Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environment (energy and emission reduction)
• Supply chain responsibility
• Labour standards (including health & safety)
• Community investment
• Business ethics
• Green products

Environmental Achievements

• 1.3% absolute emission reduction in the four largest European plants
• New combined heating and cooling systems put into use in Villingen, Germany, resulting in substantial energy and CO2 savings
• New waste and recycling initiatives

Social Achievements

• Low absenteeism rate of 2.6%
• Introduction of Management Development Plan for High Potentials
• Launch of Kendrion Academy
• Health & safety campaigns
• Introduction of sponsor policy
• Special CSR edition of staff Magazine Magnetised
• Environmental awareness campaign
• Corporate community investment project started in India: scholarships for poor Indian students
• Successful introduction of a Supplier Code of Conduct at many suppliers

Governance Achievements

• Supplier Code of Conduct introduced in all business units
• Anti-corruption risk assessment executed
• Structural stakeholder dialogue initiated
• CSR data collection information system implemented
• CSR targets included in CEO and CFO bonus schemes

Climate Goals & Targets

Environmental Challenges

• Scarcity of natural resources
• Transition to more sustainable energy
• Climate change
• Shortage of skilled engineers
• Relatively low number of women in management positions
• Uncertainty concerning the future economic situation and market volatility

Mitigation Strategies

• Investments in energy-efficient systems
• Development of energy-saving products
• New recruitment channels (social networks, cross-border recruitment)
• Intensive contacts with universities to recruit women for management positions
• Maintaining a core of temporary employees and building flexibility into contracts

Supply Chain Management

Responsible Procurement

• Supplier Code of Conduct

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: GRI

Certifications: ISO 14001 (8 plants), ISO 9001 (11 plants), ISO TS 16949 (6 plants)

Sustainable Products & Innovation

• Energy-saving fan clutches for gensets
• High Torque permanent magnet brake
• Linear actuator for driver assistance systems
• Power-saving holding magnet for fire doors

Environmental Metrics

ESG Focus Areas

• Responsible use of resources in the supply chain
• Environmental protection
• Good labour conditions
• Fair business conduct
• Strong communities
• Sustainable products

Environmental Achievements

• 10% reduction in absolute and relative CO2 emission for biggest European plants
• Introduction of the company's greensigned logo for sustainable products (KOBRA)
• ISO 14001 certification for plant in Brazil

Social Achievements

• Introduction of CSR criteria in bonus scheme for Executive Committee members
• First Kendrion CSR Award presented
• AA level credible employer certification for Kendrion (Suzhou) Co. Ltd.

Governance Achievements

• 100% acceptance of Code of Conduct
• Implementation of anti-bribery & corruption policy

Climate Goals & Targets

Environmental Challenges

• Shortage of skilled engineers
• Uncertainty concerning future economic situation and market volatility
• Increasingly stringent legislation on resource use, environment, CO2 reduction, and employee treatment
• Dependency on suppliers for conflict minerals and rare earth metals
• Need to balance employee security with cost flexibility

Mitigation Strategies

• Regional activities to enhance appeal as local employers
• Maintaining a core of temporary employees and building flexibility into contracts
• Development of in-house Supplier Code of Conduct
• CSR supplier audits
• Proactive approach to bringing employees' attention to anti-bribery and corruption issues
• Implementation of compliance training

Supply Chain Management

Supplier Audits: 5 CSR supplier audits per business unit

Responsible Procurement

• Supplier Code of Conduct

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI

Certifications: ISO 14001 (nine plants), ISO EN 9001 (eleven plants), ISO TS 16949 (six plants)

Sustainable Products & Innovation

• KOBRA spring-applied brake

Awards & Recognition

• Kendrion CSR Award
• German ‘TOP National Employer’ Award

Environmental Metrics

ESG Focus Areas

• Economic Performance
• Environmental Performance
• Labor Practices and Decent Work
• Human Rights
• Society
• Product Responsibility

Environmental Achievements

• Not disclosed

Social Achievements

• 250 employees received online compliance training

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Not disclosed

Mitigation Strategies

• Not disclosed

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Supplier Code of Conduct

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: GRI G4

Certifications: ISO

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Sustainable products
• Responsible use of resources in the supply chain
• Sustainable operations
• Environmental protection
• Fair labour standards
• Health & safety
• Fair business conduct
• Strong communities

Environmental Achievements

• 10% reduction of relative CO2 emission and energy consumption compared to 2014 for biggest plants
• Investments in energy-efficient systems resulting in substantial energy and CO2 savings
• ISO 14001 certification for two locations of Industrial Magnetic System business unit
• ISO 50001 certification for Kendrion (Villingen) GmbH, Germany

Social Achievements

• Successful introduction of a Supplier Code of Conduct, signed by 368 suppliers
• Increased number of CSR supplier audits to 36
• AAA Award from the Chinese Suzhou labour security bureau
• familyNET Award 2015 for outstanding family-friendly projects

Governance Achievements

• Implementation of a revised Code of Conduct with emphasis on anti-bribery and corruption
• Introduction of a competition compliance policy
• Implementation of a structured risk management framework

Climate Goals & Targets

Environmental Challenges

• Uncertainty concerning the future economic situation and market volatility
• Limited sphere of influence in the supply chain
• Difficulty in achieving a 100% acceptance of the Supplier Code of Conduct from all suppliers
• Need to balance employee interests with company continuity

Mitigation Strategies

• Maintaining a core of temporary employees and building flexibility into contracts
• Conducting CSR supplier audits and implementing improvement plans
• Continuous dialogue with suppliers on sustainability performance
• Fair agreements and assistance in finding other jobs for redundant employees

Supply Chain Management

Supplier Audits: 36 audits/year

Responsible Procurement

• Supplier Code of Conduct

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: GRI G4 core level

Certifications: ISO 9001, ISO/TS 16949, ISO 14001, ISO 50001

Third-party Assurance: Deloitte Accountants B.V.

Sustainable Products & Innovation

• Energy-saving module (ESM)
• Locking solenoid
• Rotary solenoid

Awards & Recognition

• AAA Award
• familyNET Award 2015
• Kendrion Taking Responsibility Award 2015

Environmental Metrics

ESG Focus Areas

• Climate change
• Energy efficiency
• CO2 emissions
• Occupational health and safety
• Training and education
• Non-discrimination
• Equal opportunities
• Supply chain management
• Human rights
• Sustainable production
• Sustainable product portfolio
• Business ethics & Integrity
• Economic performance
• Responsible & innovative products
• Employee health & safety
• Employee development
• Customer engagement
• Energy management & emissions
• Responsible procurement
• Material & waste management
• Strategic partnerships & co creation
• Community involvement
• Water management

Environmental Achievements

• Reduced relative CO2 emissions from energy by production plants by 54% compared with 2015
• 5.5% reduction of total waste compared to the prior year
• Overall recycling rate increased from 82% to 83%
• Reduction relative CO2 emissions from energy by production plants by 8%

Social Achievements

• Good safety results across its production plants
• Continued focus on the safety of the production processes
• Implementation of a global company culture campaign
• 48% female workforce

Governance Achievements

• No suppliers that did not fulfil the recommended requirements for compliance with the Supplier Code of Conduct
• Completed review on decarbonization strategies and mitigation plans

Climate Goals & Targets

Environmental Challenges

• Global supply chain shortages and raw material price increases
• Shortages in semiconductors, steel, copper, and plastics
• Significant semi-conductor shortages which reduced global car production
• COVID-19 pandemic continued to impact the lives of people around the world
• Increased pressure on price and/or payment terms from large customers impacting margins and cash flow
• Risk of significant increase of purchase prices

Mitigation Strategies

• Showing great flexibility and agility to capitalize on positive demand development
• Adding a number of new large clients to its customer portfolio
• Investing in the localization of production lines and research & development capabilities in China
• Streamlining operations and relocating production lines to facilities in Rumania and Germany
• Developing scenario analyses to estimate potential (financial) impacts of COVID-19
• Adjusting strict operating procedures to ensure continuation of production in a safe and responsible manner
• Focusing on cost control and working capital management
• Increasing the number of alternative sources for important (raw) materials
• Securing continuity of the supply chain by monitoring critical suppliers
• Negotiating contractual terms that ensure sales prices increase when volumes are reduced
• Strengthening relationships with key customers
• Implementing a new global Product Lifecycle Management (PLM) system
• Outsourcing standard IT services
• Conclude fixed-price arrangements with steel suppliers and suppliers of machined steel parts
• Customer contracts contain copper price clauses
• Fixing purchase price for products that contain permanent magnets

Supply Chain Management

Supplier Audits: 26

Responsible Procurement

• Kendrion Supplier Code of Conduct
• Supplier sustainability and quality audits
• Conflict mineral reporting template

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather conditions
• Natural disasters

Transition Risks

• Material price increases
• Carbon tax

Opportunities

• Global trend towards electrification of industrial processes
• Transition to sustainable mobility (ACES)

Reporting Standards

Frameworks Used: GRI

Certifications: ISO 14001, ISO 50001

Third-party Assurance: Deloitte Accountants B.V.

UN Sustainable Development Goals

• SDG 3
• SDG 8
• SDG 12
• SDG 13
• SDG 5

Kendrion aims to contribute to the advancement of several selected SDGs. These are also areas in which we aim to contribute to the advancement of selected UN Sustainable Development Goals (SDGs), towards SDG 5 (Gender equality) and 8 (Decent work and economic growth).

Sustainable Products & Innovation

• Electromagnetic Brakes for wind power turbines
• Components and technologies for transport subsystems for electric vehicles
• Components and subsystems for inductive heating
• Components for nuclear power plants
• AVAS sound system for electric cars
• Valves for smart active damping systems
• Turnkey sensor cleaning solution

Environmental Metrics

ESG Focus Areas

• Climate change
• Energy efficiency
• Carbon emissions
• Occupational health and safety
• Training and education
• Non-discrimination
• Equal opportunities
• Sustainable sourcing
• Ethical behavior
• Diversity
• Human rights

Environmental Achievements

• Reduced relative CO2 emissions from energy by production plants by 60% compared with 2015
• Reduced relative energy consumption by 15.2%
• Reduced relative CO2 emission by 14.0%
• New 28,000 m² manufacturing facility in China will be outfitted with solar panels, generating approximately 550,000 KwH of solar energy per year

Social Achievements

• Recurring annual improvement of health and safety figures
• Implemented The Circle of Trust, a confidential support line for female employees
• Improved employee satisfaction scores
• 29 CSR supplier audits conducted

Governance Achievements

• Established a Global Legal Compliance and Governance Framework
• Implemented a Speak-up procedure
• Implemented a new online compliance training program

Climate Goals & Targets

Environmental Challenges

• Supply chain volatility
• Soaring energy costs
• Inflation
• Semiconductor and other material shortages
• Geopolitical tensions
• COVID lockdowns in China
• Low global and European car production
• Unpredictable demand patterns

Mitigation Strategies

• Increased average sales prices
• Streamlined costs
• Relocated production lines to reduce costs
• Developed alternative sourcing strategies
• Invested in local capabilities and supply chains
• Implemented predictive planning tools
• Improved IT infrastructure
• Split Automotive Business Group into Automotive ‘Core’ and Automotive ‘E’

Supply Chain Management

Supplier Audits: 29/year

Responsible Procurement

• Kendrion Supplier Code of Conduct

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather conditions
• Natural disasters

Transition Risks

• Changes in regulations
• Material price increases
• Carbon tax

Opportunities

• Development of energy-efficient products
• Growth in renewable energy markets

Reporting Standards

Frameworks Used: GRI

Certifications: ISO 14001, ISO 50001

Third-party Assurance: Deloitte Accountants B.V.

UN Sustainable Development Goals

• SDG 3
• SDG 8
• SDG 12
• SDG 13

Initiatives contribute to good health and well-being, decent work and economic growth, responsible consumption and production, and climate action.

Sustainable Products & Innovation

• AVAS sound systems
• Active suspension
• Sensor cleaning systems
• Inductive heating systems

Awards & Recognition

• IMI Critical Supplier award

Environmental Metrics

ESG Focus Areas

• CO2 emissions reduction
• Gender diversity
• Sustainable sourcing
• Energy consumption reduction

Environmental Achievements

• Reduced CO2 emissions by 40.6% from 2015 to 2018 and further reduction to 14,9% in 2023. Target of 70% reduction by 2028.
• Reduced energy consumption by 15.3% (target 15%)

Social Achievements

• Improved EcoVadis sustainability rating from top 22% in 2022 to top 19% in 2023.
• Opened a new office in Drachten, Netherlands (initially 3 engineers) for 3T, a high-growth segment.

Governance Achievements

• Established reporting frameworks for Scope 1, 2 & 3 emissions reporting.
• Implemented gender diversity ambition at Business Group level for indirect staff, aiming for a 25% improvement over time with a minimum threshold of 33%.

Climate Goals & Targets

Environmental Challenges

• Sudden, severe market slowdown in H2 2023 in Industrial Brakes, resulting in a 30% decrease.
• Limited growth available in US and Europe for Kendrion’s scale in the Automotive sector.

Mitigation Strategies

• Deployment of Kurzarbeit (short-time work) to protect short-term profitability in Industrial Brakes.
• Overhaul of key business processes in Industrial Brakes to improve resilience in a cyclical market.
• Divesting Automotive activities to focus on higher-margin industrial markets.
• Resource re-allocation to IB, IAC and China.

Supply Chain Management

Responsible Procurement

• Integrating ESG metrics into sourcing process
• All key suppliers invited to fill out a questionnaire covering the main areas that determine the degree of sustainable sourcing

Climate-Related Risks & Opportunities