To do this, we have to know all the relevant facts and figures about our own ecological footprint. We still have a long way to go, particularly with regard to indirect emissions, but in the past year we have made significant progress and improved the processes for expanding data collection.

Sustainable development driven ahead in 2022, reporting format adapted
Last year SFS seized its economic opportunities and achieved strong growth, both organically and by integrating Hoffmann. With a view to our sustainable development, we expanded the scope of data collection, improved the evaluation process through standardization and increased transparency. We made good progress, particularly in the environmental field, expanding our renewable energy sources and significantly reducing our direct emissions.

We adapted our ESG reporting to the new requirements of the Global Reporting Initiative (GRI Standards 2021) and, together with our stakeholders, discussed and evaluated the topics that are important to us. Taking double materiality – both the impact the company has on the environment, society and the economy in relation to these issues (inside-out) and also the impact they have on SFS (outside-in) – into account the following key topics were identified:

• Energy and emissions
• Sustainable solutions
• Procurement
• Employee promotion and engagement
• Occupational health and safety

In future we will report on these topics in a focused manner and improve our sustainable development with the help of long-term goals that are integrated into our corporate strategy.

Creating added value with sustainable solutions
At SFS, sustainability is an important driver of innovation. We strive to deliver products and services that take environmental, social and economic benefits into account across the entire life cycle, with the aim of creating sustainable added value. This endeavor was realized in the year under review, for example, through environmentally friendly solutions such as GARANT Green Plus, and tools where the handles are made from renewable raw materials.

Increased transparency in supply chains
To comply with our duty of care more consistently and increase transparency across the entire value chain, we intensified our dialog with our suppliers during the year under review. Environmental and social criteria assessments have been carried out with all direct suppliers of SFS since 2023, with the goal of being fully able to measure more accurate the indirect emissions (Scope 3) too going forward, and reduce them in the long term.

Social
Employee development and satisfaction encouraged
In terms of social issues, the focus in 2022 was on employee satisfaction and development. Employee satisfaction remains at a consistently high level. For example, around 80% of employees are satisfied with SFS as an employer and 87% rate the company as attractive. These are the results of the international survey conducted in 2021, which were supplemented by the outcome of the 2022 survey in the Electronics and Distribution & Logistics International divisions.

In continuing and executive education we are pursuing the longterm goal of 5–7% of permanent employees worldwide participating in dual-track education and training programs. With a score of 5.4%, we hit this target again in 2022 (PY 5.1%). We have further expanded personnel development, particularly in middle management and through the Advanced Leadership Development Program (ALDP). This should be seen in light of the fact that we want to fill 70% of senior management positions with internal candidates.This target too was fully met once again in 2022 with a score of 100% (PY 100%).

Too little progress in reducing the accident rate
At the end of 2022 the SFS Group employed 13,282 people (FTEs, PY 10,509), of which 12,617 FTEs are included in the ESG reporting. This strong growth is attributable to the completion ofthe transaction with Hoffmann, which had 3,082 employees at year-end. On a like-for-like basis, the headcount declined slightly by –2.9%. The number of accidents per million hours worked was reduced by –1.4%. This brings us a little closer to our goal of halving the accident rate by 2025, but we are unlikely to achieve it.Based on the 2020 figure of 4.7 accidents per million hours worked,the target for 2025 stands at 2.35 accidents per million hours worked.

Governance
High compliance standards maintained, social engagement expanded
In terms of corporate governance, as in the previous year, there were no compliance incidents that resulted in fines or legal proceedings. The results of the compliance audits conducted at the four companies were positive. We identified weaknesses in knowledge of the Code of Conduct and internal reporting channels and have taken appropriate countermeasures. Thanks to the merger with Hoffmann, we were also able to expand our commitment to support for disadvantaged children and young people.

Outlook for 2023: filling data gaps, setting new targets
In 2023 we intend to close existing data gaps and set additional targets as a result. At the same time, there is a need to increase the focus on the rate of occupational accidents. In addition to the reduction targets for Scope 1 and Scope 2 already announced, we are also planning to develop a decarbonization strategy that will go all the way to net zero.

We would like to invite you to join us on this exciting and challenging journey. Your concerns, demands and ideas are helping shape our transformation.

Yours sincerely,