Azelis : The 2022 report

Introduction

This Sustainability Report sets out a comprehensive overview of our sustainability strategy, our business model and the extra-financial performance of Azelis in 2022.

Based on sustainability indicators, this Report describes our non-financial risks and opportunities, and summarizes the impact of our activities on our major stakeholders and our efforts to create value over time for all of them. It aims to provide a balanced picture of our activities in 2022, highlighting the challenges and risks we face as well as the progress we have made.

This Report also outlines Azelis’ contribution to attaining the United Nations Sustainable Development Goals.

Action 2025

Our five-year sustainability strategy, Action 2025, embodies our ambition to be a world-leading provider of sustainable solutions and services in the specialty chemicals and food ingredients distribution industry, as well as an industry-leading innovation service provider. It commits Azelis to achieving a series of ambitious targets by 2025 across all the major sustainability aspects impacting our operations.

Our Action 2025 program reflects the principles of international benchmarks used to track progress in sustainability, including the UN Sustainable Development Goals (SDGs), the ISO 26000 standard, the Responsible Care® / Responsible Distribution® programs, and the guidelines of the Global Reporting Initiative (GRI) that are used as a reference.

Methodology

Azelis is committed to maintaining a transparent and credible reporting environment that enables us to articulate our strategy, drive performance and maintain a dialogue with our business partners to meet their expectations.

We carry out a materiality assessment every three years with our stakeholders to help us identify the main extra-financial risks, opportunities and challenges faced by Azelis and to determine the key performance indicators (KPIs) for monitoring progress in these areas. The next materiality assessment will be done in 2023, in accordance with the requirements of the EU CSRD Corporate Sustainability Reporting Directive.

This Sustainability Report is based on the United Nations Global Compact initiative principles, ISO 26000 and the Global Reporting Initiative (GRI) guidelines that are used as reference.

As a company listed on the Brussels stock index (Euronext Brussels), this Sustainability Report constitutes Azelis’ non-financial statement and is based on the requirements of the Belgian law regarding the disclosure of non-financial information (transposition of the European Non-Financial Reporting Directive (NFRD) 2014/95/EU).

The annexes to this report contain detailed information relating to our non-financial performance in 2022 and corresponding KPIs. An independent auditor has performed a review and has provided limited assurance (see page 113) on selected non-financial KPIs in this Report.

For detailed information about our methodology, please see pages 121-127 of this Report.

Contents

Introducing Azelis

1. A message from our CEO
2. Executive summary

1. Azelis at a glance
2. Our purpose and our values
3. Our strategy for sustainable growth

12 Our business model to create value for our stakeholders

15 Interview with our CFO

1. Our #1 industry ranking from Sustainalytics
2. Managing our risks and opportunities

20 Our risk assessment process in 2022

Action 2025:

One vision for sustainability

1. Action 2025 progress on targets
2. The four pillars of Action 2025
3. Engaging with our stakeholders

1. Our materiality matrix
2. Our governance of sustainability

1. Strengthening our sustainability reporting
2. Our roadmap towards integrated reporting

One united team

1. Investing in the future of our people

1. Driving growth through learning

1. Raising the bar for employee satisfaction
2. One culture of accountability and performance

1. Enriching our talent pools

1. Putting health and safety first

1. Boosting Because giving back matters

1. Our contribution to the UN SDGs

One innovative culture

1. Innovation catalyst for sustainable products

1. Our key markets and products

1. Driving value creation with innovation
2. Our state-of-the-art Innovation Centers
3. Sharing knowledge through our customer portals

1. Sustainability in the supply chain

1. Our contribution to the UN SDGs

03

One governance strategy

86 Sound governance as the foundation of sustainability

1. Code of Conduct – the bedrock of our behavior

1. Fighting fraud, bribery and corruption
2. Stronger screening measures on third parties
3. Tailoring continuity plans to local circumstances

1. Working to reduce cybersecurity risks
2. Our contribution to the UN SDGs

One environment, one world

1. How we are reducing our greenhouse gas emissions
2. Investing in climate change improvements
3. Cutting carbon at our offices and warehouses

1. A greater focus on Scope 3 emissions
2. Waste management

1. Our environmental management standards

1. Our contribution to the UN SDGs

113 Auditor’s report

Our annexes

1. Annex I – Definitions: Key Performance Indicators
2. Annex II – EU Taxonomy

121 Annex III – Methodology

128 Annex IV – ESG and other tables

135 Glossary

Our mission to deliver innovation through formulation continues to drive our business forward. Azelis made strong progress in 2022, despite a challenging economic and geopolitical environment, thanks to our robust business model and the dedication of our people.

I met colleagues in many Azelis offices and locations during 2022 and I was deeply impressed by the commitment of our people to delivering sustainable value propositions at all levels of our business. Employees across Azelis have wholeheartedly embraced our sustainability strategy in terms of their understanding of what needs to be done and their determination to drive it forward.

Our across-the-board commitment to sustainability saw us become the top-ranked business in our sector in the 2022 global Sustainalytics ratings, which measures our exposure to environmental, social and governance (ESG) risks and how well we are managing those risks. That #1 position is recognition for all the hard work our employees have put in over the past few years.

We made good strides towards tackling climate change within the scope of our activities and on improving the diversity of our leadership teams. Regarding “Environment” and the second key sustainability KPI, carbon intensity emissions (Scope 1 and Scope 2), our 2025 target was achieved (see KPIs on pages 24-25) in 2022. The target realization has been impacted following improved calculation of the carbon intensity emissions since 2021 onwards, in addition to a slower increase in carbon emissions compared to the increase of revenues in comparison with 2021. Furthermore, specific carbon mitigation measures have been taken in 2022 such as installation of solar panels, sourcing renewable energy whenever possible and implementing mobility budgets amongst other actions.

The proportion of women on our senior management team increased from 23.5% to 31.8% in 2022. Since the launch of our biennial Employee Satisfaction Surveys in 2014, we have seen continuous improvement over the years. We achieved excellent results in our latest survey, exceeding our Action 2025 targets on loyalty and working conditions and achieving our employee engagement target.

We developed thousands of formulations in 2022, many of which provide sustainable solutions to existing challenges, from using pea proteins as a mincemeat alternative to harnessing bacteria to produce pesticides

for organic farming. We have implemented tools for our lab community worldwide to measure progress in developing formulations which have positive impacts for society.

Our continued investment in our global laboratory network and digital platforms has strengthened our ability to innovate for principals and customers. In 2022 we increased the number of customer and principal portals and e-Labs, expanding our capacity to help customers in a virtual environment on a 24/7 basis, and completed the migration of all our IT systems onto cloud-based infrastructure.

Our sustainability leadership differentiates Azelis and helps our principals and our customers meet their own sustainability goals. Now that we are at the top of the Sustainalytics rankings, we must strive to stay there. We want to be a leader in our sector and that is why we are setting new targets where we have exceeded our Action 2025 goals and why we are creating an annual fund, from 2023, to invest in climate change mitigation projects across our facilities.

Our annual revenue in 2022 rose to €4.1 billion, up from €2.8 billion in 2021, representing a year-on-year increase of 45.3% and we achieved €456.9 million of adjusted EBITA, a 164 bps margin expansion over the previous year. These excellent results were due to a combination of mergers and acquisitions and organic growth, underpinned by the key drivers of our business strategy: innovation, digitalization and sustainability.

In 2023 we will continue to pursue our purpose of working together with our principal partners and customers to make the world a better place. We are excited to meet the challenges ahead as we press on with accelerating our growth strategy, while creating value for all our stakeholders.

Dr. Hans Joachim Müller,

Group Chief Executive Officer

2022 highlights

Executive summary

At Azelis 2022 was a year of improvement and consolidation of our sustainability strategy as we aligned further with our investors’ expectations. We introduced several new initiatives and increased our commitment to helping customers develop sustainable products through increased numbers of e-Labs and customer portals. We also approved a new annual fund for climate change mitigation projects and reached some of our Action 2025 targets well ahead of time – including on carbon intensity and diversity.

We attained the highest ranking among a peer list of 178 international traders and distributors compiled by Sustainalytics, which makes Azelis the leader in sustainability in our industry and puts us in the top 5th percentile of more than 15,000 companies rated by the firm worldwide. The Sustainalytics ratings evaluate a company’s exposure to Environmental, Social and Governance (ESG) risks and how well it manages them. We believe that the Sustainalytics rating, together with our EcoVadis® Platinum assessment achieved in 2021, affirms our continued strong performance across a broad range of ESG metrics.

In 2022 we engaged an independent auditor to help us enhance the substance and integrity of our sustainability reporting by providing limited assurance on a number of our KPIs, including the results of our employee satisfaction survey; the percentage of employees

in talent pools; the percentage of revenue covered with ESG assessed suppliers through Together for Sustainability® audits and EcoVadis® assessments and TfS® audits, tools available through (TfS®); the number of material breaches of laws, regulations and ethical behavior policies; the percentage of employees being trained in ethical behavior policies; the percentage of employees that have passed our knowledge reviews; and the number of reports raised through our SpeakUp! Line. Our KPIs on the percentage of women in leadership positions and carbon emissions intensity received limited assurance in 2021 and 2022.

Photo: Karen Yee and Kimberly Chung, Azelis Singapore.

We intend to improve our performance further in the coming years with a focus on waste management and the continuous identification of sustainable products. Where we met our targets early, we will review them as a demonstration of our determination to improve even further.

Our Action 2025 strategy – based on the four pillars of People, Products and Innovation, Governance and Environment – continues to spur us on and forms the basis on which we pursue our one global mission to be a leading provider of sustainable products and services in our sector. In 2022 we made advances on each of these four pillars.

In the People area we increased the proportion of women on our senior management team to 31.8% from 23.5%. We carry out Employee Satisfaction Surveys every two years and achieved strong results in our latest survey, exceeding our Action 2025 target scores on loyalty and working conditions and achieving our target for employee engagement.

On Products and Innovation we opened a second Regional Innovation Center, in Singapore, and initiated upgrade construction work on a third Center, in the US, which will open in 2023. In addition, we opened a Regional Competence Center for Meat and Meat Alternatives in Poland. On the industrial side, we moved our lubricants and metal working fluids laboratory from Germany to Italy, where it will become a Regional Competence Center for Industrial Applications in

2023. We continued to develop the local capabilities of our labs, and we now run more than 60 laboratories globally. While we made good progress on supply chain monitoring through our membership of Together for Sustainability®, we also identified challenges in collecting information on the number of sustainable products in our portfolio and will revisit the issue in 2023 with a new approach.