General information

Basis for preparation

Reporting policy and justification of choices

This is dsm-firmenich’s second Integrated Annual Report after the merger between DSM and Firmenich. In it, we report for the calendar year 2024. Our previous Report was the dsm-firmenich Integrated Annual Report 2023, published on 29 February 2024. We publish our Report exclusively in digital format, and the Report is available in an online version and as a PDF.

In the Management Report (consisting of the sections Our Company to Sustainability Statements), we explain our vision and policy with respect to sustainability practices and report on our activities. We are in favor of convergence in reporting standards and frameworks, moving to globally accepted non-financial reporting standards. Currently, we recognize and participate in a number of initiatives that are driving toward that goal.

Mandatory Reporting requirements

The basis for our non-financial reporting is the Swiss Code of Obligations. The Sustainability Report, as described in Article 964b of the Code, consists of all the information within the Sustainability chapter and the Sustainability Statements chapter. This Report also provides relevant climate-related financial disclosures as required by the Swiss Ordinance on Climate Disclosures. This Ordinance is based on the Recommendations of the Task Force on Climate-related Financial Disclosures report, version of June 2017, and the annex Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures, version of October 2021. This Report contains our disclosures on Governance, Strategy, Risk Management, and Metrics and Targets. For information on how we report against the TCFD recommendations, see Appendix to the Sustainability Statements.

Our disclosures in the Sustainability Statements are reported in accordance with the European Sustainability Reporting Standards (as set out in Annex 1 to the Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards) and are subjected to limited assurance. A small number of metrics are subjected to reasonable assurance and are indicated with ^[RA].

We highlight areas of relevance to our company in the People and Planet sections. Information from these sections is incorporated by reference where relevant into the Sustainability Statements.

As this is the first year of reporting in accordance with the ESRS in our Annual Report, we include dsm-firmenich-specific metrics based on existing metrics and targets, and we have interpreted the requirements according to our own insights, the FAQs and guidances that are available, and through engagement with peer companies and key industry associations and working groups. As the collective experience with, and understanding of, ESRS matures, we will update our interpretations and  the usage of entity-specific metrics, and address any inherent measurement or evaluation uncertainties.

Voluntary reporting requirements

Our reporting is also based on voluntary non-financial reporting guidelines such as the Global Reporting Initiative (GRI) Standards and the UN Sustainable Development Goals (SDGs). dsm-firmenich has reported with reference to the GRI Standards for the period 1 January 2024 to 31 December 2024.

A detailed overview of how we report according to the GRI Standards indicators, including a reference to relevant sections in this Report, is provided in the GRI Content Index, available separately on our website.

We have also aligned our approach with the SDGs and are familiar with the opportunities and responsibilities the SDGs represent for our business. We embrace all SDGs, but have chosen to highlight those particular goals which most closely align with our business activities, along with our people and operations. In this Report, we include the SDGs in our reporting process, for example by mapping SDG reporting priorities in our value creation model, in the Our approach to sustainability section, and in the solutions that we highlight.

Selection of topics

The topics covered in this Report were selected on the basis of our materiality analysis, which assessed the relevance and impact of selected topics for both our company and various stakeholders. The sustainability data in this Report are qualitative as well as quantitative; the qualitative information can also contain quantitative elements. The Materiality Matrix and the process by which it is created is described later in this section.

Scope

The sustainability data in this Report cover all entities that belong to the scope of the Consolidated Financial Statements. In the value chain, sustainability data relates primarily to tier 1 suppliers. Unless otherwise explicitly stated, the sustainability data in this Report have not been verified externally.

The time horizons used in the Sustainability chapter are short term (up to three years), medium term (four to ten years) and long term (greater than ten years). The short-term horizon is consistent with that used in our Risk Management process, with a further breakdown of the Risk Management ‘long term’ horizon to include a medium term. The sustainability time horizons are applied in the respective topical risk assessments. All IROs are in the short to medium term. Climate IROs extend into the long term. The lifetime of our assets is not considered in the definitions of the time horizons due to the variability in our operational footprint.

Environmental data are reported until the moment control of the company is transferred, and social data until the end of the month in which control of the company is transferred. The date on which control of the company is transferred generally coincides with the date a divestment is closed, and control of the shares is transferred to the new owner.

Environmental methodology

Our progress on the key environmental performance indicators is collected and evaluated twice a year for all sites. The data are based on these sites’ own measurements and calculations, which in turn are founded on definitions, methods and procedures established at Group level. The site managers of reporting units are responsible for the quality of the data. Data are collected using measurements and calculations in the production processes, information from external parties (e.g., on waste and external energy), and estimates based on expert knowledge. Reporting units have direct insight into their performance compared to previous years and are required to provide justifications for any deviations above the threshold. For most parameters, the threshold is set at 10%.

The environmental materiality of all our operational sites is also evaluated at company level, based on the data collected by the sites. Each indicator has a specific threshold, and sites exceeding the thresholds on any indicator are included in the Environmental Material Sites list and are closely monitored. In 2024, over 90% of our total Scope 1 & 2 emissions and water withdrawals originate from our ISO 14001 certified sites.

Scope 3 greenhouse gas (GHG) emissions are calculated on the basis of activity data and emission factors (GHGs emitted per unit of material or activity, usually kg, km or euro, depending on the category). Emission factors are obtained from a variety of sources, including suppliers, in-house Life-Cycle Assessment (LCA) models, and industry databases. Emission factors are chosen that are considered most representative and reliable. Activity data is based on spend, volume, distance, or number of employees, depending on the category. Data is reported on the basis of a 12-month timeframe and is obtained from a number of internal systems.

Our most significant category is category 1: Purchased goods and services. Our other significant categories are the other categories included in our Science Based Targets (SBTs), being categories 3, 4 and 5.

For category 1, the emissions are calculated using data from our ERP systems, with purchased quantities multiplied by one of over 1,000 emission factors approved by our in-house LCA experts. Emission factors are based on primary supplier data or secondary sources such as the EcoInvent database. Where specific factors are unavailable, emissions are extrapolated based on spend, also for the entities not on SAP. Indirect sourcing emissions are also calculated using a spend-based approach whereby emission factors are allocated to specific indirect sourcing categories.

Emissions for category 3 (Fuel production, purchased energy, and transmission losses) and category 5 (Waste generated in operations) are calculated using data extracted from our environmental reporting system. Emissions from fuel production, purchased energy, and transmission losses are determined using the average-data method, with quantities multiplied by emission factors developed and approved by our in-house LCA experts. Similarly, operational waste emissions are calculated based on their treatment method, where waste quantities for each method are multiplied by the corresponding emission factor, also developed and approved by our in-house LCA experts.

For category 4 (Upstream transportation and distribution), we apply the calculation methodology for both outbound and inbound transportation and distribution, covering road, marine, rail, and air transport. For outbound transportation, emissions are calculated within a dedicated logistics dashboard, which integrates data directly from SAP entities and freight carriers.

The dashboard multiplies the mass of goods transported by the distance travelled per leg, and then applies the appropriate well-to-wheel emission factor for each transport mode or vehicle. For entities outside of SAP and inbound transportation, emissions are extrapolated based on available data. The year-on-year comparability of the data can be affected by changes in our portfolio as well as by improvements to measurement and recording systems at the various sites.

Social methodology

All employees are in scope for our reporting. Social data for employees are collected per Business Unit and consolidated at corporate level. Metrics on workforce and workforce composition, as well as inflow and outflow, are reported based on the year-end figures. In the year of our merger, inflow and outflow were measured versus the first full month after the merger. Employee engagement and the Inclusion index are measured via a survey that is conducted on an annual basis. Safety and health metrics are reported on a 12-month rolling average. Divestments are included for the months prior to transfer of control of the company. Occupational health cases and training hours are reported on the basis of the year-end figures. The approaches related to compensation-related metrics are included, together with the reporting of those metrics.

The reach of our nutrition improvement products is calculated based on the value of products sold in the different intervention areas. This is combined with market information on dosage, pricing and usage to convert the value of products to the number of beneficiaries.

Statement on due diligence

Due diligence is how we identify, take action, and report on progress relating to impacts on the environment and/or on people. This is integrated into our existing processes and governance and is a continually evolving process.

Information on the governance structures responsible for our due diligence can be found in the Internal engagement on sustainability section. Information on how we implement our due diligence process relating to people can be found in the Social impact, Our suppliers and Workers in the value chain sections. Information on our approach relating to environment can be found in the Physical and transition climate risk assessments, Pollution, and the Water and marine resources sections.

Information on how we manage our material impacts, risks and opportunities is included at the start of every topical section further in the Sustainability Statements.

Risk management over sustainability reporting

Material sustainability risks are integrated and managed as part of our company-wide risk management processes. Our company-wide approach to risk management is described in the Our approach to risk management section.

Material risks are reported twice per year by the Business Units and the Business Partners to the Executive Committee, and, together with the Group Risk Assessment, validated by the Audit & Risk Committee and discussed with the Board of Directors. The top risks are disclosed in the Report. Further to this, a specific project risk assessment was performed on the CSRD reporting process.

The top risks identified were:

• Data quality: risk of gaps in sustainability reporting, due to processes & systems not fully aligned, could impact our reputation
• Project timeline: due to tight timelines, risk of disclosing incomplete assessments or unchecked data in the annual report

The mitigating actions for these risks are:

• Further aligning the processes and internal controls for sustainability into our CSRD-related activities in 2025
• Further combining sustainability data into one data lake and improving data architecture and granularity
• Implementing training to deepen and broaden CSRD reporting competencies of the team

Current and anticipated financial effects, and critical assumptions

The current and anticipated effects of our sustainability matters have been evaluated and disclosed throughout the Sustainability Statements. However, we do not yet have a complete view of the current and expected financial effects of our sustainability matters other than those explicitly mentioned in our Report. See the preceding section on Risk management over sustainability reporting, as well as the Material impacts, risk and opportunities sections at the start of each topical standard. There are currently no critical climate-related assumptions that have an impact on the Financial Statements.

Significant uncertainties

The inclusion of new metrics has required us to make certain assumptions and estimates in order to enable compliance with the reporting requirements. These assumptions and estimates are made based on our current knowledge and are intended to provide our best insights into the current state. Key assumptions are made in the metric related to the reach of our nutrition improvement products. Judgements are used in the Scope 3 reporting and Substances of concern reporting.

The assumptions used to calculate the reach of our nutrition improvement products relate to the use of third-party information to estimate the intervention cost per beneficiary in each of the intervention areas. These assumptions are based on average market prices, price points defined by NGO partners or dosage and usage information based on scientific studies. As these intervention areas support different levels of malnutrition and access to nutrition, we assume that beneficiaries are only reached by one type of intervention.

In Scope 3 reporting for Category 1, direct In-house modelled emission factors (EFs) are used where supplier-specific EFs are not available and there is no representative EF from approved industry databases. In-house EFs are based on models developed by our dedicated LCA experts using product and process specific data. These LCA models are developed as per ISO 14040/14044 and our methodology is also externally reviewed.

Substances of (very high) concern (SOC/SVHC) are identified based on product and ingredient composition data included in our two main internal product data systems. This information is also used for, e.g., the creation of product labels and safety datasheets. The quantity of SOC/SVHC is calculated based on this information, with a threshold of 0.1% in the finished product, and the sales volume.

Comparative data is provided for data points that were included in the Integrated Annual Report 2023. In some cases, the definitions for comparative data may differ from the reporting year due to different reporting requirements and will be explicitly mentioned.

Governance

Our disclosures on Governance are incorporated from other sections of the Report. Please see the table below.

Strategy

Business Model and value chain

Our business model and value chain can be found in the Our integrated report and value creation section.

We are developing our approach to assess the sustainability of our portfolio. More information can be found in Our approach to sustainability – Impact measurement and reporting. The aspects of our strategy that relate to sustainability can be found in Strategy – Our approach to business.

Materiality Matrix

The recalibration of the Materiality Matrix resulted in 12 Material topics and four ‘emerging topics.’ The emerging topics are topics that warrant monitoring but are considered not material in the reporting year.

Topics are listed in each of the quadrants alphabetically and are grouped into three areas: Governance and Business, Environment, and Social. No topics were identified as only impact material, as all material topics were expected to be financially relevant.

Material topics

The material topics map to the ESRS topics as follows.

Stakeholder engagement

Our approach toward the interests and views of our stakeholders is incorporated from the following sections in the People and Stakeholder engagement sections:

• Nutrition and health
• Supplier engagement
• Investor engagement
• Community engagement
• Partnerships

The outcomes of our engagement with stakeholders are discussed internally in the relevant functions and teams. In turn, this feeds into our strategy and business approach. Our due diligence is referenced in the Statement on due diligence.

Impact, risk and opportunity management

Materiality assessment process

The materiality assessment is an annual process. The first step evaluates the business context to identify if material changes have occurred. If none have occurred, the previous conclusions are re-assessed. If material changes have occurred, a full materiality assessment is performed. The assessment of potential and actual positive and negative impacts, risks and opportunities, including applied thresholds, will be based on current guidance documents relating to the assessment, such as the Materiality Assessment Implementation Guidance by EFRAG. The assessment is validated by the Global Sustainability Leadership Team (GSLT) and approved by (the Sustainability Committee of) the Board of Directors. The next assessment is expected in 2025.

The Materiality assessment process, as well as the due diligence process, are dynamic and are constantly evolving, based on internal and external learnings. We anticipate performing the next full materiality assessment process in 2025, including engagement with various stakeholder groups. We aim to continuously improve our materiality assessment and due diligence processes to better address the evolving needs of our stakeholders. This includes enhancing transparency and accountability in reporting, as well as integrating feedback from stakeholders to refine and strengthen the company's sustainability practices. It is important to note that our materiality assessment process may not have captured every impact, risk and opportunity that any individual stakeholder (group) may have identified.

2024 Materiality assessment

As there were no material changes in our organizational or operational context, such as a merger or acquisition, changes in the supply chain or global events, the conclusions of the previous materiality analysis were still considered to be relevant, and were used in the preparation of the 2024 Materiality Matrix. As a result, no additional consultations were conducted in 2024. A re-assessment of the 2023 outcomes was performed based on additional information and new insights. This was through the assessment of seven ‘lenses’:

• Defining topics
• Benchmark
• Enterprise Risk Management
• Methodologies
• Scale, scope, and irremediability
• Value creation model
• Grouping of topics

The outcome of the seven lenses was aggregated. This aggregated outcome was further reviewed in combination with thresholds focusing on 2023 topics that scored low on impact and financial materiality and assessed as being of low stakeholder importance. The re-assessment resulted in the following changes:

• The topics Animal welfare, Partnerships & relationship management, Raw materials & waste, and Regenerative agriculture have been classified as emerging topics. These are topics that warrant monitoring but are considered not material in the reporting year
• Innovation, digital & technology was considered as an enabler, and as such has been integrated into multiple topics
• Cybersecurity was considered part of Corporate governance, business ethics & transparency
• Multiple topics related to our workforce have been integrated into a single topic, Inspiring place to work

The proposed Materiality Matrix was reviewed and approved by the Sustainability Committee

Content index

An overview of the location of the material disclosure requirements, including those that have been incorporated by reference, can be found in Appendix to the Sustainability Statements – ESRS content index. Disclosure requirements that have been voluntarily complied with to meet the needs of ratings, rankings, and other stakeholders are not included in this index as they are not considered material for dsm-firmenich to report on from an ESRS perspective. The list of datapoints in cross-cutting and topical standards that derive from other EU legislation can be found in Appendix to the Sustainability Statements – ESRS Datapoints derived from other EU legislation.