To: the General Meeting and the Board of Directors of DSM-Firmenich AG
Report on the assurance engagement on the sustainability information 2023 included in the Integrated Annual Report
Our qualified opinion
We have performed a reasonable assurance engagement on the non-financial information in the sections ‘About dsm-firmenich’, ’Letter to our Stakeholders’, ‘Strategy’ and ‘Sustainability’ included in the Integrated Annual Report for 2023 (hereafter: the ‘sustainability information’) of DSM-Firmenich AG. (hereafter 'the Company'), based in Kaiseraugst, Switzerland.
In our opinion, except for the effects of the matter described under ‘Basis for our qualified opinion’ section of our report, the sustainability information is prepared, in all material respects, in accordance with the GRI Standards and the Company’s internally developed supplemental reporting criteria as included in the ‘Reporting Criteria’ section of our report and as disclosed in the section ‘Non-Financial Reporting Policy’ included in the chapter ‘Sustainability Statements’ of the Integrated Annual Report.
Basis for our qualified opinion
Scope 3 emissions are calculated amongst others on the basis of spend data and emission factors. We have observed limitations with regards to the reconciliation of the spend data with the financial information underlying the consolidated 2023 financial statements of the Company. Consequently, we have not been able to perform sufficient assurance procedures over the completeness of spend data and therefore an uncertainty remains regarding the completeness of Scope 3 emissions as included in the sustainability information.
We have performed our reasonable assurance engagement on the sustainability information in accordance with Dutch law, including Dutch Standard 3000A ’Assurance-opdrachten anders dan opdrachten tot controle of beoordeling van historische financiële informatie (attest-opdrachten) (assurance engagements other than audits or reviews of historical financial information (attestation engagements)). This engagement is aimed to obtain reasonable assurance. Our responsibilities under this standard are further described in the ‘Our responsibilities for the assurance engagement on the sustainability information’ section of our report.
We are independent of the Company in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence). Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics for Professional Accountants).
We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Reporting Criteria
The sustainability information is prepared in accordance with the Sustainability Reporting Standards of the Global Reporting Initiative (GRI Standards) and the Company’s internally developed supplemental reporting criteria as disclosed in the section ‘Non-Financial Reporting Policy’ included in the chapter ‘Sustainability Statements’ of the Integrated Annual Report. The GRI Standards used are listed in the GRI Content Index as referenced to in the chapter ‘Global Reporting Initiative.
The comparability of sustainability information between entities and over time may be affected by the absence of a uniform practice on which to draw, to evaluate and measure this information. This allows for the application of different, but acceptable, measurement techniques.
Consequently, the sustainability information needs to be read and understood together with the reporting criteria used.
Materiality
Based on our professional judgement we determined materiality levels for each relevant part of the sustainability information as included in the Integrated Annual Report. When evaluating our materiality levels, we considered quantitative and qualitative considerations as well as the relevance of information for both stakeholders and the Company.
Scope of the assurance engagement of the group
The Company is the head of a group of components. The sustainability information incorporates the consolidated information of this group of components to the extent as disclosed in the ‘Non-Financial Reporting Policy’ of the Integrated Annual Report.
Our assurance procedures for the assurance engagement of the group consisted of assurance procedures at corporate and component level. Our selection of components in scope of our assurance procedures is primarily based on the component's individual contribution to the consolidated sustainability information. Furthermore, our selection of components considered relevant reporting risks and geographical spread.
By performing our assurance procedures at corporate and component level, we have been able to obtain sufficient and appropriate assurance evidence about the Company's reported sustainability information to provide an opinion about the sustainability information.
Our key assurance matters
Key assurance matters are those matters that, in our professional judgement, were of most significance in our assurance engagement on the sustainability information. We have communicated the key assurance matter to the Managing Board and the Supervisory Board. The key assurance matters are not a comprehensive reflection of all matters discussed.
These key assurance matters were addressed in the context of our assurance engagement on the sustainability information as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The impact of the merger and performance on the Company’s Food System Commitments were determined to be key assurance matters as these assessments are inherently subject to assumptions and management judgement, whereas the determination of other important sustainability indicators on Safety, Health and Environment and Human Resources require such judgement to a lesser extent.
The impact of the merger
Description
The effects of the merger between DSM and Firmenich on the sustainability information is complex due to the harmonization of processes and reporting definitions.
The sustainability information includes data from DSM and Firmenich, each as from 1 January 2023 (the 'reporting period'). This is different from the financial statements, in which the financial information of Firmenich is consolidated as from merger date as required under International Financial Reporting Standards. As this is the first year of reporting for the Company, no comparative data is available for 2022
Our response
- We have performed assurance procedures on the sustainability information starting with an assessment of the newly established sustainability governance framework
- We performed additional inquiries with topic owners in order to understand the processes within the Company, and to gain further insight into the harmonization of processes, we conducted additional site visits
- We examined the non-financial reporting policy and reporting definitions by reviewing documentation, such as reporting manuals, and by inquiring key personnel
Our observation
We have determined that the non-financial reporting policy and reporting definitions are appropriately applied within the Company. We also consider the disclosure on the merger and the reporting period in the Integrated Annual Report as being adequate.
Food System Commitments
Description
The Company reports on a set of performance indicators related to Food System Commitments (‘FSCs’). The FSCs are quantifiable commitments on the environmental or societal impact in global food systems of the Company together with its partners in its value chain. The FSCs, grouped in the areas Health for People, Health for Planet, Healthy Livelihoods and Basic commitments, are explained in the ‘Food Systems Commitments’ section of the Integrated Annual Report. The FSCs the Company reports over in 2023 are defined as listed below:
- Help close the micronutrient gap of 800 million vulnerable people by 2030
- Support the immunity of half a billion people by 2030
- Enable double-digit on-farm livestock emission reduction by 2030
- Support the livelihoods of 500,000 smallholder farmers across the value chain together with our partners by 2030
- Deforestation-free in our primary supply chains by 2030
- Good workforce nutrition by 2030
The performance indicators related to the FSCs are significant to our assurance engagement since we identified that they serve as material indicators for the Company to report on their societal reach and impact on global food systems. Also, the assessment of commitment is inherently subject to uncertainties as a result of estimates, assumptions and judgement.
Our response
- For each FSC we obtained an understanding of the reporting process, applicable definitions, applied reporting criteria and methodologies, performed walkthrough procedures and evaluated the design and implementation of relevant internal controls.
- We inquired the Company’s staff Members involved in the FSC reporting process and inspected internal documentation to understand the application of these definitions, applied reporting criteria and methodologies. Methodologies were supported with individual assessments of applied estimates and assumptions per FSC, which we consider to be critical in validating the (external) reference sources applied for each FSC.
- We challenged underlying evidence, such as sales and purchase volumes, market studies and external (scientific) research on relevant topics, such as but not limited to: greenhouse gas emissions (e.g. methane), intake dosages, crop yield factors, lives reached overlap factors, attendance statistics for educational webinars and certifications related to deforestation programs. We assessed external sources used for its relevance and reliability.
- We assessed whether the reporting criteria, estimates, assumptions and definitions are adequately disclosed in the Integrated Annual Report.
Our observation
We consider that the definitions and criteria for the performance indicators related to FSCs as described in the Company's internally developed methodology documents and reporting criteria as disclosed in the section 'Non-Financial Reporting Policy' included in the chapter ‘Sustainability Statement’ of the Integrated Annual Report have been appropriately applied and that the estimates and assumptions are adequately explained. We also consider the disclosure on the performance indicators, related to FSCs, in the Integrated Annual Report as being adequate.
Corresponding information not assured
The Science Based Targets baseline information related to scope 1 + 2 GHG emission reduction of Firmenich and DRT as included in chapter ‘Sustainability performance’ has not been part of this reasonable assurance engagement. Consequently, the corresponding sustainability information and thereto related disclosures for the period are not assured with reasonable assurance. Our opinion is not modified in respect of this matter.
Limitations to the scope of our assurance engagement
The sustainability information includes prospective information such as ambitions, strategy, plans, expectations and estimates. Prospective information relates to events and actions that have not yet occurred and may never occur. We do not provide any assurance on the assumptions and achievability of this prospective information.
References to external sources or websites in the Integrated Annual Report are not part of the sustainability information as included in the scope of our assurance engagement. Therefore, we do not provide assurance on this information.
Our opinion is not modified in respect to these matters.
Responsibilities of the Managing Board and the Supervisory Board for the sustainability information
The Executive Committee of the Company is responsible for the preparation and fair presentation of the sustainability information in accordance with the reporting criteria as included in the ‘Reporting Criteria’ section of this report, including the identification of stakeholders and the definition of material matters.
The Executive Committee is also responsible for selecting and applying the reporting criteria and for determining that these reporting criteria are suitable for the legitimate information needs of stakeholders, considering applicable law and regulations related to reporting.
The choices made by the Executive Committee regarding the scope of the sustainability information and the reporting policy are summarized in the chapter ‘Non-Financial Reporting Policy’ of the Integrated Annual Report.
Furthermore, the Executive Committee is responsible for such internal control as it determines is necessary to enable the preparation of the sustainability information that is free from material misstatements, whether due to error or fraud.
The Board of Directors is, amongst other things, responsible for overseeing the Company's sustainability reporting process.
Our responsibilities for the assurance engagement on the sustainability information
Our responsibility is to plan and perform our assurance engagement in a manner that allows us to obtain sufficient and appropriate assurance evidence for our opinion.
Our assurance engagement has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material misstatements due to error or fraud during our assurance engagement.
Misstatements can arise from errors or fraud and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of the sustainability information. The materiality affects the nature, timing and extent of our assurance procedures and the evaluation of the effect of identified misstatements on our opinion.
We apply the ‘Nadere Voorschriften Kwaliteitssystemen’ (NVKS, regulations for quality management systems) and accordingly maintain a comprehensive system of quality management including documented policies and procedures regarding compliance with ethical requirements, professional standards and other relevant legal and regulatory requirements.
We have exercised professional judgement and have maintained professional skepticism throughout the assurance engagement, in accordance with the Dutch Standard 3000A, ethical requirements and independence requirements. Our assurance included among others:
- Performing an analysis of the external environment and obtaining an understanding of relevant sustainability themes and issues, and the characteristics of the Company;
- Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the sustainability information. This includes the evaluation of the results of the stakeholders' dialogue and the reasonableness of estimates made by management of the Company;
- Obtaining an understanding of the systems and processes for collecting, reporting and consolidating the sustainability information, including obtaining an understanding of internal control relevant to our assurance engagement, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control;
- Evaluating the procedures performed by the Company’s Corporate Operational Audit department;
- Identifying and assessing the risks if the sustainability information is misleading or unbalanced, or contains material misstatements, whether due to errors or fraud. Designing and performing further assurance procedures responsive to those risks, and obtaining assurance evidence that is sufficient and appropriate to provide a basis for our opinion. The risk that the sustainability information is misleading or unbalanced, or the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from errors. Fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. These further procedures included among others:
- Inquiry with management and relevant staff of the Company at corporate and component level responsible for the sustainability strategy, policies and results;
- Inquiry with relevant staff of the Company responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the sustainability information;
- Determining the nature and extent of the assurance procedures at corporate and component level. For this, the nature, size and/or risk profile of these components were decisive. Based thereon we selected the components to visit. The visits to production sites in the China, Switzerland, Germany, France and the United Kingdom were aimed at, on a component level, validating source data and evaluating the design, implementation and operation of controls and validation procedures;
- Obtaining assurance evidence that the sustainability information reconciles with underlying records of the Company;
- Evaluating relevant internal and external documentation, on a test basis, to determine the reliability of the information in the sustainability information; and
- Performing an analytical review of the data and trends.
- Evaluating the consistency of the sustainability information with the information in the Integrated Annual Report which is not included in the scope of our assurance engagement;
- Evaluating the overall presentation and content of the sustainability information; and
- Considering whether the sustainability information as a whole, including the disclosures, reflects the purpose of the reporting criteria used.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the assurance engagement and significant findings, including any significant findings in internal control that we identify during our assurance engagement.
Amstelveen, 28 February 2024
KPMG Accountants N.V.
P.J. Groenland – van der Linden RA