Royal DSM Integrated
Annual Report 2022
Creating brighter lives for all
NUTRITION ∙ HEALTH ∙ BIOSCIENCE
1
Table of contents
Key data 3
4
7
12
15
18
18
20
28
38
51
67
84
92
92
100
107
114
115
116
116
117
121
121
125
126
132
136
Co-CEO letter
Our approach to the Sustainable
Development Goals
Sustainable Portfolio Steering
Food System Commitments
Report by the Managing Board
Purpose
Strategy
Case studies
Stakeholders
People
Planet
Profit
Review of business
Animal Nutrition & Health
Health, Nutrition & Care
Food & Beverage
Materials
Corporate Activities
Reporting policies
Financial and reporting policies
Non-financial reporting policy
Corporate governance and risk management
Corporate governance
Dutch Corporate Governance Code
Governance framework
DSM Code of Business Conduct
Risk management
What still went wrong in 2022
Royal DSM Integrated Annual Report 2022
144
Supervisory Board and Managing Board
Royal DSM
148
Statements of the Managing Board 150
Report by the Supervisory Board 151
Supervisory Board Report 153
Remuneration report 2022 162
Information on the DSM share 177
Sustainability statements 182
Notes to the Sustainability statements 188
199
199
207
Consolidated financial statements
Summary of significant accounting policies
Consolidated financial statements
Notes to the consolidated financial
statements of Royal DSM
213
Parent company financial statements 266
Notes to the parent company financial
statements
268
Other Information 276
Independent auditor’s report 276
Assurance report of the independent auditor 290
Special statutory rights 296
DSM figures: five-year summary 297
Explanation of some concepts and ratios 303
List of abbreviations 310
Royal DSM Integrated Annual Report 2022 2
Forward-looking statements
This document may contain forward-looking statements with respect to DSM's future performance and position. Such statements are
based on current expectations, estimates and projections by DSM and information currently available to the company. Examples of
forward-looking statements include statements made or implied about the company's strategy, estimates of sales growth, financial
results, cost savings and future developments in its existing businesses as well as the impact of future acquisitions, and the company's
financial position. These statements can be management estimates based on information provided by specialized agencies or advisors.
DSM cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be
understood that many factors can cause the company's actual performance and position to differ materially from these statements. These
factors include, but are not limited to, macro-economic, market and business trends and conditions, competition, legal claims, the
company's ability to protect intellectual property, changes in legislation, changes in exchange and interest rates, changes in tax rates,
pension costs, raw material and energy prices, employee costs, the implementation of the company's strategy, the company's ability to
identify and complete acquisitions and to successfully integrate acquired companies, the company's ability to realize planned
divestments, savings, restructuring or benefits, the company's ability to identify, develop and successfully commercialize new products,
markets or technologies, economic and/or political changes and other developments in countries and markets in which DSM operates.
Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in
the 'Risk Management' section.
As a result, DSM's actual future performance, position and/or financial results may differ materially from the plans, goals and
expectations set forth in such forward-looking statements. DSM has no obligation to update the statements contained in this document,
unless required by law. The English-language version of this document is leading.
Royal DSM Integrated Annual Report 2022 3
2022
2021
People
Workforce at 31 December (headcount)
20,682
21,358
Female:male ratio²
31:69
30:70
Total employee benefit costs (in € million)
1,910
1,853
Frequency Index of Recordable Injuries (per 100 DSM employees and contractor employees)
0.28
0.22
Employee Engagement Index (in %)
77
76
Planet
Primary energy use (in PJ)
19.5
21.4
Energy Efficiency Improvement (in %, year-on-year)
(0.4)
6.0
Greenhouse gas emissions, market-based (scope 1 + 2, in CO₂ equivalents, x million tons)
1.05
1.21
Greenhouse gas scope 1 + 2 cumulative absolute reduction (in %, baseline 2016)
35
27
Water withdrawal for non-once-through-cooling (x million m³)
26
26
Brighter Living Solutions Plus (as % of running business)³
67
-
Profit (in € million)
Net sales from continuing operations
8,390
7,269
Adjusted EBITDA from continuing operations⁴
1,395
1,379
EBITDA from continuing operations
1,304
1,288
Adjusted operating profit from continuing operations (EBIT)⁴
767
808
Operating profit from continuing operations (EBIT)
682
711
Net profit for the year
1,715
1,680
Adjusted net operating free cash flow from continuing operations⁴
310
626
Capital expenditure, cash based
644
570
Dividend for DSM shareholders (based on profit appropriation)
167⁵
438
Net debt
87
1,019
Shareholders' equity
10,743
9,318
Total assets
17,395
16,020
Capital employed
11,473
11,019
Market capitalization at 31 December⁶
19,978
34,608
Per ordinary share in €
Net earnings
9.80
9.68
Financial ratios (%)
Sales to high-growth economies / net sales (continuing operations)
47
47
Adjusted EBITDA margin (continuing operations)⁴
16.6
19.0
Average working capital / annualized net sales (continuing operations)
24.3
22.3
ROCE (continuing operations)⁴
7.3
8.7
Gearing (net debt / equity plus net debt)
0.8
9.7
Equity / total assets
62.3
58.7
Cash provided by operating activities / Adjusted EBITDA⁴
55.9
77.5
1 For definitions, see Explanation of some concepts and ratios. People and Planet are reported in accordance with the Non-financial reporting policy. As
the divestment of DSM Engineering Materials was announced prior to the launch of the EES, Employee engagement and associated metrics are reported
excluding DSM Engineering Materials.
2 For the indexes based on age, nationalities, gender, inflow and outflow, the companies that are not integrated into the HR systems (approx. 6% of the
total workforce) are not taken into account.
3 The year 2022 was the first of reporting the new Brighter Living Solutions Plus.
4 In presenting and discussing DSM’s financial position, operating results and cash flows, DSM (like many other publicly listed companies) uses certain
Alternative performance measures (APMs) not defined by IFRS and referred to as ‘Adjusted’. These APMs are used because they are an important
measure of DSM’s business development and DSM’s management performance. A full reconciliation of IFRS performance measures to the APMs is given
in Note 2 of the Consolidated financial statements.
5 Subject to approval by the Annual General Meeting of Shareholders.
6 Source: Bloomberg.
Key data
Key data
1
Royal DSM Integrated Annual Report 2022 4
Co-CEO letter
Dear reader,
In our reflections for each of the past two years, we have described the challenges facing the world and expressed our
admiration for how our DSM colleagues have successfully navigated such volatile and demanding times. 2022 was no
different. While the COVID-19 pandemic eased in many regions, new human conflicts, extreme weather events and supply
chain challenges caused a multitude of challenges to overcome, both for DSM and the global economy, once again. Within
this context, our purpose has never been more relevant or valid.
This was also a year of change at DSM as we made major strides in our strategic journey. By setting in motion the
divestment of all our Materials businesses and simultaneously announcing an exciting agreement to merge with Firmenich,
we are putting in place the foundations of a unique company that can lead science-based progress in nutrition, beauty
and well-being, and continue our purpose-led journey, creating value for all our stakeholders, including customers,
employees, shareholders, and society at large.
A year of challenge and opportunity
Conflicts and extreme weather events in 2022 had worldwide repercussions, with increasing raw materials costs and
soaring energy and food prices impacting everyone. Unfortunately, this disruption may only be a foretaste of the
challenges that global warming will continue to bring. The United Nations’ Intergovernmental Panel on Climate Change
released updated research during the year warning that it is now or never if humanity is to avert the worst consequences
of climate change. For DSM, this only makes our determination even greater to accelerate the potential that digital
technology and bioscience have in driving environmental and societal prosperity, especially at the nexus of climate, food,
nutrition, and health.
With a growing global population that needs and deserves the health benefits that come from good nutrition, we see a
great opportunity to meaningfully improve the sustainability and productivity of the world’s food systems for the benefit of
people and the planet. There is also growing recognition, heightened by concerns during the pandemic, of the importance
of being proactive about our own health. This shift in individual attitudes and public health policy towards preventative
actions is an opportunity to reduce the future burden of healthcare more broadly through improved nutrition.
Throughout this report we highlight just a few of our growing range of solutions. For example, we are developing enzymes
that help animals digest more nutrition from their feed, helping the sustainability and efficiency of farming. In our human
nutrition activities, we are scaling our capabilities to enable the formulation of tasty and nutritious beverages with the
vitamins, minerals and probiotics necessary to maintain an effective immune system, countering the declining nutritional
value of what we eat. And we are also creating algae-based omega-3s that provide a sustainable alternative to fish oil,
reducing the pressure on our oceans. Ultimately, our strategic focus means we are well positioned to contribute to
resolving the looming polycrisis, capturing the opportunities to make an even bigger difference for people and the planet.
“As we harness the latest advancements in digital technology and
bioscience, we can offer realistic, scalable solutions to the significant
challenges associated with feeding humanity sustainably.”
Focusing on growth in Health, Nutrition & Bioscience
Having announced an acceleration in executing our strategy in late 2021, we began 2022 with a new simplified operating
structure, and were already well underway in a review of our two remaining Materials businesses, DSM Engineering
Materials and DSM Protective Materials. That review ultimately concluded with us finding new owners for both and in deals
that realized the considerable value that had been created over the decades. We are thankful to everyone who contributed
to the success of these businesses and wish everyone working in them today every success as they continue their
development under new ownership.
Co-CEO letter
Royal DSM Integrated Annual Report 2022 5
For our Health, Nutrition & Bioscience activities, we established three distinct yet complementary market-focused
businesses – Animal Health & Nutrition, Health, Nutrition & Care, and Food & Beverage – each with clear opportunities to
benefit the health of people and the planet. This structure better enables us to leverage DSM’s strong scientific
competences, the quality of our worldwide manufacturing operations, and our growing range of nutrition and health
solutions. As we harness the latest advancements in digital technology and bioscience, we can offer realistic, scalable
solutions to the significant challenges associated with feeding humanity sustainably. And by creating new value
propositions and innovation opportunities for our customers, such as through the rapidly emerging area of precision &
personalization, we can drive further long-term growth.
Performance-driven results
Against the backdrop of considerable global volatility, we delivered a solid financial performance that consolidated the
rapid sales growth of recent years, highlighting the resilience of underlying consumer demand for our essential products
and services. Rising energy and raw material costs weighed on profit margins, particularly in the second half of the year,
owing to the time gap between the rate of inflation and the implementation of our multiple price actions. Underlying end-
consumer demand however remained resilient across our markets.
Each of our Health, Nutrition & Bioscience businesses delivered good organic sales growth, reflecting their quality. Total
group sales, for our continuing operations, were up 15% and Adjusted EBITDA was up 1%. Ultimately, we realized an
Adjusted Net Operating Free Cash Flow from continuing operations of €310 million. Given the positive structural long-term
drivers of our business, underpinned by our strong innovation pipeline, we remain confident in the mid-term financial
targets for DSM.
Purpose-led progress
Within the context of such challenge, our people continued to demonstrate great resilience. Overall employee engagement
remained at an all-time high of 77% and many associated indicators in our Employee Engagement Survey showed
sustained improvement. Safety continues to be core to our purpose so we were disappointed to see the frequency of
recordable Injuries return to pre-pandemic levels as COVID-19 restrictions in most countries eased. We will be scrutinizing
every aspect of workplace safety in 2023 as our aim remains to make DSM fully incident- and injury-free. Looking at
Diversity, Equity & Inclusion, the representation of women at executive level improved again (26%, up from 23%), helping
us better reflect our global customer base and their end-consumers. Our Employee Resource Groups, which support a
broader agenda including generational diversity, visible and non-visible disabilities, and LGBTQ+ inclusion, are now well
established and having an important impact.
For the planet, we routinely evaluate what DSM can do to go further and faster toward net-zero, building a resilient
business with a minimal environmental footprint. It remains possible to limit global warming to 1.5°C but this requires all
organizations to align with the latest climate science. Consequently, we accelerated our target for cutting greenhouse gas
emissions associated with our own operations for the second successive year. Our new target of a 59% reduction from
2016 levels by 2030 was also independently validated by the Science Based Targets initiative as aligned with limiting global
warming to 1.5°C. We are able to go further faster thanks to our rapid action in recent years, such as switching to
renewable sources of purchased electricity whereby we exceeded our target eight years early. We now aim for 100%
worldwide by 2030. These efforts have again been acknowledged by CDP, considered the gold standard for evaluating
corporate environmental disclosure, which awarded both our climate change strategy and water stewardship A ratings,
making us one of only a handful of companies in our sector worldwide to achieve such high recognition.
Going beyond our own footprint, we continue to steer the development of our portfolio toward solutions that help our
customers to have a better environmental and/or societal impact. In the first full year since setting clear Food System
Commitments, targeting the areas where we feel we can make the greatest contribution to improving how the world
produces and consumes food, we have our initial results. These quantify the considerable positive impact we are having
on the health of millions of people, on healthy livelihoods, and on health of the planet, already although we have a long
way to go to reach our ambitious aspirations for 2030.
The creation of DSM-Firmenich
As stewards of this great company, we were honored to be able to propose the next momentous step in DSM’s evolution –
a transformational merger with Firmenich that will create the leading creation and innovation company in nutrition,
Co-CEO letter
Royal DSM Integrated Annual Report 2022 6
beauty and well-being. The transaction subsequently received overwhelming support from DSM shareholders – 99.86% – at
an aptly named Extraordinary General Meeting. Like DSM, Firmenich enjoys a tremendous heritage of scientific discovery
and purpose-led business. By uniting our complementary capabilities to bring about one of the largest creation
communities in the industry, we intend to unlock new opportunities that benefit our customers as well as the world. In
turn, this will position us to deliver enhanced growth and further shareholder value. DSM has a long track record of
successful transformation, and the opportunity to bring together so many passionate people with a common commitment
to improve the health of people and the planet is compelling as we seek to deliver value for all stakeholders.
“As stewards of this great company, we were honored to be able to
propose the next exciting phase of DSM’s evolution.”
Thank you
As we prepare for an exciting new phase for DSM and the opportunities that the merger will bring, we would like to thank
our employees for what they achieved in difficult circumstances in 2022. This has been another incredibly challenging year,
but the future is bright.
A special note of appreciation goes to Helen Mets, who successfully led our Materials businesses in recent years and
stepped aside after concluding the agreements to divest them. Our thanks go likewise to our Executive Committee
colleagues Cristina Monteiro (People & Organization), Trish Malarkey (Science & Innovation), and Luca Rosetto
(Operations), who will leave once the merger is completed in 2023. All four have been invaluable members of our
leadership team over the years and their guidance and support has helped make the merger possible. We wish them all
the very best for the future.
Finally, we thank our customers, suppliers, and shareholders for their continued trust. We look forward with continued
optimism and confidence, ready to seize the opportunities ahead.
Stay safe and stay healthy!
Geraldine Matchett and Dimitri de Vreeze
Co-CEOs DSM
Royal DSM Integrated Annual Report 2022 7
Our approach to the Sustainable Development Goals
The UN Global Goals for Sustainable Development (SDGs)
In 2016, the United Nations launched the SDGs, a roadmap to a more
environmentally and socially conscious and responsible world by 2030.
Companies have a key role to play in achieving the SDGs and we believe
that our combination of Health, Nutrition & Bioscience contributes
toward achieving the SDGs.
Working on the SDGs
With our strong combination of scientific competences and our portfolio of health and nutrition solutions, we are ideally
positioned to contribute to, and capture the growth opportunities offered by, the urgent societal and environmental
consequences associated with how the world currently produces and consumes food. Our long-term strategy is based on
challenges in our food systems and the SDGs. In 2021, we announced our new Food System Commitments for 2030 that
demonstrate how we contribute to a positive impact on Health for People, Health for the Planet, and Healthy Livelihoods.
For more information on how we contribute to food systems transformation, please see Food System Commitments.
Our initiatives and actionable framework comprise three pillars:
- Improve: We improve our own operations to do no harm to people and planet. We optimize our own operational
impact by continually raising safety standards, promoting health and well-being in our own workforce, reducing
our emissions and our impact on nature/biodiversity and improving our resilience, increasing our use of
renewable energy, reducing our water consumption, and unlocking more value from limited resources
- Enable: We enable our customers and partners to have a positive impact by delivering products and solutions
that enable them to deliver sustainable and healthy solutions for the planet and society
- Advocate: We advocate in our business ecosystem for systemic change — we advocate for the future we believe in
and we fully accept our responsibilities as a corporate member of society
Our purpose and strategy align most closely with five of the SDGs, and we show here how we approach these core SDGs.
Information about our engagements can be found in the Sustainability statements and throughout this Report.
SDG 2 and SDG 3
Through our commitments, initiatives, and approach, we align most closely with the following SDG targets: 2.1, 2.2, 2.3, 3.2,
3.4 and 3.9.
The link between adequate nutrition and health has never been clearer. Diet-related non-communicable diseases
(including type 2 diabetes, heart disease, stroke, and some cancers) have overtaken communicable diseases as the
primary cause of deaths worldwide. At the same time, malnutrition in its various forms affects a significant portion of the
world’s population: around 40% of adults and 20% of children are overweight or obese, 3.1 billion people are unable to
afford a healthy diet, and approximately 2.3 billion were moderately or severely food insecure (Global Nutrition report
2022). Recent research (Lancet, 2022) shows that at least 3 billion people suffer from one or more vitamin or mineral
deficiency. Furthermore, the research found that half of all preschool-aged children and more than two-thirds of women
of reproductive age fail to consume the most crucial nutrients needed for growth and development.
Our approach to the Sustainable Development Goals
Royal DSM Integrated Annual Report 2022 8
Our commitments
- We will help fill the micronutrient gap experienced by 800 million people by 2030 by the provision of fortified
staple foods and health supplements that offer a proven and cost-effective method of combating malnutrition, as
well as by empowering consumers to achieve healthier diets
- We will support the immunity of 500 million people by 2030 by delivering essential vitamins, minerals and other
ingredients to consumers worldwide through high-performance dietary supplements
- Together with our partners, we will support the livelihoods of 500,000 smallholder farmers across value chains by
2030; we will achieve this by scaling up our innovative social enterprise model, Africa Improved Foods
Our initiatives
- We create awareness about the benefits of healthy diets and improved nutrition while continuing to develop new
food solutions together with our partners of the World Business Council for Sustainable Development, the World
Food Programme, World Vision, UNICEF, GAIN and the Sun Business Network
- It is our responsibility to obtain comprehensive information on the safe use of our products, and to make
conscious choices concerning the substances we use and produce, taking into account the whole product life
cycle
Our approach
Improve
Enable
Advocate
By reducing occupational safety
incidents and promoting health &
well-being in our own workforce,
including good workforce nutrition,
whereby we inform our employees
about what constitutes a healthy
diet, how consumers can make
healthy choices and about the role
of healthy nutrition throughout life
stages.
By supporting customers to enable
the production of healthy and
affordable food and nutrition
through solutions such as the
sustainable production of animal
protein foods (such as dairy, eggs,
meat, poultry and fish), plant-based
protein foods, fortified staples and
public health supplements,
immunity-supporting solutions, and
food & beverage solutions.
Our biomedical solutions improve
quality of life for surgical patients.
and improve people’s health status.
We advocate a food system
transformation that provides
nutritious food that is sustainably
produced, in partnerships to
address sustainable and healthy
nutrition through partners such as
the World Business Council for
Sustainable Development (WBCSD)
and the World Economic Forum
(WEF), and in partnerships to fight
malnutrition, such as the UN World
Food Programme (WFP), UNICEF,
World Vision International and
Scaling Up Nutrition (SUN).
SDG 7 and SDG 13
Through our commitments, initiatives, and approach, we align most closely with the following SDG targets: 7.2, 7.3, 13.2 and
13.3.
The stability of the world’s climate is under threat. We believe there is an urgent need to take action to curb climate
change and its irreversibly damaging effects by dramatically limiting greenhouse gas emissions, transitioning to renewable
energy, and adopting low-carbon emission solutions and processes. At the same time, it is also crucial to strengthen the
resilience and adaptive capacity of societies against intensifying climate hazards and their impact on people and the
environment.
Our approach to the Sustainable Development Goals
Royal DSM Integrated Annual Report 2022 9
The food, agriculture and forestry sectors are responsible for at least one quarter of anthropomorphic greenhouse gas
emissions (IPCC, 2021). Agri-food also signficantly impacts biodiversity loss on land and in the oceans. Transforming food
systems from farm to fork will therefore be key to reduce environmental impacts and mitigate climate change while
ensuring food stays affordable and farmers are provided a healthy livelihood.
The transition to a low-carbon economy will also create business opportunities and drive growth for our innovative and
sustainable solutions. We contribute to the development of a low-carbon economy not just by reducing our own emissions
but also by developing solutions to help customers and consumers to cut theirs.
Our commitments
- We commit to reaching net-zero emissions across our value chains by 2050, aligning our actions with a 1.5°C
ambition, and to set us on this path, we work with our Science Based Targets (SBT), comprising a scope 1 + 2
absolute reduction of 59% and a scope 3 intensity reduction of 28% by 2030 versus baseline 2016
- We will enable double-digit reductions in emissions from on-farm livestock by 2030
- We will reach 150 million people with nutritious, delicious, sustainable plant-based protein foods by 2030
- Our SBTs are supported by targets of an average annual energy efficiency improvement of >1% and 100%
purchased electricity from renewable sources by 2030
Our initiatives
- We apply an internal carbon price of €100/t CO
2
eq to our key investments and acquisitions
Our approach
Enable
Advocate
By enabling the low-carbon
economy through solutions that
help customers cut emissions and
improve society’s ability to adapt to
climate change. These include
products with significantly lower
carbon footprints (such as
Quali-C®), improving the
sustainability of animal farming
(such as Bovaer®, which reduces
methane emissions from cows by
30% or more) and advancing plant-
based protein options (such as
CanolaPRO®).
We advocate accelerated climate
action and building the movement
for a low-carbon, resilient economy
by showcasing solutions and best
practices in key climate platforms
such as COP26 and through
collaboration with cross-domain
initiatives such as the World
Economic Forum (WEF) and We
Mean Business, and leading
thematic climate platforms such as
the Carbon Pricing Leadership
Coalition (CPLC) and RE100.
SDG 12
Through our commitments, initiatives, and approach, we align most closely with the following SDG targets: 12.2, 12.3, 12.4
and 12.5.
As the world’s population grows, demand for the Earth’s resources will only continue to rise, and with a population
projected to grow to 9.7 billion people by 2050, some estimates suggest we will need the equivalent of three Planet Earths
by then to sustain our current lifestyles. In addition, over 30% of all food produced is either lost or wasted, representing a
huge drain on natural resources. Considering our global economy is only 8.6% circular and that planetary boundaries are
already crossed, society as a whole must move away from linear production and consumption systems and work together
Our approach to the Sustainable Development Goals
Royal DSM Integrated Annual Report 2022 10
to build sustainable food and production systems. We are making important contributions to the development of a
circular, bio-based economy founded on closed-loop solutions.
Our commitments
- We will improve water withdrawal efficiency in water-stressed areas by 10% by 2030 versus 2020
- We will maintain improvements in our total process-related waste efficiency and work towards a new target of
50% absolute landfill reduction by 2030 vs. 2020
Our initiatives
- ‘Safe and sustainable by design’ is the leading principle in the development of new and better products and
processes
- We act as advocates for SDG 12.3 ‘Halving food loss and waste’ and we actively support our customers with
reducing food loss and waste reduction from farm to fork, for instance in the dairy, juice, meat and eggs value
chains
Our approach
Improve
Enable
By unlocking more value from the
limited available resources. Water
security, waste management and
our impact on nature and
biodiversity are important aspects
of our continuous improvement
mindset. We minimize the use of
substances of concern wherever
possible.
By enabling our customers to
design safer and more circular end-
products, and to minimize the use
of finite resources by using
renewable raw materials and
valorizing by-products. These
include our solutions Veramaris®
1
and CanolaPRO®.
1 Veramaris® is a trademark owned by Veramaris V.O.F, a joint venture between DSM and Evonik
Our approach to the Sustainable Development Goals
Royal DSM Integrated Annual Report 2022 11
Our contribution across the SDGs
Our purpose-led, performance-driven strategy is based on global megatrends and the SDGs. We align our approach with
five ‘core’ SDGs: SDG 2 and SDG 3, SDG 7 and SDG 13 and SDG 12. In addition to these ‘core’ SDGs, we believe that we can
also apply our Improve, Enable and Advocate approach to a varying extent across all the SDGs. Below we indicate our
estimated contribution in respect of all the SDGs.
Improve
Enable
Advocate
1
No Poverty
●●
●
●●
2
Zero Hunger
●
●●●
●●●
3
Good Health and Well-Being
●●
●●●
●●●
4
Quality Education
●
●
●●
5
Gender Equality
●●
●
●●●
6
Clean Water and Sanitation
●
●●
●
7
Affordable and Clean Energy
●●●
●
●●●
8
Decent Work and Economic Growth
●●
●
●●
9
Industry, Innovation and Infrastructure
●
●●
●●
10
Reduced Inequalities
●●
●●
●●
11
Sustainable Cities and Communities
●
●●
●●
12
Responsible Consumption and Production
●●
●●●
●●●
13
Climate Action
●●
●●
●●●
14
Life Below Water
●
●●
●●
15
Life on Land
●
●●
●●
16
Peace, Justice and Strong Institutions
●
●
●●
17
Partnerships for the Goals
●●
●●
●●●
Estimate of contribution
● Minor ●● Moderate ●●● Major
Improve: Improving the impact within our own operations.
Estimated based on a review of our strategy and company-wide programs, including the DSM Responsible Care Plan.
Enable: Products that enable our customers to deliver sustainable products for planet and society.
Estimated based on a qualitative assessment of the benefits of our products as measured through our environmental
and social life cycle assessments.
Advocate: Advocating the future we believe in and acting on our responsibilities.
Estimated based on the topics addressed by the platforms and networks that we participate in.
Royal DSM Integrated Annual Report 2022 12
Sustainable Portfolio Steering
More than a decade of positive impact
At DSM, sustainability is a core value and key business driver of the company. We deliver science-based, sustainable, and
scalable solutions that address the challenges of our world today. In 2010, we introduced our Eco+ indicator to measure
and steer the environmental performance of our products and innovations. We were a founding member of the
Roundtable for Social Metrics, a methodology that we implemented as People+ in 2016, the year that our Brighter Living
Solutions (BLS) key performance indicator (KPI) was introduced.
The commonality between these elements is that the insights from our product impact studies have shown us where to
make further progress and apply our scientific competences. We have thus been able to steer and constantly improve the
sustainability performance of our products for our customers and end-consumers. Externally, we contributed to a sector-
wide framework developed by the World Business Council for Sustainable Development (WBCSD) to execute Portfolio
Sustainability Assessments (PSA).
The area of impact measurement is constantly evolving and receives increased attention and scrutiny from internal and
external stakeholders. This is evident from the increased attention that legislators provide to product performance impact.
Building on the success of our previous impact measurement program, we foresaw the need to renew our methodology to
improve transparency and prepare us for upcoming reporting requirements.
Measuring the sustainability performance of our products through BLS+
For our renewed methodology, we established 11 sustainable impact drivers against which our solutions are assessed to
create insight into their sustainability profiles. This is a holistic assessment covering themes that impact people,
livelihoods, and the planet. It can therefore be applied across our entire portfolio to increase the transparency of our
reporting.
The solutions that are designated as Brighter Living Solutions Plus (BLS+) need to deliver a sustainability benefit while
doing no significant harm to people or planet. These products pass our internal minimum performance requirements,
deliver a recognized benefit to one or more of the 11 impact drivers, and have no recognized, urgent negative impacts
across the other impact drivers. The 11 drivers enable us to align the impact of our products more closely with the
Sustainable Development Goals.
“The improved BLS+ indicator builds on our decade-long experience
in impact measurement and provides deep insights into the
sustainability performance of our product portfolio.”
Achim Hupperts, VP Sustainability Royal DSM
Sustainable Portfolio Steering
Royal DSM Integrated Annual Report 2022 13
By first looking at the performance of each product individually, we have better data availability, can better identify
steering levers to further improve our portfolio, and can provide an appropriate representation of the sustainable
performance of our entire portfolio. If a benefit is expected to outperform the market, a full comparative life cycle analysis
is required, providing additional quantitative evidence to further substantiate the assessment of the product.
Key changes from BLS to BLS+
The key changes to the updated BLS+ methodology are the following:
- A minimum performance level is established for all products linked to Product Stewardship criteria
- The assessment approach is more holistic, structured, and comprehensive, ensuring transparency of impact on
People, Planet and Livelihoods
- The initial qualitative assessment is based on DSM stand-alone product performance, identifying whether the
product delivers sustainability benefits and causes no significant harm, as recognized by stakeholders
- To achieve the Outperforming category, a full comparative life cycle is required in addition to the qualitative base
assessment, providing additional quantitative evidence
Moving from BLS to BLS+
To effectively steer the portfolio, we identified the need to
differentiate performance levels across the portfolio. The outcome of
the new assessment places a product into one of three performance
categories: ‘Outperforming’, ‘Performing’ or ‘In Transition’.
There will be a changeover period during which all existing assessments based on the former BLS methodology will be
updated to the new BLS+ methodology. As part of the changeover, all products with valid assessments and which were
identified as BLS based on a comparative:
- Life cycle analysis will be classified as Outperforming
- Expert opinion will be classified as Performing
The three performance categories will be used for internal steering and target-setting; however, external disclosure will be
on the BLS+ indicator, combining Performing and Outperforming. The BLS+ indicator represents the third-party net sales
related to the sum of the products that are defined as Outperforming and Performing, as a ratio of total third-party net
sales.
The 11 Sustainable Impact Drivers of the renewed methodology
Royal DSM Integrated Annual Report 2022 14
Sustainable Portfolio Steering
The 2022 reporting for BLS+ excludes Materials, as the updated methodology was pres
ented after the announcements of
the intention to divest the Materials businesses. This gives a more representative picture of our performance today and in
the future. The performance of the Materials businesses was on average slightly higher than the total DSM performance.
Furthermore, the 2022 performance includes acquisitions in line with our non-financial reporting policy, which has a
significant impact on the indicator. These actions were also performed on the 2021 BLS indicator to define a baseline for
the conversion to the BLS+ indicator in 2022.
For 2022, we performed a high-level review of the existing BLS assessments to ensure the validity of our conclusions, which
resulted in some disqualifications, and we put a significant effort in further evaluation of the portfolio according to the
BLS+ methodology. These new assessments had an impact of 11% on the overall portfolio performance.
BLS+ 2022 Performance review
BLS to BLS+ conversion sales bridge
In addition to reclassifying the assessments that were valid under the old methodology, we will also apply the new
methodology to the remainder of the unassessed portfolio. This may lead to products qualifying under the new BLS+
indicator which were not qualified under the previous BLS indicator – products that deliver a clear health or
environmental footprint benefit, recognized by stakeholders in the value chain, yet where that benefit is considered on a
par with a key competitor.
Royal DSM Integrated Annual Report 2022 15
Food System Commitments
The world is facing multiple interconnected global food system challenges that impact the health of people and planet,
and the livelihoods of the people who produce our food.
In order to achieve the Sustainable Development Goals and the Paris Agreement, the world needs to transform its food
systems. We are determined to apply our science-based solutions to contribute to significantly reducing the
environmental impact of food production, improve health impacts through improved nutrition and create a fairer food
industry, joining forces with governments, NGOs, academics, and knowledge institutes.
In 2021, we published a series of commitments that outline our dedication to transforming food production and
consumption. These align with our business priorities, which deliver the environmental, social and health impacts we
create. We will deliver on these commitments by working closely with our value chain partners, including our customers
and suppliers.
For more information on how we measure our Food Systems Commitments, see the Non-financial reporting policy.
Health for People
642 million
Help close the
micronutrient gap of 800
million vulnerable people
by 2030
In 2022, we provided nutritional solutions that reach 642 million vulnerable
people, many of whom are mothers and children with especial nutritional
needs. These nutritional solutions currently entail the market output of a
selection of our nutrition portfolio such as fortification for staple foods,
public health supplements and emergency foods, with the reach measured by
means of the use of standard formulations and dosage regimes.
This year, we have made our solutions more widely accessible, working
together with our partners including the World Food Program, UNICEF and
World Vision.
321 million
Support the immunity of
half a billion people by
2030
In 2022, our products helped support the immune systems of 321 million
people. We measure this figure via our sales of vitamin C and D solutions into
multivitamin and straight supplements. The inclusion rate of vitamins is
based on the composition of consumer products, and the annual use of
supplements by consumers is based on market research.
This year, we further promoted the role of micronutrients for a well-
functioning immune system and the vital role of health and well-being. We
provided support to an article in the journal Vaccines titled “Micronutrients to
Support Vaccine Immunogenicity and Efficacy”, as well as a global ‘Immunity
Report 2.0’ campaign that focused on key consumer-immunity trends and
solutions to support customers.
Food System Commitments
Royal DSM Integrated Annual Report 2022 16
Health for Planet
20.5% Dairy
20% Swine
6.8% Poultry
Enable double-digit on-
farm livestock emission
reduction by 2030
We deliver solutions that enable our animal protein farmer customers in
various animal protein value chains to achieve emission reduction. In 2022, we
enabled:
- A 20.5% reduction in greenhouse gas emissions in dairy production
(target: 20% in 2030)
- A 20.0% reduction in ammonia emissions from swine farming (target:
30% in 2030)
- A 6.8% reduction in phosphorus emissions from poultry farming
(target: 30% in 2030)
The percentage of emission reduction potential per kg of animal protein
product is calculated on the verified lifecycle-assessment-based reduction
performance of the feed additive solutions on the market.
In 2022, we further invested in cutting edge technologies such as Bovaer®, our
methane inhibitor solution for ruminants. Bovaer® achieved EU approval in
February 2022, and we began construction to scale up production of Bovaer®
with the official groundbreaking ceremony in November at our location in
Dalry (Scotland). For swine we are further investing in technologies such as
feed enzymes and eubiotics, including VevoVitall® and Digestarom®.
62 million
Reach 150 million people
with nutritious, delicious,
sustainably produced plant-
based foods by 2030
In 2022, we reached 62 million people with solutions for nutritious, delicious,
sustainably produced plant-based protein foods such as meat, dairy and fish
alternatives. We calculated the number of people's lives reached by reference
to our market output and known recipes and market consumption data for
plant-based meat and dairy alternatives.
In December, we launched the Vertis plant proteins portfolio of solutions,
which will enable us to expand our impact and further develop our
collaboration with key customers in the meat and dairy foods segments.
Healthy Livelihoods
>60,000
smallholder farmers
Support the livelihoods of
500,000 smallholder
farmers by 2030
Through our Africa Improved Foods (AIF) joint venture, and working together
with our partners, we reach at least 60,000 smallholder farmers in Rwanda
and Sub-Saharan Africa. AIF engages with small holder farmers directly, and
via traders and farming cooperatives, as well as by working with our partners
including World Vision to maintain and improve farmer livelihoods. We are
working on solutions to further improve the documentation of the full scale of
our impact, with an eye to local conditions and the differing business context
and practices. Furthermore, we are developing new business activities in
greater Africa, Latin America and South East Asia where farmer engagement,
training and improved livelihoods are core to the business model. We will
assess the impact of these activities as they mature.
Food System Commitments
Royal DSM Integrated Annual Report 2022 17
Basic Commitments
Food system commitment 6: Deforestation-free in our primary supply chains by 2030
In 2022, 67% of our relevant sourced volume was assessed as deforestation-free. This relates to our Tier 1 supply chain for
our deforestation-risk crops: palm-derivative products, sugarcane, and direct soy and corn products. We assess
‘deforestation-free’ through certification schemes such as RSPO (Roundtable on Sustainable Palm Oil) and Bonsucro,
making the next steps toward deforestation-free primary supply chains.
Food system commitment 7: Good workforce nutrition for all employees by 2030
As a company focused on supporting good health through nutrition, we ensure access to good nutritional information and
increased access to healthy nutrition for all our employees. In 2022 we launched the ‘Let’s Chat Nutrition’ program, with 3
global webinars reaching DSM employees globally, creating further awareness of what a healthy diet involves, how to make
healthy choices and how nutrition needs change throughout the lifespan. In 2022, we provided access to food via canteens
as well as food in vending machines for 69% of our workforce. In 2023, an approach to define the ‘healthy’ dimension of
food will be documented, and we will assess the access to healthy food with this definition.
Royal DSM Integrated Annual Report 2022 18
Report by the Managing Board
Purpose
We have distinguished ourselves for more than a decade by embracing sustainability and providing value for all
stakeholders across the three dimensions of People, Planet and Profit. Our purpose is fully anchored in our long-term
purpose-led, performance-driven strategy as we strive to contribute to a brighter world with our science-based solutions.
Creating brighter lives for all
As a global leader in the science behind better health and nutrition, we have the opportunity, capability, and therefore the
responsibility to apply our resources and expertise where they can have the greatest impact. We use our bright science to
deliver positive transformations at scale and to create brighter lives for all.
We aspire to create value for all our stakeholders — customers, employees, shareholders, and society at large — and to
build a strong legacy and a brighter future for generations to come.
We strive to contribute to a brighter world with our science-based
solutions
Acting on our purpose
We make change happen in three ways:
- Improve: We improve our own operations with the aim of continually reducing their impact on people and planet.
We optimize this by continually raising safety standards, promoting health and well-being in our workforce,
improving resilience, reducing our environmental footprint, and unlocking more value from finite resources
- Enable: We enable our customers and partners to have a positive impact by developing solutions that help them
to deliver healthier and more sustainable outcomes for the planet and society
- Advocate: We advocate in our wider business ecosystem for systemic change, advocating for the future we believe
in and fully accepting our responsibilities as a corporate member of society
We are convinced that every company has a responsibility to deliver value for all stakeholders — not just employees,
customers, and shareholders, but also the communities in which it operates as well as the wider world. We feel this
responsibility, and therefore take an integrated approach whereby we work to reduce our negative impact and maximize
our positive impact through the implementation of a range of internal and external initiatives. These include:
- Delivering against science-based targets in line with keeping global warming to no more than 1.5°C, providing a
firm foundation for DSM to achieve net-zero across our operations and value chains by 2050 if not sooner
- Applying our competences and resources to address urgent societal and environmental challenges, including
quantifiable commitments linked to food production and consumption where we can make the greatest impact
An overview of these initiatives can be found in Planet and throughout this Report. Examples of our purpose-led solutions
are provided in Animal Nutrition & Health, Health, Nutrition & Care and Food & Beverage.
Our purpose is championed at every level across our company, including our Executive Committee which sets DSM’s
overall strategy and direction.
Report by the Managing Board – Purpose
Royal DSM Integrated Annual Report 2022 19
DSM Executive Committee
DSM Executive Committee (clockwise from top left): Philip Eykerman, Andre Bos, Helen Mets (left DSM in December 2022), Ivo Lansbergen, Patricia Malarkey,
Luca Rosetto, Cristina Monteiro, Patrick Niels, Dimitri de Vreeze and Geraldine Matchett.
Royal DSM Integrated Annual Report 2022 20
Strategy
Health, Nutrition & Bioscience
Throughout 2022, we made rapid progress on DSM’s strategic journey toward becoming a company focused on Health,
Nutrition & Bioscience, using our resources and capabilities to address the urgent societal and environmental
consequences associated with how the world currently produces and consumes food.
Consequently, and in parallel, we completed a review of strategic options for our two Materials businesses and reached
sale agreements whereby they will each be core to the respective growth ambitions of new owners. For more detail, see
the section on Materials. During the same period, we announced our intention to enter into a merger of equals with
Firmenich, the world’s largest privately-owned fragrance and taste company. This new chapter in our history is introduced
in the Co-CEO letter.
Our evolution as a purpose-led, science-based company remains anchored in developing customer-centric, market-ready
quality solutions. At the same time, we continue to prudently manage costs and drive operational excellence to support
further growth.
Following changes in 2021, our Health, Nutrition & Bioscience organization is now structured into three distinct end-
market-focused Business Groups:
- Animal Nutrition & Health
- Health, Nutrition & Care
- Food & Beverage
Each business has clear opportunities to benefit the health of people and the health of the planet which, by addressing
major societal and environmental challenges, underpin our exciting future potential. Each business is also closely aligned
with its respective customers and, through the integration of dedicated research and development teams, is fully equipped
to rapidly develop impactful, science-based innovations. We carefully consider complementary acquisitions when they can
further strengthen our capabilities or expand our customer offering in line with our long-term strategy.
By improving the impact of our own operations, enabling health and nutrition solutions for our customers, and advocating
for making global food systems sustainable, we positively contribute to achieving the United Nations Sustainable
Development Goals while at the same time improving our financial performance. By delivering on all aspects of our
People, Planet and Profit ambitions, we seek to provide value for all our stakeholders.
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 21
Our Strategy
The world’s food systems as business drivers
The global population surpassed 8 billion in 2022 and is projected to reach 9.7 billion by 2050. Simultaneously, demand for
healthier, balanced, and more nutrient-rich diets is rising — driven not only by the growth in the number of people but
also by changing public awareness of the connection with health and subsequent consumer expectations.
At the same time, the Intergovernmental Panel on Climate Change (IPCC) Report of 2021 warned that our world is rapidly
approaching critical and irreversible tipping points. While food production remains one of the largest contributors to
environmental degradation, climate change is already creating considerable challenges worldwide. Multiple systemic and
interconnected challenges are impacting the health and well-being of people, animals, and the planet.
Advances in bioscience and digital technology offer realistic scalable solutions to mitigate and even tackle these
challenges while creating new markets and innovation opportunities. With our strong combination of scientific
competences and our growing portfolio of nutrition and health solutions, we are ideally positioned to capture these
opportunities and create value for people and the planet as well as our business.
Our business model for growth
Our Health, Nutrition & Bioscience strategy is derived from our ‘global products, local solutions’ business model and
complemented by our growing competences in the rapidly emerging area of ‘precision & personalization’.
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 22
We develop global products based on shared scientific foundations, in particular our biotechnology and chemistry
expertise, which are then produced at the quality and scale enabled by our internationally diversified manufacturing
network. Our growing portfolio includes vitamins, nutritional lipids, carotenoids, minerals, eubiotics, enzymes and yeasts,
as well as texturants, flavors and cultures, that have important human and animal nutritional benefits.
Our end-market focus allows us to better understand local needs such that we can deliver relevant solutions for our
customers. In turn, this approach opens up additional innovation possibilities. With our significant worldwide premix
footprint, together with increasing competences in analytics and diagnostics that enable tailored formulations and
delivery systems, we are able to develop customized local solutions for our customers wherever they are.
Through this well-established business model, we have built distinct business groups that benefit from shared capabilities
as part of a profitable growth company. Developments in data science and bioscience are creating exciting additional
opportunities to address challenges in health and nutrition. Rapid advances in fields such as computational biology, gene
technology and Artificial Intelligence (AI) are transforming our ability to better understand and influence the interplay
between health, nutrition, and the environment in both human and animal biology, even at an individual level.
We are swiftly developing an additional dimension to our future growth: precision & personalization. Drawing on our
emerging capabilities, which were complemented in 2022 by our acquisition of animal nutrition technology company
Prodap, we seek to create digital solutions that make the invisible, more visible and deliver unprecedented levels of
specificity. Leveraging our reputation, science-based competences, and worldwide customer base, we seek to create digital
solutions that deliver more targeted and therefore more effective health solutions as well as measurable sustainability
benefits.
Our focus in Science and Innovation
Science and innovation are fundamental to our future growth and a crucial means by which we will support the
sustainable transformation of global food systems, the need to mitigate and adapt to climate change, and to overcome
resource scarcity through bio-based nature-positive solutions. Building on more than 150 years of expertise, DSM today is
a global leader in bioscience, and our innovations address major societal challenges as we reach billions of people
around the world.
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 23
Innovation is what transforms our ‘Bright Science’ into ‘Brighter Living’. Supported by our global network of advanced
biotechnology and chemistry centers, we aim to develop breakthrough innovations with proven benefits by leveraging our
understanding of health and nutrition for both people and animals.
Our long-term success requires us to be able to serve our customers with innovation that is grounded in market insights
and enabled by digital technology as well as best-in-class production and launch capabilities. In order to achieve this, we
regard innovation as an enterprise-wide endeavor in which those who invent, make and sell have a shared responsibility.
We deploy our science and innovation capabilities via shared and business-dedicated teams that reflect the end-market
orientations of our Health, Nutrition & Bioscience businesses. With priority-setting and resource allocation done by those
closest to the customer, we ensure our teams are connected to those customers’ needs and have full alignment from
ideation to commercialization.
Through cross-business teams, we develop and scale process innovations that benefit the competitiveness of all our
businesses. Applying biodata and translational science, with the use of advanced digital technologies such as big data,
deep learning and modeling as well as lab automation, strengthens our entire organization further by helping accelerate
innovation and providing objective evidence of the efficacy of new solutions.
Our ongoing investment in science and innovation ensures that we have the right combination of skills, technologies, and
partners to meet specific unmet market needs. At the end of 2022, we had 75 laboratories spread across 12 countries and
over 1,300 scientists, including professors and academic associates around the globe, all working together to drive the
progress of our Health, Nutrition & Bioscience businesses.
To reinforce our worldwide position as a leader in bioscience and create greater value for DSM and society at large, we
continued to align our science and innovation organization with the changing needs of the market as well as with the
increasing speed of technological and scientific advances in the world. By encouraging an environment which supports
both the short-term needs of our businesses today and the longer-term requirements for breakthrough advances in
science, we maximize our potential to make a positive difference for People, Planet and Profit.
Purpose-led, performance-driven innovation
We focus on four overarching growth themes that address major global societal, environmental and technological trends
which in turn inform our innovation platforms. These themes – Pathways, Proteins, Prevention and Precision – and the
resulting platforms help us to deliver a business-anchored pipeline of innovations that are aligned with our future
strategic needs and support our growth ambitions.
- Pathways: Using our base strength in biotechnology and chemistry to manufacture ingredients with better
effectiveness, efficiency, or a better environmental footprint — for example, Veramaris® algal-based lipids provide
a more sustainable fish oil alternative with multiple applications including aquaculture and dietary supplements
- Proteins: Solutions that reduce the footprint of animal protein production and meet the growing demand for
meat, fish, and dairy alternatives — for example our feed additive Bovaer®, which significantly reduces methane
emissions from cattle, or plant-based specialty proteins such as CanolaPRO®
- Prevention: Using our rich portfolio of active ingredients to proactively optimize health and immunity – for
example, as we learn more about the gut microbiome of people and animals, we see potential in developing
solutions such as our first precision biotic, Symphiome®, which modulates specific metabolic pathways to benefit
the health of poultry animals and the environment
- Precision: Digitally enabled new business models can identify the precise nutrition needed to maximize health
outcomes for people and animals – for example our Verax™ platform digitizes animal health and nutrition
monitoring and nutrition including early disease diagnosis and diet formulation optimization
Each growth theme is also connected to a technology platform that develops disruptive technologies to a level of
readiness required for implementation in a business context. A balanced mix is maintained between serving the shorter-
term innovation needs of customers today and developing disruptive concepts.
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 24
Our resulting pipeline of innovation underpins our future growth as well as our sustainability ambitions.
R&D expenditure
Innovation sales – defined as products and applications that have been introduced during the previous five years — have
improved our profitability, delivering higher margins than the average of our running business. We continuously invest in
innovation in view of the overall balance of our product portfolio and product life cycles.
Scientific collaboration
Our open and collaborative approach increases our scientific scope and helps us make joint scientific contributions to
address significant scientific societal and environmental challenges. We participate in more than 70 public-private
partnerships (PPPs) that are relevant to our innovation growth themes.
Our employees collaborate with more than 100 organizations worldwide including academic institutions and other R&D
partners such as the European Union scientific research initiative Horizon Europe, Iowa State University in North America,
and Maastricht University in the Netherlands.
External venturing
The DSM Venturing unit provides investment, coaching, and support for startups that have the potential to transform
health and nutrition through bioscience and digital technology, as well as through new business models. We made 6 new
investments in 2022, 14 follow-on investments, and successfully realized the value of several of our investments through
various liquidity events. We also generated several leads for collaboration with businesses at DSM. By the end of the year,
our portfolio included 38 startups (2021: 38). For more information, see the DSM Venturing website.
Internal venture-building
We build and scale innovative ventures within DSM by means of a venture-capital approach with dedicated
entrepreneurial teams, simple startup-style board governance, and value inflection driven milestone-based funding
rounds. An example of this approach is the creation and development of Hologram Sciences, Inc. This venture incorporates
our activities in personalized nutrition in the US within the framework of our Health, Nutrition & Care business, and has
launched brands such as d.velop™, designed to optimize vitamin-D immunity, and Phenology™, offering holistic support
including the physical, mental, and emotional impacts for the perimenopause and menopause experience. Hologram
Sciences combines proven science with the latest technology to create health diagnostics, digital coaching and
personalized nutrition solutions that help people optimize their health and well-being.
IP & Licensing
Our group of qualified IP professionals protect DSM’s innovations by securing patents and trademarks worldwide. This
group also includes certified licensing professionals who offer expertise for intellectual property-intensive deals across all
of DSM’s businesses, including joint development agreements, technology acquisitions and sales, and in-, out- and cross-
licensing deals. DSM filed 165 patents across our Health, Nutrition & Bioscience activities in 2022 (2021: 179). This reflects
our continued focus on innovation projects with the highest potential for business impact.
2022
2021
R&D expenditure in € million (continuing operations)
345
315
R&D expenditure as % of net sales (continuing operations)
4.1
4.3
Staff employed in R&D activities (continuing operations)
1,226
1,162
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 25
Our focus in Animal Nutrition & Health
Our Animal Nutrition & Health business is one of the world's largest suppliers of animal feed additives, seeking to
accomplish a robust and achievable transformation that will make livestock farming worldwide radically more sustainable.
By drawing upon the latest science and technology, we aim to reduce the ecological footprint of animal protein production
even as consumer demand worldwide increases. We support the entire livestock value chain to address growing
environmental and economic challenges by applying our global network of manufacturing facilities and research and
development expertise. With a broad portfolio of specialty products and services, we work towards the United Nations
Sustainable Development Goals 2 (Zero Hunger), 3 (Good Health and Well-Being), 12 (Responsible Consumption and
Production), 13 (Climate Action), and 14 (Life Below Water).
Our growing range of solutions includes essential products such as vitamins, minerals and carotenoids that help improve
animal health and farming efficiency, supporting the livelihoods of farmers while keeping vital protein affordable for
consumers. Groundbreaking innovations, including the application of novel enzymes, microbes and eubiotics, further
contribute to reducing food loss or reducing emissions from livestock to alleviate the pressure on the planet's finite
natural resources on land and in the seas. We continue to build specialist competences for a wide variety of animal
species, as well as invest in our direct business-to-farmer and overall go-to-market capabilities.
Advances in digital technology are underpinning our emerging precision services, where we use sophisticated data
analysis and diagnostic tools to measure and pinpoint specific health and environmental opportunities for improvement
at the farm level such that we can offer bespoke customer solutions. In this way we aim to make the invisible, more visible,
further improving the welfare of animals, as well as the profitability and sustainability of farming.
Our focus in Health, Nutrition & Care
As a leading end-to-end provider of specialty nutritional, personal care and biomedical solutions, our Health, Nutrition &
Care business aims to help keep the world’s growing population healthy through all of life’s stages.
Building upon our deep scientific competences, we are focused on improving the immune, gut, brain and skin health of
people, as well as orthopedic and cardiovascular solutions. In doing so, we tackle major societal challenges that range
from preventing malnutrition to supporting an aging population and safeguarding people against environmental threats
like air pollution and skin cancer. Through our broad and growing portfolio of clinical-science-backed solutions, we
address the United Nations Sustainable Development Goals 2 (Zero Hunger), 3 (Good Health and Well-Being) and 12
(Responsible Consumption and Production).
As a consequence of the COVID-19 pandemic, consumers worldwide are increasingly aware of the crucial role of nutrition
in supporting immunity. This is driving innovation as we develop solutions including vitamins, nutraceuticals and
probiotics to meet demand. The pandemic has simultaneously accelerated consumers’ use of digital technology to
proactively seek information and make purchasing decisions in order to take preventative health measures.
As a fully integrated provider, we enable our customers to concentrate entirely on the branding and commercialization of
their products. This approach also creates opportunities for our own direct-to-consumer business, i-Health, and for our
personalized nutrition venture Hologram Sciences, Inc., which adds advanced diagnostics and lifestyle advice to provide
pioneering holistic customized solutions.
As part of our long-term commitment to improve the health of people everywhere, we continue to champion efforts to
increase the availability of micronutrient-rich food among the world’s most vulnerable communities through partnerships
such as with the United Nations World Food Programme, UNICEF and World Vision, as well as our joint venture Africa
Improved Foods.
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 26
Our focus in Food & Beverage
In Food & Beverage, we develop sustainable solutions at the intersection of taste, texture, and health, supporting the
availability of diets that are healthy for people as well as the planet without compromising on taste.
As a leading global supplier of food ingredients, including yeasts, enzymes, cultures, bio-preservatives, hydrocolloids,
specialty proteins, and sugar alternatives, we help our customers satisfy the unique tastes and nutritional needs of
consumers while simultaneously reducing demands on the planet’s finite resources and the industry’s environmental
footprint. By making diets healthier and more sustainable, and giving increasing numbers of people access to affordable,
quality food, we address the United Nations Sustainable Development Goals 2 (Zero Hunger), 3 (Good Health and Well-
Being) and 12 (Responsible Consumption and Production).
We apply more than 150 years of bioscience and fermentation expertise alongside a unique and extensive portfolio of
solutions and deep application knowhow to provide a fully integrated offering. By anticipating and rapidly adapting to
evolving consumer needs and expectations, such as the growing interest in natural and clean label products or
flexitarianism, we help our customers develop and deliver on-trend, differentiating products fast.
Powered by close customer proximity and the ability to deliver products that are fully tailored to specific local market
requirements, we strive to ensure customers and consumers do not need to choose between food that is delicious,
nutritious, or sustainable. They can enjoy it all.
Delivering purpose-led, positive impact
At DSM, sustainability is not only our core value and a key responsibility; it is also a key business driver that is fully
engrained in our purpose, strategy, business, and operations. Our approach for bringing about positive change is to
improve, enable and advocate.
Responsibility for our own footprint and care for our people
Core to our strategy as a purpose-led company is our commitment to creating brighter lives for all. This guides how we
think about our impact on the world, the communities around us, and our own people. Over the course of recent years, we
have developed, and acted upon, an ambitious set of increasingly high goals.
With regards to minimizing our environmental footprint, we routinely evaluate what DSM can do to go further, faster. This
has led us to regularly increase our targets as we cut emissions, transition to renewable electricity, and improve the
energy efficiency of our operations worldwide. The independent assessment of the Science Based Targets initiative
provides validation that our plans are in line with the latest climate science and in limiting global warming to no more
than 1.5°C.
Concurrently, we have long-held ambitions for further improving employee engagement, safety, and diversity, in
recognition of our respect for, and responsibility toward, our colleagues around the globe. We routinely assess our
progress and set new higher targets to drive our progress.
For more details on our initiatives and progress, see People and Planet.
Report by the Managing Board – Strategy
Royal DSM Integrated Annual Report 2022 27
Creating a positive impact for society
Through investment in our bioscience-based innovations, extensive partnerships, and vocal advocacy activities, we aim to
help deliver change to ensure accessible, affordable, healthy nutrition for all within planetary boundaries. Recognizing the
urgent societal and ecological challenges specifically linked to how the world produces and consumes food, we have also
set a series of quantifiable commitments in areas where we believe we can best apply our expertise to make the greatest
positive impact more widely in society.
Sustainable portfolio steering
To better support our customers in delivering sustainable and healthy solutions, we have updated our methodology for
steering the development of our portfolio of solutions that allows for greater comparability, supports reporting against
new and future requirements of regulating authorities, and creates transparency on our contribution towards achieving
the United Nations Sustainable Development Goals. The products and services that we consider to be delivering a
sustainability benefit, while doing no significant harm to people or planet, are identified and designated as being Brighter
Living Solutions Plus (BLS+). More information on our BLS+ methodology can be found in Sustainable Portfolio Steering.
Food System Commitments
DSM was one of the first companies in the sector to make our societal impact explicit through a set of measurable
commitments and our actions support the United Nations Sustainable Development Goals 2 (Zero Hunger), 3 (Good Health
and Well-Being), 12 (Sustainable Consumption and Production), and 13 (Climate Action). Details of our progress can be
found in Food System Commitments.
Delivering performance-driven profitable growth
Generating profitable growth enables us to have a greater positive impact on the world and to deliver value for all
stakeholders. The key driver of our growth, beyond the underlying trends of the areas in which we operate, is the
continued expansion of our offering to customers. By harnessing our innovation expertise and emerging bioscience and
digital technology, and complemented through acquisition, we develop new business models and solutions that increase
our customer intimacy and improve their and our own productivity and efficiency.
In this way we aim to deliver ambitious mid-term profit targets:
- Mid-single digit % organic sales growth
- An above 20% adjusted EBITDA margin
- High-single digit % adjusted EBITDA growth
Our cash allocation policy has a clear order of priority:
- Disciplined capital expenditure for organic growth: approximately 6.5% of annual sales
- A stable, preferably rising dividend
- Disciplined M&A
- In the absence of value-creating M&A, capital to be returned to shareholders
We are committed to maintaining a strong investment-grade credit rating. DSM’s policy is to have a stable, preferably
rising, dividend, targeting an average payout of 40–50% of adjusted earnings.
Our strategy helps us make the right capital allocation choices including the selection of acquisition targets and the
development of our Health, Nutrition & Bioscience portfolio, for the benefit of all stakeholders.
Royal DSM Integrated Annual Report 2022 28
Case studies
Improving feed efficiency: innovative feed enzymes for affordable and
sustainable animal protein
Demand for animal protein continues to rise as the world’s population grows. The World Resources Institute predicts that
this demand will reach 445 million tons of animal protein per year by 2050, to meet the needs of a projected population of
9.7 billion. According to the UN Food and Agriculture Organization (FAO), this means approximately 70% growth compared
to today.
This growth in animal production places tremendous pressure on the world’s natural resources. The animal protein sector,
which currently accounts for 14.5% of human-derived greenhouse gas (GHG) emissions globally, must become more
efficient, use less land, and reduce its environmental footprint if it is to play its role in achieving net zero GHG emissions
by 2050 while meeting the animal protein requirements of a growing global population.
At the same time, it is essential to keep a tight control over production costs so as to ensure that producers can operate at
a profit while animal protein remains affordable. Feed costs reached an all-time high in 2022, and these price increases
were compounded by growing pressures on harvests caused by the impact of climate change. In view of the fact that feed
costs constitute some 60% to 70% of total animal production, livestock farmers are finding it increasingly challenging to
maintain a balance between the demands of cost efficiency and the requirements for sustainable farming.
Feed enzymes are an established and evolving technology that offers a measurable means to achieve a balance between
affordable and sustainable animal protein production. These feed additives improve feed ingredient digestibility, thereby
substantially reducing the amount of feed needed to meet the world’s growing demand for animal protein. Feed enzymes
also enable the greater use of alternative, local feed ingredients and by-products, thereby reducing our reliance on soy
and other major crops.
Case studies
Royal DSM Integrated Annual Report 2022 29
The dilemma of rising feed costs
Recent imbalances in the supply and demand of commodities essential for livestock production have driven up the prices
of corn, wheat and soybean, which are the main constituents of livestock diets. Poor harvests, as well as strong demand
from the animal production sector, have reduced the available level of stocks of grain raw materials in the past two to
three years, while demand has remained high. Market prices for soy, corn and wheat more than doubled in consequence
between January 2021 and March 2022. This already accelerating trend was exacerbated by Russia’s invasion of Ukraine in
February of 2022, which had the effect of driving up raw material prices to levels not seen in the past 10 years.
Since March 2022, prices of grains and oils have remained at an unprecedentedly high level. Recent global harvests of soy,
corn and wheat have disappointed expectations, with the notable exception of soy production in Brazil, keeping the stock-
to-use ratio (i.e., the balance between supply and demand) very low. Thus, it is broadly expected that prices will stay on a
‘high plateau’ throughout 2023 and beyond. Furthermore, the quality and availability of grains will remain a challenge.
The current pressures on the production of feed raw materials have also led the animal production industry to adapt the
composition of animal diets to deliver essential levels of energy and efficiency, using more alternative raw materials
and/or by-products (e.g., dried distillers’ grains with solubles, sunflower, canola, barley, sorghum, and meat and bone
meal). While the use of alternative raw materials and/or by-products is desirable from a cost perspective, it also creates
certain nutritional challenges that need to be addressed.
Another key feed ingredient is rock phosphate – a finite resource, and essential for animal health. Rock phosphate
experienced a more than 50% price increase during 2022, and may be subject to further sharp increases over the next five
years, caused by the combination of high demand and low availability.
All the above-mentioned factors are putting the animal production industry under severe pressure to manage its feed
costs, protect its profitability, and help provide a sustainable income for farmers.
Feed enzymes offer a potential solution here. They help improve animal performance when used in combination with
existing diets. Feed enzymes such as carbohydrases and proteases can facilitate body weight gain of between 1% and 7%,
while at the same time improving feed conversion ratio (FCR, a measure of an animal's efficiency to convert feed into
increased body mass) by 1%. In summary, a farmer needs less feed for the same output, which reduces not only overall
feed costs but also the environmental footprint.
Making Efficient Use of Natural Resources Video
Feed enzymes for feed optimization
There are various categories of feed enzymes designed to reduce feed costs. Phytase, for example, helps optimize
phosphorous nutrition by degrading phytic acid. Phytic acid is the principal form of storage for phosphorus in plant seeds.
Optimizing its degradation by the use of feed enzymes means that less rock phosphate needs to be added to animal diets.
Carbohydrases help optimize energy release from raw materials of plant origin and increase the availability of this energy
to the metabolism. Protein is an expensive feed nutrient, and feed protease can improve its digestibility.
Case studies
Royal DSM Integrated Annual Report 2022 30
Feed enzymes also play a critical role in degrading anti-nutritional factors such as phytic acid, trypsin (a digestive enzyme
that breaks down proteins in the small intestine) inhibitors and non-starch polysaccharides.
Our feed optimization portfolio is unique in the feed enzymes market, offering the broadest range of feed enzyme
solutions across species, as well as the latest cutting-edge technologies. In 2022, we launched our new generation phytase,
HiPhorius®, taking the parameters of available phosphorus release to new levels. This followed our 2021 release of ProAct
360
TM
, the first and only second-generation feed protease, with improved speed and efficacy. Finally, we also offer the
broadest range of carbohydrase products, with RONOZYME
®
WX, RONOZYME
T®
MultiGrain, RONOZYME
®
HiStarch and
RONOZYME
®
VP. Some of these products have unique enzymatic activities that can extract nutrients from every feed raw
material of plant origin, helping nutritionists to optimize the inclusion of these materials in the feed.
This cutting-edge range of enzymatic solutions can be combined to leverage the individual features of each product,
delivering very attractive cost savings and a return on investment ranging from 1:3 to 1:15, depending on dietary
composition and the enzyme technology used.
Stronger together with Pecuario CMI
CMI is a family-owned company that has been generating job opportunities and promoting economic development across
Central America since 1920. Operating in 15 countries today, CMI offers high-quality products and services through its two
Business Groups, Foods and Capital. The CMI business portfolio is highly varied, and includes wheat flour mills; pasta,
cracker and cookie manufacturing; poultry and swine production, processed meats and various types of sausages;
nutritional animal production and pet foods; and restaurants featuring the Pollo Campero brand.
“The use of DSM enzymes in our operations
allowed us to significantly reduce feed costs
without compromising animal performance. It also
contributed to reducing the environmental
footprint, contributing to our sustainability goals
with a positive impact on individuals, families and
communities.”
Sergio Sevilla, Chief Operating Officer Pecuario CMI
Our impact
Our transformational enzymatic solutions are the product of an industry-leading partnership with Novozymes, the world
leader in biosolutions. For more than two decades, the DSM-Novozymes Alliance has potentiated our respective strengths
in animal nutrition and enzymatic technology. We have united our unique capabilities by means of a common mindset, a
cutting-edge science platform, and effective ways of collaboration, to create an innovation powerhouse for animal
nutrition.
Through the DSM-Novozymes Alliance, we offer customers our combined expertise in enzyme development and animal
nutrition and health, allowing them to succeed in their business by raising healthy and high-performing animals in a
sustainable way.
Overall, we estimate that the use of feed enzymes technology by the animal production industry has the potential to
deliver annual cost savings in excess of €5 billion, across monogastric species (i.e., animals with a single-compartmented
Case studies
Royal DSM Integrated Annual Report 2022 31
stomach, such as poultry and pigs). Moreover, our feed enzymes also support more sustainable animal production by
facilitating more efficient use of natural resources while reducing emissions of nitrogen, phosphorous and CO
2
eq and
improving the welfare of farm animals by increasing the bioavailability of the full nutritional and caloric content of
reformulated diets.
RONOZYME
®
HiPhos and HiPhorius® phytase technologies enable the reduction or even elimination of the use of rock
phosphate in animal diets, turning the phytate naturally present in feed raw materials of plant origin into available
phosphorous and myo-inositol, thus reducing feed costs and at the same time reducing phosphorus loss into the
environment.
RONOZYME
®
ProAct & ProAct 360
TM
protease technologies optimize the digestibility of the available protein in the feed,
permitting lower inclusion levels of soy products, reducing feed costs and reducing nitrogen losses into the environment.
Our carbohydrase solutions (RONOZYME
®
WX, RONOZYME
®
MultiGrain, RONOZYME
®
HiStarch and RONOZYME
®
VP) enable
optimization of the energy available in the feed, allowing the inclusion of lower proportions of grain, oils and fats and
more use of local alternative raw materials. Incorporating these carbohydrases in the diet reduces feed costs while at the
same time delivering an improved environmental footprint.
A recent feed formulation exercise by DSM revealed that further feed cost reductions are also possible. For example, the
use of a combination of RONOZYME® ProAct, RONOZYME® HiPhos (2000 FYT/kg) and RONOZYME® Multigrain generated a
cost reduction of 4–6% compared with a formulation based on 1,000 phytase units (FYT) per kilogram of RONOZYME®
HiPhos with only a mineral matrix applied.
How we support the SDGs
Our innovative enzyme solutions for feed optimization enable more nutritional value to be obtained from the diet while
supporting animal health and well-being and reducing the environmental impact of livestock farming. They thus contribute
to the achievement of four of the SDGs.
SDG 2 - End hunger, achieve food security and improved nutrition and promote sustainable agriculture
Our feed optimization enzyme solutions enable the animal production industry to make more efficient use of natural
resources by unlocking the nutrient potential of feed raw material. They support the sustainable production of valuable
animal protein by permitting reduced reliance on crops such as soy and corn, as well as greater use of alternative, local
feed ingredients and by-products.
SDG 3 - Ensure healthy lives and promote well-being for all at all ages
By enabling the production of sustainable and affordable protein from healthy animals, our feed optimization enzyme
solutions contribute to the availability of healthy diets that promote well-being.
SDG 12 - Ensure sustainable consumption and production patterns
Our feed optimization enzyme solutions encourage sustainable consumption and production patterns by reducing reliance
on crops such as soy and corn for animal diets and facilitating the increased use of alternative, local feed ingredients and
by-products.
SDG 13 - Take urgent action to combat climate change and its impacts
Our feed optimization enzyme solutions help reduce emissions of nitrogen, phosphorous and CO
2
eq emissions into the
environment by enabling the use of lower-protein diets and improving the digestibility of protein, as well as by reducing
reliance on finite reserves of mineral phosphates.
Case studies
Royal DSM Integrated Annual Report 2022 32
Harnessing algae for healthier people and planet with life’s®OMEGA
The omega-3 long chain polyunsaturated fatty acids DHA and EPA are an important part of the human diet. These
nutritional lipids play a key role in supporting growth and development, as well as overall health and well-being
throughout life. Extensive studies attest their benefits for, among other things, cardiovascular health, cognitive function,
visual health and immune function.
DHA and EPA can only be accessed via the diet: neither humans nor any other animals can synthesize them in the body.
They are therefore primarily sourced from cold-water fatty fish – such as salmon, mackerel, tuna, herring, and sardines –
which in turn derive them from the algae that they naturally consume. Simply put, cold-water fatty fish harvest DHA and
EPA created by algae in their bodies. The world’s population reached 8 billion in 2022; two years previously, a study had
estimated that less than 20% of the then 7.8 billion people on the planet were consuming the recommended 250 mg/day
of these nutritional lipids. High volumes of omega-3s are therefore required to support the health of this rapidly growing
global population. Meeting this need from wild-caught fish, however, would place unsustainable pressure on the oceans,
whose fish stocks cannot replenish themselves fast enough to keep pace with demand.
Case studies
Royal DSM Integrated Annual Report 2022 33
Ocean ecosystems in danger
Sea the difference video
Our oceans are the largest ecosystem on Earth and perform essential ecological functions. They are responsible for
generating approximately 50% of the oxygen in the atmosphere and are also the world's largest store of carbon. They are
vital to the existence of all species on the planet, and for human beings provide nutrition, medicines, minerals and
renewable energy resources.
Among the highly beneficial nutrients provided by the oceans are omega-3 fatty acids. Traditionally, these are extracted
from wild-caught fish to make fish oil. However, with the increase of the world’s population and challenges such as
overfishing and bycatch, plastic pollution, climate change, and coastline overpopulation, ocean food chains are being
disrupted, resulting in irreparable damage to vital marine ecosystems.
Obtaining naturally occurring nutrients such as omega-3 fatty acids from marine resources will only increase the already
unsustainable pressure on wild-caught fish stocks. Aquaculture as an alternative to open sea fishing does not solve this
pressure as farmed fish also need to consume omega-3s to support their own health, and this has traditionally been
provided in the form fish oil derived from wild-caught cold-water fatty fish. There is an urgent need to find a sustainable
solution to protect the world’s oceans while at the same time helping to keep the world’s population healthy through
adequate provision of omega-3s.
Although the health benefits of omega-3 fatty acids have been extensively demonstrated, current consumption of these
vital nutrients by humans lags behind recommended requirements. This shortfall can be attributed to a number of factors,
including:
- Lack of consumer awareness as to the health benefits of omega-3s
- Growing awareness of the impact of omega-3 consumption on marine ecosystems
- Lack of vegetarian or plant-based options to omega-3s The off-putting fishy smell and taste traditionally
associated with omega-3s sourced from fish
- Our response at DSM has been to Lack of consumer awareness as to the health benefits of omega-3s
- Growing awareness of the impact of omega-3 consumption on marine ecosystems
Lack of vegetarian or plant-based options to omega-3s , an innovative form of omega-3 that addresses the needs of a new
generation of health-conscious and environmentally-conscious consumers.
Sustainably cultivated omega-3 for a growing world
life’s®OMEGA are omega-3 fatty acids fermented from natural algae that are not produced by genetic modification. This is
done by means of a controlled proprietary indoor process, with multiple production locations ensuring reliability of
supply. life’s®OMEGA is a pure and potent form of EPA and DHA in a single source. Our proprietary process permits full
quality control and traceability, with no organic pollutants and no allergens.
Case studies
Royal DSM Integrated Annual Report 2022 34
Our enhanced life’s®OMEGA portfolio provides an exciting innovation opportunity for brands that are looking to meet
trending consumer health needs and create accessible products with purpose.
Stronger together with Chong Kun Dang HealthCare
Chong Kun Dang HealthCare (CKDHC) is Korea's leading healthcare company and the country’s number 1 dietary
supplement provider. CKDHC’s dietary supplement portfolio includes the leading omega-3 brand PROMEGA. In 2022, this
portfolio was expanded by the launch of a new product, Algae rTG Omega-3 (‘rTG’ stands for re-esterified triglyceride, the
most potent, absorbable and fast-acting form of omega-3) containing DSM’s life’s®OMEGA Ultra TG.
“Our partnership with DSM made possible the
launch of our new algal-based omega-3
supplement, Algae rTG Omega-3. This world-first
offering addresses the needs of sustainability-
conscious consumers by protecting precious
natural resources and supporting the
development of sustainable ocean ecosystems.”
Hogon Kim, President Chong Kun Dang HealthCare
Our impact
With life’s®OMEGA, we demonstrate our strong commitment to protect the oceans and our responsibility to offer
innovative solutions with the potential to benefit the health of billions without influencing marine life and our planet’s
ecosystems. life’s®OMEGA fulfils the new generation of consumers’ requirements for essential nutrition and serves the
global population’s growing need for plant-based alternatives to animal-source foods and nutrients.
How we support the SDGs
Our life’s®OMEGA portfolio supports the attainment of UN Sustainable Development Goals 3, 12 and 14.
SDG 3 - Ensure healthy lives and promote well-being for all at all ages
Offering all the clinically proven benefits of omega-3s, life’s®OMEGA addresses the needs of a new generation of
consumers who are seeking ways to achieve holistic health and well-being without damaging the planet.
SDG 12 – Ensure sustainable consumption and production patterns
life’s®OMEGA is fermented from natural, non-GMO algae by a proprietary indoor process, ensuring reliability of supply and
full scalability of production to meet our customers’ needs. life’s®OMEGA has a lower carbon footprint that omega-3s
sourced from fish oil, thus helping protect the environment.
SDG 14 – Conserve and sustainably use the oceans, seas and marine resources for sustainable development
life’s®OMEGA is extracted from algae cultivated in indoor fermenters and therefore does not adversely impact marine
resources. It relieves oceans of the pressure of overfishing and bycatch and is a sustainable solution that respects
biodiversity and helps protect the oceans.
Case studies
Royal DSM Integrated Annual Report 2022 35
Health benefits in a bottle: how consumers are embracing functional
beverages
The crucial role of nutrition in supporting well-being was thrown into sharp perspective during the COVID-19 pandemic,
fueling worldwide interest in the health benefits of adequate nutrition. Many health-conscious consumers have been
adopting a more proactive approach to their diets, recognizing fortified foods and drinks as a valuable complement to a
healthy, balanced diet. Recent research shows that fortified foods, including functional beverages, can make a significant
contribution to immune health, providing a complementary way to obtain the full range of vitamins, minerals, probiotics
and other key nutrients necessary to maintain an effective immune system.
The quest for proven health benefits
As a direct result of the COVID-19 pandemic, research shows that 66% of global consumers are actively looking to improve
their physical and cognitive health, along with their dietary habits. Furthermore, this post-pandemic study indicates that
42% say they are seeking out functional and/or fortified products more frequently than in the past. Many are drawn to
functional foods and beverages that offer proven benefits for immunity, heart health, digestive health, mental health, and
energy levels.
Positive nutrition can help supplement existing diets and prevent potential nutrient shortages. It comes as no surprise,
then, that in Europe alone, nearly 1,000 products with an immunity claim were launched in 2021, with fortified fruit juice
and drinking yogurt occupying the top two categories. Today’s wellness-conscious consumers are seeking better-for-you
(BFY) beverages that go beyond satisfying thirst, helping them reach their holistic health goals.
This accelerating global trend presents beverage manufacturers with challenges as well as opportunities. They need to
develop products that have proven health benefits and at the same time offer attractive taste and sensory qualities. And
they need to get these innovative new offerings to market as quickly and cost-efficiently as possible.
Case studies
Royal DSM Integrated Annual Report 2022 36
Our solutions
Good nutrition is essential for good health. We provide an extensive range of nutritional solutions to help protect and
improve the well-being of consumers worldwide. We work closely with beverage manufacturers to improve and fortify their
products in an appealing way. Our aim is to meet evolving consumer demands for functional beverages that possess
validated health benefits while still offering an enjoyable consumption experience.
Our experts develop custom nutrient premix blends based on more than 1,400 high-quality ingredients, including vitamins,
minerals, amino acids, carotenoids, nutraceuticals, specialty proteins, sweeteners, prebiotics, probiotics, fibers and
hydrocolloids. The development of our solutions for sport drinks, fortified waters and drinkable dairy beverages is
supported by experts who ensure production efficiency and quality, while other specialists secure product differentiation
by means of proven front-of-pack health claims. We also provide regulatory expertise, market insights and brand support
to help position each customer product for success.
At DSM, formulating healthier products means going beyond, for example, removing sugar and salt: it is about delivering
an appealing product with a nutrition profile that provides a health benefit that resonates with consumer expectations. We
leverage our nutritional science and advocacy capabilities to support consumers in their health journeys by providing the
nutrient-rich product concepts they seek. Below are some examples of our suite of innovative solutions.
Our ‘#StayStrong Immunity Drink concept’
Our #StayStrong concept for promoting immune function is an example of how we support producers and consumers
alike. Developed in two formats – one a lactose-free milk drink and the other an oat-based drink – the #StayStrong
Immunity Drink is fortified with vitamins A and D. The dairy-based concept also contains added vitamin E and probiotics,
while the plant-based option contains added vitamin E and life’sDHA® omega-3. The concept demonstrates how we can
create immunity solutions that offer taste, texture, and health in one convenient product.
Our ginger and turmeric ‘Resilience Drink concept’
This drink concept helps the body and mind cope with external and internal stress factors by the inclusion of ingredients
that help strengthen resilience and immune defense. Our Resilience Drink immunity shot contains ginger, turmeric,
selenium and zinc, all of which possess powerful anti-inflammatory properties and protect cells from oxidative stress. The
incorporation of vitamin B
6
, B
5
and zinc supports psychological and cognitive functions and improves mental performance.
The inclusion of vitamin C, B
6
and B
12
helps combat tiredness and fatigue.
Our aronia and acerola ‘Energy Boost Drink concept’
This concept was designed to help consumers boost immunity and energy for their daily tasks, delivering added health
benefits for immunity, energy and mental performance. Our Energy Boost Drink concept contains red berries high in
polyphenols that stimulate the immune system. The inclusion of vitamin C, B
3,
B
6
and B
12
plus iron further supports the
normal functioning of the immune system. Mental performance is supported by the incorporation of blueberry
polyphenols, which increase cerebrovascular blood flow and improve memory function, along with ginseng, vitamin B
5
and
zinc. Ginseng and vitamin B
5
, together with vitamins C, B
6
and B
12
,
also contribute to normal energy-yielding metabolism
and to the reduction of tiredness and fatigue.
Stronger together with Eckes-Granini
Eckes-Granini is the leading supplier of fruit juices and fruit beverages in Europe. This family-owned business based in
Nieder-Olm (Germany) has pursued a consistent course of international expansion since the early 1990s. Together with
strong national and regional juice and fruit beverage brands such as the natural vitamin C brand hohesC, the
internationally renowned premium brands Granini and Pago represent the foundation of the Eckes-Granini Group.
Operating with fully owned subsidiaries and strategic partners, primarily in Europe, Eckes-Granini today generates annual
sales of €873 million with a total of 1,708 employees.
Case studies
Royal DSM Integrated Annual Report 2022 37
“People are increasingly aspiring to embrace a
healthy lifestyle. A balanced diet is a crucial
element in this. With innovative recipes, scientific
research and nutritional education, we help
consumers to enjoy a healthy diet. DSM is a
competent partner that provides ideal solutions to
develop those healthy fruit juices and shots.”
Dr. Volker Herdegen, Manager Research & Innovation Eckes-Granini
Our impact
We have an unparalleled portfolio of micronutrients and extensive expertise in connecting nutritional needs with the right
nutrient. We possess the ability to identify worldwide nutritional challenges and to address these with locally appropriate
beverage propositions. On top of these capabilities, we have a deep understanding of local regulatory requirements and a
continuous focus on sustainability. We are therefore well placed to support the needs of food and beverage manufacturers
and the expectations of increasingly health-conscious consumers around the world.
- Across Germany, Austria, France, Hungary, Spain, Italy and Scandinavia, premium multivitamin juice products and
fortified vitamin waters are available containing our vitamin premixes and beta-carotene solutions
- In the UK, fortified juices are sold with our premix B
3
and B
6
solutions and the front-of-pack claim to ‘Help Keep
You Focused’
- In California (USA), supermarket shelves are stocked with fortified juices containing our Blend for Immunity Shot
with vitamins B
3
, B
6
, B
9
, B
12
- In the Middle East and Africa, we fortify juices free of added sugar with our Quali® vitamins A, C and E
- In Algeria, our premixes feature in newly launched energy waters
- In China, consumers can purchase sports drinks containing our vitamin E solutions
How we support the SDGs
Our portfolio of nutritional ingredients essential for good health covers a wide range of products, thereby helping to
ensure healthy lives and promote well-being.
SDG 3 – Ensure healthy lives and promote well-being for all at all ages
Our health benefit solutions for sports drinks, for example, energize the body, supporting muscle function, endurance and
recovery, as well as heart, mind, eye and joint health. We also offer health essentials for women and men that more
generally support energy and endurance, weight management, and heart, mind, eye and joint health.
Royal DSM Integrated Annual Report 2022 38
Stakeholders
Our purpose can only be realized by working with our stakeholders. Through empowering our employees, engaging with
our customers and suppliers, and with the support of our investors, we will create a stronger legacy and a brighter future
for generations to come. We discuss topics that are relevant to our operations and our impact on society regularly with
our stakeholders. These conversations shape how we define and execute our strategy, including risk management,
materiality, and new business opportunities.
Employees
Our people are our most important asset, and our employees represent more than 110 nationalities
1
, working at more than
250 sites and offices in 55 countries worldwide. The safety, health and well-being of our people is our highest priority and
we aspire to provide an incident- and injury-free working environment for everyone, including our contractors. In 2022, we
took the next steps in implementing hybrid working practices while realizing our People & Organization Strategy. We also
expanded our focus area on human rights, engagement, and inclusion and diversity with the inclusion of ‘equity’. For
information on how we engage with our employees, see People.
Customers
Our customers are key stakeholders. They drive our business, and through our collaborations we enable solutions that
help solve some of the world’s biggest problems. For information on our business and how we engage with our customers,
see Animal Nutrition & Health, Health, Nutrition & Care, and Food & Beverage. For information on our approach on product
quality, see People.
Investors
Capital providers play a significant role in the success and prosperity of our company. They support us in our pursuit of a
long-term-oriented strategy which aims to continually create value for shareholders while offering a low-risk environment
for debt holders. For more information on how we communicate with investors, see Investors and elsewhere in this Report.
Suppliers
Our supply chain consists of more than 34,600 suppliers. Our suppliers play an essential role in developing our business,
and we work closely with them through our Sustainable Procurement Program, comprising our supplier development and
evaluation program, our scope 2 program, our scope 3 program and the procurement of renewable fuels. For more
information on how we work with our suppliers, see Suppliers.
Society
We engage with society at multiple levels — from local community initiatives to collaborations with universities and
research institutes. We work with NGOs and civil society toward solutions for societal issues, and advocate on both the
governmental and the societal level on important issues relating to the Sustainable Development Goals and the Paris
Agreement. We also engage in philanthropic and sponsorship activities comprising the in-kind contributions of our
employees’ time and expertise, as well as the annual donation of approximately €5 million. As outlined in our Code of
Business Conduct, we do not make political donations. For more information on how we engage with these stakeholders,
see Society.
1 All data presented in Stakeholders are subject to the Non-financial reporting policy.
Report by the Managing Board - Stakeholders
Royal DSM Integrated Annual Report 2022 39
How we create value for our stakeholders
Our Value Creation model illustrates our long-term value creation and is based on the Value Creation and Capitals
concepts of the Integrated Reporting <IR> framework and gives an overview of how we create value for our stakeholders
based on six capital inputs: Human capital, Societal & relationship capital, Natural capital, Financial capital, Intellectual
capital and Manufactured capital. We cluster these six capitals into People, Planet and Profit.
We transform our capital inputs into value and positive impact through taking advantage of the opportunities and
minimizing the risks around the relevant megatrends in our business. A key part of our strategy, aside from our financial
targets, is to continuously strengthen our commitment to sustainability. Through our business model, business strategy
and purpose, we aim to have a positive impact for People, Planet and Profit, and deliver our share toward the Sustainable
Development Goals (SDGs).
More information on our Value Creation model and the definitions of the six capitals, are provided in Explanation of some
concepts and ratios.
Capital Inputs
2
People
Planet
Profit
Our employees represent more than
110 nationalities in 55 countries. We
engage with our stakeholders and
partners to achieve our Purpose.
We consume raw materials (including
renewable and recyclable materials),
energy from renewable and non-
renewable sources and water.
We employ shareholder equity and
borrowings to invest in partnerships
and innovation. We purchase goods
and services that are used in our
manufacturing assets.
20,682
Employees
19.5
Primary energy use (PJ)
€10,743
Shareholders’ equity (million)
31:69
Gender ratio (f:m)
26
Water withdrawal (non-once-through
cooling, x million m
3
)
€3,064
Borrowings (million)
Inputs:
Inputs:
Inputs:
- Employees
- Training & development
- Stakeholder engagement &
Public-private partnerships
- Philanthropy & sponsorship
- Raw materials (including bio-
based and recycled-based
materials)
- Energy (including renewable
sources)
- Water
- Shareholders’ equity
- Borrowings
- Partnerships
- Scientific environment and
academic infrastructure
- Purchased goods & services
- Manufacturing footprint
Our Business Model
We are a purpose-led, performance-driven organization developing innovative solutions to address the urgent societal
and environmental challenges linked to the way the world produces and consumes food. Our Business Groups are the
main building-blocks of the company’s organization. They have integral long-term and short-term responsibility for
business and have at their disposal all functions that are crucial to their business success. Our Business Groups receive
enabling services from various global support and corporate functions and are supported by the regional organizations.
Our Brighter Living Solutions Plus — solutions that create sustainable value for our stakeholders — account for 67% of our
net sales.
2 All data presented in the People and Planet columns are subject to the Non-financial reporting policy.
Report by the Managing Board - Stakeholders
Royal DSM Integrated Annual Report 2022 40
Percentage of net sales by end-use market (continuing operations)
17%
8%
6%
8%
Food & Beverage
Dietary Supplements
Early Life Nutrition
Personal Care
45%
5%
11%
Animal Nutrition
Medical Pharma
Other
Value Outcomes
3
People
Planet
Profit
The safety of our employees is our
highest priority. Our investments in
training and career development
provide value for employees and
stakeholders. We aspire to pay a
living wage to all our employees. Our
products support improved nutrition
and a more sustainable food system.
We work to reduce our environmental
footprint and support the reduction
of the footprints of our value chain
partners. Our products enable the
transition to a more circular economy
and contain safer ingredients and
materials than alternative products.
We aim to deliver a strong financial
performance, enabling us to re-invest
in our asset base, fund our purpose-
driven innovations, pay stable
(preferably rising) dividends and
provide good returns to our
bondholders. Our tax policy follows
both the letter and spirit of the law.
0.28
Frequency Index recordables
11.0
Scope 1 + 2 + 3 emissions
(million tons CO
2
eq)
€1,395
Adjusted EBITDA from continuing
operations (million)
77%
Employee engagement (excluding
Engineering Materials)
78%
Purchased renewable electricity
€310
Adjusted net operating free cash flow
from continuing operations (million)
Outcomes:
Outcomes:
Outcomes:
- Safety & health
- Brighter Living Solutions Plus
- Engaged workforce
- Skills & employability
- Employee benefits
- Improved nutrition
- Reduced environmental footprint
- Brighter Living Solutions Plus
- Enabling the transition to a more
circular economy
- Safer ingredients & materials
- Financial performance (Adjusted
EBITDA and Adjusted net
operating free cash flow)
- Interest payments, capital gains /
losses and return on investment
- Total Shareholder Return,
including dividend
- Contribution to civil society via
wages, taxes and social security
including pensions
- Contribution to business success
for customers and suppliers
3 All data presented in the People and Planet columns are subject to the Non-financial reporting policy.
Report by the Managing Board - Stakeholders
Royal DSM Integrated Annual Report 2022 41
Impact and SDGs
People
Planet
Profit
- Better fed and healthier
individuals and communities
- More prosperous and resilient
employees for our company and
in our value chain
- More sustainable use of
resources, for our company and
in our value chain
- Products that contribute to safer,
healthier working and living
environments
- We are purpose-led,
performance-driven through
science-based sustainable
solutions
- Sustainable returns to investors
- Positive contributions to
economic growth in the countries
and markets in which we operate
Materiality
In order to assess Material topics that are both of interest to society and have impact on our businesses, we annually
update our Materiality analysis. In 2022, we conducted a full Materiality analysis due to the divestment of our Protective
Materials business and the announcement of the divestment of our Engineering Materials business. We also took this
opportunity to focus on the business perspectives of Materiality. The matrix is based on the ‘double materiality’ concept,
addressing both the impact of the company on the topic and the impact of the topic on the company. The outcome of the
analysis informs us which topics should be reported on in this report and is in accordance with the GRI Standards.
Our update in 2022 used the Materiality matrix 2021, Corporate Risk Assessment 2021 and the European Sustainability
Reporting Standards (ESRS) consultation drafts as its point of departure. A long list of material topics was defined using
desk research into third-party publications, peer analysis, interviews with DSM senior managers, and internal
documentation. Further interviews with internal and external (investor, policy maker and business council) stakeholders
were conducted to generate a short list. Workshops were held at Business Group level, resulting in Business Group
Materiality Matrices. These matrices were combined with company-level information to create a draft Materiality matrix.
This was reviewed and validated jointly with the Corporate Risk Assessment by the Executive Committee, and finally
approved by the Managing Board.
Changes in 2022
In 2022, the DSM Materiality matrix was developed from business-led perspectives. This resulted in a redistribution of sub-
topics and changes to topic names to reflect the perspectives of our individual businesses. Two topics were deleted
(‘Responsible Sourcing’ and ‘Sustainable Innovation’) as these were considered to be solutions or approaches that help us
manage many of the material topics, rather than separate material topics. Three topics were added: ‘Community relations’,
‘Food loss & waste’, and ‘Resilience to economic & political volatility’.
For more information on materiality, see Management approach for material topics.
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Royal DSM Integrated Annual Report 2022 42
Materiality matrix 2022
Collaborative platforms and networks
We collaborate with like-minded organizations through platforms and networks that contribute to our purpose of creating
brighter lives for all. These collaborations are chosen to amplify and accelerate our advocacy efforts in support of a
transition to more sustainable economic models on topics that fit with our strategy. Collaborative platforms and networks
such as these can help formulate new solutions and measurement and performance methods, as well as roadmaps for
business contributions toward achieving the Sustainable Development Goals (SDGs). In this section, we describe some of
the most significant initiatives.
Cross-cutting initiatives
World Economic Forum (WEF)
We are a strategic partner of WEF. We actively participated in both its virtual and in-person events throughout 2022,
including the Annual Meeting in May. In 2022, our Co-CEO Dimitri de Vreeze represented DSM in the International Business
Council (IBC). He also remained a member of the Steering Committee of the Chemical Governors. Our Co-CEO, Geraldine
Matchett, remained a member of the Steering Committee of the Consumer Governors and the Food Security Stewards. Both
spoke at various virtual events of the Forum.
We actively contributed to several initiatives in 2022, including the Alliance of CEO Climate Leaders, the CEO Action Group
for the European Green Deal, the Food Innovation Hub Europe, and we participated in a number of meetings with public
figures organized by WEF.
The SDG Tent
With the return of the Annual Meeting in May 2022, which had not been held in 2021 due to the COVID-19 pandemic, we
once again joined forces with partners including Salesforce, Procter & Gamble, Rabobank and Yara for the SDG Tent, a
venue for discussing business engagement for achieving the SDGs. Several successful events were hosted in the SDG Tent
on topics such as food systems, climate action, circular economy and sustainable consumer choices.
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Royal DSM Integrated Annual Report 2022 43
World Business Council for Sustainable Development (WBCSD)
We are a member of WBCSD and participate in various working groups and coalitions. Ms. Matchett is a member of
WBCSD’s Executive Committee and is a Commissioner in WBCSD’s Business Commission to Tackle Inequality (BCTI).
Food & Agriculture Pathway
Our Vice President Sustainability is a Board Member of the Food & Agriculture Pathway and a founding member of the
Food Reform for Sustainability and Health (FReSH) project, with the aim to reorient food systems in support of improved
population health on a healthy planet. In 2022, the WBCSD and nine leading member companies, including ourselves,
published the paper ‘Food Affordability’, which outlined the roles that the food industry can play in providing affordable,
nutritious food that supports healthy and sustainable diets. The paper mentions our good practices of fortified staples.
Toward the end of the year, a series of ‘Processed Food Dialogues’ was organized by WBCSD with industry, NGO and
academic stakeholders to discuss the role of the processing of food in providing sustainable and nutritious food while
reducing food waste.
In 2022, we also took part in developing the Taskforce on Climate-related Financial Disclosures (TCFD) Climate Scenario
Tool for Food, Agriculture and Forest Products providing a set of sector-relevant transition scenarios. We also helped
launch an initiative entitled “Putting food on the table at COP27 and beyond” to mobilize action across public and private
sectors.
Redefining Value
Redefining Value is WBCSD’s program supporting external disclosure and decision-making. In 2022, we participated in
several workstreams, including the CFO Network. We supported a number of WBCSD consultations on topics including the
International Sustainability Standards Board (ISSB) exposure drafts and the Impact weighted accounts consultation. We
endorsed the joint statement developed by WBCSD, PRI (Principles for Responsible Investment) and IFAC (International
Federation of Accountants) calling for increased alignment between standard-setters and supporting a global baseline for
reporting sustainability-related information.
The European Chemical Industry Council (Cefic)
Cefic represents the voice of large, medium and small chemical companies across Europe. Mr. de Vreeze represented us
until October 2022 in Cefic’s Executive Committee and Board and chaired Cefic’s Sustainability Forum, through which he
focused on the acceleration of Cefic’s sustainability journeys. In 2022, we actively contributed to various workstreams of
the Sustainability Forum, focusing amongst others on the development of indicators driving and monitoring the industry’s
progress towards the SDGs in general and the EU Green Deal in particular and on developing guiding design principles for
innovation that is safe and sustainable by design. Our experts are also member of various other internal Cefic groups and,
for example, actively contributed to shaping Cefic’s view on the EU Sustainable Finance strategy.
Accounting for Sustainability (A4S)
A4S brings together leading CFOs to help embed the management of environmental and societal issues into business
processes and strategy, particularly through the finance function. Ms. Matchett is a founding member of A4S and supports
these objectives. In 2022, we participated in several virtual events and meetings, and we provided senior finance leaders
with the opportunity to participate in the A4S Academy, a program which enables senior finance leaders to broaden their
perspective on sustainability, the impact it has on business, and how companies can contribute.
Dutch Sustainable Growth Coalition (DSGC)
The DSGC is a CEO-led coalition of eight Dutch multinational corporations which aims to drive sustainable growth business
models that combine economic profitability with environmental and social progress. The coalition of CEO’s uses their
leadership for the development toward a future-proof world and sustainable growth. The DSGC stimulates activities and
international cooperation, in value chains and between sectors, that contribute to the achievement of the SDGs. Every year
the DSGC organises a meeting with the Dutch cabinet. In 2022, this meeting focussed on the energy transition, circular
economy and international corporate responsibility. Moreover, the DSGC organised knowledge exchange sessions between
company experts around, for example, innovation and technology. DSGC is supported by VNO-NCW and facilitated by
Accenture.
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Royal DSM Integrated Annual Report 2022 44
Planet initiatives
Carbon Pricing Leadership Coalition (CPLC)
We continue to drive carbon pricing and share our experiences on the topic through the Carbon Pricing Leadership
Coalition. The CPLC’s long-term objective is for effective carbon pricing to be applied throughout the global economy. In
addition to facilitating leadership dialogues, the CPLC and its partner organizations are also mobilizing business support to
put an internal price on carbon. We apply an internal carbon price of €100 per ton of CO
2
eq.
RE100
Our engagement with RE100, the world’s leading campaign to scale up the corporate sourcing of renewable power,
continued throughout 2022. In addition to peer exchange to advance the uptake of renewable electricity in China, we
participated in several learning events, conferences and advocacy opportunities in Europe, the US and China.
We Mean Business Coalition
We Mean Business activates hundreds of companies and investors to commit to low-carbon initiatives. In 2022, we worked
on several advocacy and communications activities in the context of COP27 that reiterated the private sector’s
determination for concrete steps and called on governments to urgently match their ambition and policies to limit global
temperature rise to 1.5°C above pre-industrial levels, and demonstrate the private sector’s support for these efforts, along
with the enabling solutions developed to date.
Global Center and Commission on Adaptation (GCA)
We continued our partnership with the GCA, particularly by lending our expertise in food security, and helping smallholder
farmers manage risks and climate shocks through Africa Improved Foods (AIF), but also by mobilizing the private sector to
adopt an integrated strategy to address climate adaptation alongside climate mitigation efforts.
Business for Nature
Business for Nature is a global coalition that brings together business organizations, conservation organizations and
companies to demonstrate and amplify a business voice on nature, calling for governments to adopt policies to reverse
nature loss in this decade. We supported Business for Nature’s ‘Make it Mandatory’ campaign in the leadup to Biodiversity
COP 15, joining more than 330 businesses and financial institutions. We signed the COP 15 Business Statement calling on
Heads of State to ‘Make It Mandatory’ and require all large businesses and financial institutions to assess and disclose
their impacts and dependencies on nature by 2030.
Science Based Targets Network (SBTN)
We joined the Science Based Targets Network’s Corporate Engagement program in 2020. SBTN builds on the momentum of
the Science-Based Targets initiative to develop methods for companies to set science-based targets for nature, addressing
all of Earth’s systems, including biodiversity, ocean, land, and freshwater. In 2022, we provided input to their draft guidance
for setting science-based targets for water, which is expected to be launched in early 2023.
Taskforce for Nature-Related Financial Disclosures (TNFD)
The TNFD aims to develop and deliver a risk management and disclosure framework for organizations to report and act on
evolving nature-related risks with the aim of supporting a shift in global financial flows away from nature-negative
outcomes and toward nature-positive outcomes. As a TNFD Forum member, we joined over 750 organizations to support
the mission of the TNFD and to consult on the development of the framework.
Champions 12.3
Ms. Matchett is a member of Champions 12.3, a coalition of executives from governments, businesses, international
organizations, research institutions, farmer groups, and civil society dedicated to inspiring ambition, mobilizing action, and
accelerating progress toward achieving SDG Target 12.3 by 2030. An important and promising angle addresses climate
action through value chain collaboration.
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Royal DSM Integrated Annual Report 2022 45
People initiatives
UN World Food Programme (WFP)
The DSM-WFP partnership ‘Improving Nutrition, Improving Lives’, in place since 2007, aims to improve the nutritional value
of the food that WFP distributes and reach 35 million people annually with nutritionally improved products through this
partnership. During more than 15 years of partnership, both organizations have helped fight nutritional deficiencies which
stunt growth, hinder development, and threaten the lives of one in two people globally, greatly limiting their potential.
In 2022, the partnership was extended for another three years, building on its successes to date. We offer WFP our
technical and scientific expertise in nutrition, quality assurance and marketing, as well as financial assistance, to improve
the availability and affordability of fortified, nutritious foods for people in need.
In Bangladesh, for example, the partnership has supported more than 70 small and medium-sized enterprises (SMEs) in
building their capacity to produce fortified rice that looks, cooks, and tastes like ordinary rice, but crucially includes
essential vitamins and minerals that help curb micronutrient deficiencies. This initiative has directly benefited local food
producers and processors and has resulted in more than 8 million people in the country now having access to fortified
rice through social safety nets. In addition, DSM and WFP are working together to drive the transformation of food systems,
supporting local food companies and value chains in developing countries to deliver more affordable, fortified, nutritious
food options to communities in need.
Through the rice fortification and retail projects of WFP Country Offices (COs) under the partnership, WFP and national
stakeholders leveraged existing platforms to reach an estimated 10.5 million indirect beneficiaries with fortified rice and
Social Behavior Change and Communication (SBCC) campaigns. Furthermore, through the partnership, approximately 200
retailers and millers received technical support and 400,000 school-age children benefited from fortified rice as a result of
DSM’s donation of fortified rice kernels (FRK) to WFP COs.
UNICEF
Since 2013, UNICEF, DSM, and Sight and Life have partnered to improve nutrition for women and children. Built on multiple
pillars, the partnership aims to expand the scientific evidence base and proof of viability of targeted nutritional
interventions, to increase awareness of the importance of good nutrition, and to make nutritious food products accessible
to those who need them most.
Creating enabling environment and scaling up micronutrient powder uptake
Through this partnership, UNICEF leverages DSM’s core business assets to support the Government of Nigeria in scaling up
access to micronutrient powders to improve children’s diets, while mobilizing commitment from the business sector to
tackle malnutrition. In Nigeria, our aim is to increase access to vital nutrients during the critical first 1,000 days of life in
order to support optimal physical and cognitive development. We also want to focus on the implementation research of
micronutrient powder (MNP) programming and use it as a proof concept for future MNP/MMS (multiple micronutrient
supplement) interventions in countries in Africa as well as other regions. To date, we have reached three million children
aged 6–23 months suffering from malnutrition and have supported the Government of Nigeria in realizing its vision of
scaling up the program nationally from five to ten states. The program has also added MMS for pregnant and lactating
women and integrated MNP guidelines into the national standards in Nigeria.
The Social Movement on Nutrition program
In India, we have created the platform ImpAct4Nutrition (I4N) to engage private sector for workforce nutrition and create a
social movement around nutrition literacy in support of the National Nutrition Mission (POSHAN Abhiyaan). As of
November 2022, I4N has more than 260 pledged corporate partners and through them the platform has been able to reach
more than 2.6 million employees by using the ACE (Assets, CSR and Employees engagement) card for Nutrition. I4N is
committed to transforming the workforce landscape for socially responsible businesses, implementing roadmaps for
employee engagement programs, nutrition literacy for employees and communities, and corporate social responsibility
(CSR) programs with enhanced CSR spends on nutrition.
In 2022, I4N conducted 37 digital nutrition learning sessions with its pledged partners and reached more than 46,000
people. The POSHAN Talks Series, a key medium to chronicle important conversations about the nutrition space as
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Royal DSM Integrated Annual Report 2022 46
successfully hosted with industry leaders. Sixteen POSHAN talks, 10 POSHAN stories, and a POSHAN podcast were created,
documenting private sector initiatives, challenges, and best practices for nutrition.
Scaling up maternal and child health interventions among vulnerable population groups in Mexico
In 2022, the partnership extended to Latin America. Together, the partners enabled an understanding of the Multiple
Micronutrient Supplements (MMS) landscape in Mexico to ensure there is alignment with other actors and avoid overlap in
efforts around demand generation and the regulatory environment for impactful intervention and strengthening of the
health-care system. The goal of the project is to help improve maternal and child health and nutrition through scaling up
maternal and child health interventions among vulnerable population groups in Mexico. The strategy was implemented in
2022 in three priority states supported by UNICEF: Yucatan, Chiapas and Chihuahua. By 2024, the partners aim to ensure
MMS supplementation in at least seven priority states.
World Vision International
Our partnership with World Vision and Sight and Life, with the slogan of ‘Joining Forces for Last-Mile Nutrition’, aims to
bring prosperity and good nutrition to the most vulnerable communities in the Global South. Leveraging the unique
capabilities and know-how of each partner, we design and implement sustainable market-based solutions that bridge the
gap between public and private efforts for improving nutrition and fostering local economic development. For example, in
2022 the partners worked on solutions for maize in Rwanda, eggs in Indonesia and Ethiopia, distribution channels in Brazil,
and MMS in the Philippines.
The maize value chain in Rwanda
In Rwanda, the partners enable transformation of the local maize value chain, ensuring a more efficient, inclusive and
sustainable supply chain. Partners work with and enable smallholder farmers through training and provision of market
access, while working on improving the quality of, and access to, raw materials for Africa Improved Foods (AIF) in Rwanda.
After positive results of the initial pilot, the partners are now collaborating for scale-up.
The EGGciting project
The EGGciting project in Indonesia was completed successfully in 2022. It focused on eggs as an important source of
nutrition and worked to increase the availability, accessibility, and consumption of eggs at the household level in Sulawesi
(Indonesia). Partners addressed bottlenecks in the supply chain and improved the quality of feed, while stimulating
demand for improved nutrition among consumers through the use of social marketing that stimulated the consumption of
eggs as a nutritious product. As a result, the consumption of eggs at a household level nearly tripled, from 9% to 26%,
among the targeted beneficiaries. Elements of the program are being integrated into ongoing World Vision programs,
ensuring long-term, sustainable impact.
Building on the success of the EGGciting Indonesia project, the partners brought the EGGciting model to three regions in
Ethiopia: Boset, Shasheme and Bui. The program focuses on training smallholder farmers in poultry farm operation and
feed management for improved nutrition, safety, quality, sustainability, and livelihoods. Simultaneously, the program aims
to increase the accessibility to eggs and the understanding of their nutritional value, especially for women and children.
Social distribution of nutrition in Brazil
In Brazil, market research to support the social distribution of nutritional products was initiated in 2019. This pilot
continued throughout 2021 and is projected to transform the distribution of micronutrient-enriched products in Brazil by
incubating last-mile-nutrition female entrepreneurs to serve populations living in vulnerable communities through a door-
to-door business model, operating in Fortaleza. In 2022, a partnership was formed with a local distributor, Omnilife, which
produces and sells nutritional and cosmetic products. A group of 400 women received nutrition and entrepreneurship
training.
MMS in the Philippines
In the Philippines, the partners launched a new program focusing on the MMS value chain for pregnant and lactating
women in the municipalities of Tacloban, Bulan, Pio Duran and Pasacao. The program builds on the momentum behind
MMS after its inclusion in WHO’s essential medicine list. It aims to increase the availability and access to MMS, ensure
adequate demand and use, and further encourage policy reform to include MMS. The pilot design is being co-created by
partners, including the local government, and implementation is set to begin in 2023.
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Royal DSM Integrated Annual Report 2022 47
Africa Improved Foods (AIF)
AIF is an African social enterprise that produces fortified foods made mainly from maize and soybean sourced from
smallholder farmers in the region. These products include mineral- and vitamin-rich porridges and help meet the
nutritional needs of vulnerable population groups such as pregnant and breastfeeding mothers, older infants, and young
children. AIF addresses the food challenges facing Africa by building resilient food systems through sourcing,
manufacturing, and selling nutritious, affordable, and accessible products. AIF was launched in 2016 in Rwanda as a public-
private partnership between the Government of Rwanda and a consortium comprising DSM, the Dutch Development Bank
(FMO), DFID Impact Acceleration Facility managed by CDC Group plc (CDC), and the International Finance Corporation (IFC),
the private-sector arm of the World Bank Group.
A study performed by the University of Chicago in 2018 showed that AIF delivers true value, improving the livelihoods of
smallholder farmers, employees and their families, improving food safety, reducing malnutrition and contributing to
broader development. Since the launch of AIF, we have reached 1.6 million consumers, contributing more than USD 900
million in discounted net incremental benefits to the African economy.
AIF’s Kigali factory contributes to the local and regional economy
AIF’s mission is to produce high-quality nutritious foods from local ingredients. Working with smallholder farmers in
Rwanda and across the region, AIF improves their productivity and product quality, and are scaling this further with
partners. AIF is focused on developing robust value chains that address the challenges of climate change and employment
creation in the African food value chain.
AIF’s Kigali factory employs over 470 skilled workers with well-paid jobs. Regional procurement of goods and services (such
as transportation) has led to indirect economic development across East Africa. Reaching more than 1.6 million consumers
daily, AIF has proven that this model can be profitable while contributing to SDG 1 (No Poverty), SDG 2 (Zero Hunger) and
SDG 13 (Climate Action).
Positive results in 2022 despite the pandemic
AIF’s revenue grew to almost USD 62 million in 2022, as the need for humanitarian nutritious food supply remained high.
Africa Improved Foods was awarded the best large enterprise product of the year in the East African Community (EAC) for
its Nootri Toto product. This product is specifically designed and fortified with vitamins, minerals, proteins and calcium to
complement the diet of infants above six months, providing them with the required nutrients to support their strong
growth and development. The year also marked the beginning of AIF’s new ambitious growth strategy, with groundwork in
Ethiopia (in partnership with Unilever Ethiopia) and Kenya to accelerate and further scale up AIF’s impact.
MANDI
In 2022, we continued to expand MANDI (Making A Nutritional Difference to India), a socio-commercial consumer products
business delivering local nutrition and home fortification solutions that are affordable and convenient. The range of home
fortification products involved, branded as NuShakti™, includes solutions for staples such as rice and wheat flour, as well
as fruit-flavored fortified beverage powders, vitamin-enriched candies and mineral-enriched protein health food drinks for
children – all of which have a base immunity benefit.
Partners in Food Solutions (PFS)
PFS works to increase the growth and competitiveness of food companies in Africa. These aims are achieved by inspiring
business leaders and linking highly skilled corporate volunteers from a consortium of leading companies including DSM,
Cargill, General Mills, Hershey, Bühler, Ardent Mills, and J.M. Smucker Company with promising entrepreneurs and other
influencers in the food ecosystem. The seven corporate partners have empowered hundreds of entrepreneurs to work
toward stronger, more resilient food value chains across the African continent.
In 2022, DSM employees contributed more than 1,400 volunteer hours working with 60 African customer organizations
across 10 countries. By sharing expertise, the volunteers were able to assist local entrepreneurs in growing their
businesses and supporting a supplier base of more than 100,000 farmers. In total, 67 DSM volunteers supported 84 service
offerings to clients, of which 25 customer organizations are owned or managed by women.
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Royal DSM Integrated Annual Report 2022 48
Scaling Up Nutrition (SUN)
The SUN Business Network (SBN) — co-hosted by the Global Alliance for Improved Nutrition (GAIN) and WFP — is the
private-sector branch of the SUN Movement. It aims to support businesses in growing the role they play in nutrition and to
support SUN countries in developing national business engagement strategies. The SBN is established in 18 countries and
supports the development of new networks in 26 countries. These include almost 1,400 companies, mostly small and
medium-sized enterprises. The global membership platform currently has 25 members. Our Honorary Chairman Mr. Feike
Sijbesma is a member of the Lead Group of the SUN Movement and Co-Chair of the Advisory Group of the Network.
As an SBN global member, we support the implementation of SBN principles, notably around workforce nutrition
commitments; overweight, obesity and diet-related non-communicable diseases; and the delivery of technical assistance
to national SBNs and their members. We advocate for business to take a leading role in these important issues and
collaborate with SBN for stronger business accountability on nutrition and for the adoption of SMART nutrition pledges by
business (UN Food System Summit, Nutrition for Growth Summit).
Sight and Life
The year 2022 marked 35 years of Sight and Life (SAL) as global leader in the nutrition world, using science to change the
way nutrition is delivered to people who need it most, specifically women and children. Originally founded by Roche in
1984, Sight and Life was exclusively funded by DSM from 2003 until 2015, when it was established as an independent Swiss
foundation. This occasion was marked by the publication of a special edition of Sight and Life Magazine, which received a
lot of traction from the global community. In June 2022, SAL launched a new strategy in response to the growing problem
of hunger and malnutrition. The strategy builds on SAL’s proven track record and sets out an expanded ambitious scope of
work that will see SAL translating science to solutions, validating sustainable local (social) business solutions and
supporting their scale-up.
The year also saw SAL roll out the implementation phase of the Nutrition in City Ecosystems (NICE) project, a Swiss
consortium formed in partnership with the Swiss Tropical and Public Health Institute, ETH Zürich, and Syngenta
Foundation and supported by the Swiss Agency for Development and Cooperation. NICE aims to increase long-term access
to and demand for nutritious foods produced via local and agroecological systems in Bangladesh, Kenya and Rwanda.
Two more ambitious programs were launched by SAL this year: Product Innovation for Nutrition (funded by CIFF and ECF)
and an Egg hub in Ethiopia in partnership with SNV (funded by CIFF). The PIN program is an innovative approach that helps
build local value chains for nutritious products. In collaboration with Harvard Business School, the project also supports
400 entrepreneurs in emerging economies in applying business models to develop and scale nutrition innovations. It
builds on SAL’s successful partnership in Bangladesh with SMC and GAIN, which resulted in the sale of 20 million MMS
tablets to pregnant women over the course of 1.5 years. The Egg hub also builds on the successful Egg hub model set up by
SAL in Malawi, which tripled the income of smallholder farmers, while providing three times more affordable eggs in rural
Malawi for malnourished children and women.
SAL continues to produce new publications, podcasts and events focused on key themes including multiple micronutrient
supplementation, adolescent nutrition, food system change, alternative proteins and precision nutrition. This year also saw
the first ‘Partnering for Impact’ networking event for Swiss stakeholders, organized with the aim of increasing collaboration
between diverse actors across the food chain.
Catalyst
We remain an active supporter of Catalyst’s mission to improve workplaces for women. Our Honorary Chairman, Mr. Feike
Sijbesma, continued his role on the Board of Directors and Ms. Matchett her role on the European Advisory Board.
In 2022, our sponsorship of Catalyst’s work on Women and The Future of Work (a long-term, research-led program focused
on ensuring equity in future employability) continued. Our support in 2022 included participation in regular expert group
meetings, during which we provided input to shape Catalyst’s research practices and products, such as the knowledge
burst ‘Bringing Humanity to a Digital World’. In addition, we contributed to, and benefited from, regional best-practice
sessions, for example, ‘Creating Successful Inclusive Hybrid Workplaces’, the outcomes of which validate and influence the
design of DSM’s Hybrid Working practices.
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Royal DSM Integrated Annual Report 2022 49
Valuable 500
The Valuable 500 is a global NGO dedicated to unlocking the social and economic value of people living with disabilities
across the world. We continued our partnership in 2022, with a focus on raising awareness of disability inclusion and
identifying opportunities to improve accessibility in the workplace. DSM’s Valuable ERG lead, Geo ‘t Hart, was nominated to
represent DSM at a Valuable 500 Future Leaders program for people with disabilities, ‘’Generation Valuable’’, with
mentorship from Ms. Matchett. This program has dual aims: to create a cadre of leaders with disabilities while also raising
awareness of disability inclusion at top levels within organizations.
Workplace Pride
Workplace Pride is a non-profit foundation dedicated to improving the lives of Lesbian, Gay, Bisexual, Transgender,
Intersex and Queer people in the workplace. Since becoming a member in 2020, DSM has applied Workplace Pride’s global
benchmarking tool, which provides a data-led approach for evaluating and identifying opportunities to improve inclusion
for our LGBTQ+ colleagues and partners who form the basis of our global goals and programs. In 2022, we publicly shared
our commitment to LGBTQ+ inclusion with the signing by Ms. Matchett of the Declaration of Amsterdam.
One Young World (OYW)
The One Young World Summit gathers 2,000 young leaders from more than 190 countries and all sectors, empowering
them to make lasting connections to generate positive change for sustainable development. In 2022, our 11th OYW
delegation comprised 26 colleagues representing all our businesses and regions, along with four scholars active in the
areas of our Food System Commitments. This delegation attended the Manchester Summit in September 2022, which had
been delayed and relocated due to the pandemic.
Working on business development and internal engagement
The community of more than 120 OYW alumni manages different business development and internal engagement projects
for sustainability. Projects implemented by previous delegations include a Personal Carbon Footprint Calculator, a learning
and development game called ‘The DSM Sustainable City™’, a project on Sustainable Packaging, and the Tomato Project (a
development project for fortified tomato sauce). The 2022 delegation worked on projects relating to increasing the impact
of the DSM scholars’ program, a platform to boost knowledge-sharing; an internal exchange program to increase
development of employees; STEM outreach to local communities; and a Diversity, Equity, and Inclusion live chat.
External recognitions
We are proud when our efforts receive positive recognition from others. Below is a selection of some awards and
recognitions that we received from NGOs and trade organizations, customers, suppliers and academia in 2022:
- The Austrian Ministry of Labor and Economy awarded DSM Austria the State Prize for Innovation for our work on
neutralizing mycotoxins
- The UK Government’s Department for International Trade awarded DSM the 2022 Investment Award for ‘most
Sustainable Investment by a Dutch company into the UK’, in recognition of our plans to scale up production for
Bovaer®, supported by the Scottish Government
- Eurotier, the world’s leading trade fair for livestock management, presented a Silver Innovation Award for Bovaer®
in recognition of its contribution to making animal protein more sustainable
- In Brazil, Globo Rural Magazine ranked DSM as the Best Company in Animal Nutrition, recognizing the company’s
work on reducing greenhouse-gas emissions
- The Ringier Awards recognize innovations that advance China’s Food & Beverage industry. This year, four of DSM’s
products received a Ringier Award: Purifine® LM, Maxavor® Fish YE, Delvo® Plant and β-carotene
- The China Sustainability Tribune recognized DSM with the Golden Key Excellence Award for our ready-to-eat
dysphagia food solutions
- Union County College honored DSM North America as their Corporate Partner of the year. DSM has been a partner
of Union Country College for a number of years
Report by the Managing Board - Stakeholders
Royal DSM Integrated Annual Report 2022 50
ESG Ratings and Benchmarks
Sustainability is at the heart of our business. It is our core value: we see it as a key responsibility and an important
business driver. This is reflected by our inclusion in several Environmental, Social, Governance (ESG) Benchmarks and
Ratings, many of which rate us a (sector) leader.
Given the large number of prevailing ESG benchmarks, participating in each and every one of them is not feasible for any
company, so we annually review and prioritize our participation. We are in favor of further consolidation and
standardization of the ESG benchmarks, as we believe this will encourage more companies to participate than is currently
the case.
Our annual review of the ESG benchmarks in which to participate is based on the following criteria:
- Recognition and use by our stakeholders, including our investors
- Transparency of methodology
- Primary reliance on publicly accessible information
- Avoidance of additional administrative work
- Provision of sufficient feedback to participating companies to enable them to make meaningful year-on-year
improvements
Our priorities in 2022, and the outcomes, are listed below:
- For our climate strategy, and water governance and strategy in 2022, we were assessed as double A by CDP
- We hold a Platinum CSR Rating from EcoVadis. The Platinum rating places us in the top 1% of companies assessed
in our industry
- We continued to be a constituent of the FTSE4Good Index. We have been listed on this index since 2004
- We maintained a low-risk rating from ISS QualityScore throughout the year, including lowest risk (1 out of 10) in
Governance. ISS ESG reconfirmed DSM as ‘Prime’ according to its rating methodology. Our rating of B- puts us in
the top decile relative to our industry group
- MSCI’s rating of DSM was unchanged at ‘AAA’. The report highlighted our strong strategy to address carbon
emissions. It also noted our focus on energy-efficient operations and our leadership in governance practices
- We were assessed by Sustainalytics as being at low risk of experiencing material financial impacts from ESG
factors, ranking in the 4th percentile in our industry
- We were again listed in the Vigeo Eiris Benelux, Europe, Eurozone and World indices. Vigeo Eiris is now part of
Moody’s ESG Solution
Royal DSM Integrated Annual Report 2022 51
People
At a glance
- 0.28 Frequency Index of Recordable Injuries, compared to 0.22 in 2021
- 77% Employee Engagement Index, compared to 76%
1
in 2021
- 26% female executives, compared to 23% in 2021
- 31:69 female:male ratio
- 79% Inclusion Index, compared to 77%
1
in 2021
Supporting our people through a year of change
In 2022, our people around the globe experienced a year of considerable change. As well as being affected by external
developments – including the ongoing COVID-19 pandemic and economic challenges such as rising inflation and living
costs – our organization continued its strategic journey toward becoming a leader in Health, Nutrition & Bioscience. To
actively inform and engage with people about this journey and our announcement of the intended merger of equals with
Firmenich, many townhall meetings, connects and communication campaigns were launched. These provided people with
a place to raise their questions, connect and explore what makes us DSM. Meanwhile, we also worked to develop, among
other things, the resilience and change management skills of our people, kept track of the emotions people experienced
and made plans to support our people in the future.
Throughout the year, we also supported the health and well-being of our people through a range of campaigns and
initiatives, from nutrition and immunity support to mental health webinars. We also took important steps in implementing
effective and inclusive hybrid working practices during the year, which will make our organization more flexible and
resilient for the future. By aiming for a 50:50 balance between office and remote work, we hope to provide our office-based
employees with the flexibility to focus on individual work where needed, while also facilitating the right opportunities for
personal development, strong collaborations, and closer relationships. For our employees based in plants or labs, we also
continued to explore options for flexibility based on the requirements of specific roles.
Delivering on our People & Organization (P&O) strategy
Throughout the year, we supported our people during a year of change while working to realize our P&O strategy, which
was launched at the end of 2020. This strategy comprises four pillars:
- Creating a flotilla-style organization
- Empowering our people
- Resetting the context for leadership
- Creating a contemporary workplace
In 2021, we added a new area of focus with our Inclusion & Diversity strategy, which covers human rights, engagement, and
inclusion and diversity. In 2022, we included ‘equity’ as a further component of this part of our strategy.
Aligning our People approach with the Materiality matrix
Our approach to People aligns with several material topics:
- Occupational health, safety & well-being (see Safety and Health & well-being)
- Product quality & safety (see Quality)
- Human rights (see Human rights)
- Talent attraction, development & retention (see Empowering our people and Resetting the context for leadership)
- Employee diversity & inclusion (see Diversity, equity & inclusion)
1 As the divestment of DSM Engineering Materials was announced prior to the launch of the EES, people working for DSM Engineering Materials
completed a different questionnaire. The scores cannot be aggregated in the total, therefore EES and associated metrics are reported excluding
Engineering Materials. The 2021 Employee Engagement scores excluding Engineering Materials were: Employee Engagement Index 77% and Inclusion
Index 77%.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 52
Activating our Health, Nutrition & Bioscience organization
Building on our 2021 efforts to reshape our company into three new Business Groups – Animal Nutrition & Health, Health,
Nutrition & Care, and Food & Beverage – we implemented our updated organizational design in 2022. Our new set-up allows
us to get closer to our customers in the industries we serve and develop innovative solutions at greater speed. This is
supported by the establishment of a central science organization and embedded innovation teams, providing scientific
capabilities and R&D power across all three Business Groups. The new organizational set-up is described in more detail in
Strategy.
In our corporate and support functions, the new operating model and principles designed in 2021 were implemented during
the course of 2022. Supported by a series of transformation workshops, our corporate functions improved their functional
excellence, creating a support model that underpins our business ambitions and adds value to all customers and other
external stakeholders. For example, in P&O, our new organizational design enables a more fluid way of working, an improved
employee experience, and better development opportunities for employees.
In line with our ambitions to become a company focused on Health, Nutrition & Bioscience, we also supported our people
in our Protective Materials and Engineering Materials businesses. We communicated transparently, for example, about the
path ahead for both businesses under their new ownership, via townhall meetings and walk-in sessions, and organized
leadership events and team connects. We also developed the capabilities of our people managers and employees to
manage this next stage in their professional lives, via training and LinkedIn learning paths.
Safety, Quality, and Health & Well-being
The safety and health & well-being of our employees remains our top priority. As we journey toward becoming a
company focused on Health, Nutrition & Bioscience, quality has been accorded the same degree of scrutiny as safety.
Volatility in the world around us resulted in additional challenges, making this priority more important than ever. In 2022,
as we took next steps in implementing hybrid working, we continued to provide safe and healthy workplaces for our
people – whether in our offices, laboratories, plants, or homes.
Global developments in 2022 had a profound impact on our people throughout the year, from higher levels of personal
uncertainty to increased professional workloads and pressures. These challenges were compounded by higher turnover
rates and difficulties in hiring new employees. In turbulent times like these, we maintain a continuous focus on the safety,
health, and well-being of our employees. The attention for safety & health focuses on three areas to ensure that they are
embedded across our organization.
Aspiration
2022
2021
Occupational safety¹
Frequency Index REC-all
< 0.20 in
2027
0.28
0.22
Frequency Index LWC-own
0.11
0.12
.
Process safety
PSI Rate-all
< 0.15 in
2024
0.18
0.23
.
Occupational health
Health rate-all
< 0.07 in
2024
0.09²
-
Health cases-all
25
23
1 All data presented in People are subject to the Non-financial reporting policy.
2 The year 2022 was the first year of reporting the Occupational health incident rate.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 53
Safety
Occupational safety
Occupational safety is the safety of our employees and contractors in the workplace. In our 2021 DSM Responsible Care
Plan update, we strengthened our Occupational Safety Frequency Index REC target, aiming for a rate of <0.20 in 2027. This
is the next step in our ambition to make our company fully incident- and injury-free.
In 2022, however, we saw a deterioration of our Safety performance, resulting in an increase of the Occupational Safety
Frequency Index REC from 0.22 to 0.28. This level is above our 2021 target level of 0.24 and far from where we aim to be. The
increase was mainly caused by a rise in awareness-related incidents such as slips and trips. To understand and counter
the strong rise in these incidents, company-wide initiatives and discussions took place in many different leadership teams
focusing on the mindset of our people. We aim to ensure that, despite so much happening both within and beyond DSM,
our colleagues are fully focused on good safety practices at all times. At our recently acquired sites – where the frequency
and severity of incidents played a part in our higher overall incident rate – dedicated integration programs are underway
to improve safety standards and culture.
Frequency Index of Recordable Injuries
12-month moving average
Key initiatives driving success
In 2022, we focused on improving safety at those sites with the highest number of recordable incidents in 2021, with these
sites reducing their number of injuries by 40%. In addition, we rolled out several global learning activities to our
colleagues in operations to help avoid reoccurring (severe) incidents. With our peer-to-peer review initiatives, we have
shown we can identify possible gaps at an early stage to prevent incidents in the future. By integrating our safety and
health resources globally, we also gave better support to our sites on their journey to becoming incident-free.
Contractor safety
To keep our contractors safe, we employ the same strategies as for our own organization, with a focus on learning from
past incidents and on the robust implementation of our Life-Saving Rules. The Frequency Index of All Recordable
Contractor Injuries increased to 0.47 in 2022 (versus 0.41 in 2021). This trend is comparable to the total frequency index
(see above).
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 54
Focusing on safety with passion and care
In line with our aspiration to become fully incident- and injury-free, we will continue to promote an engaging and
disciplined safety culture by means of focused improvement programs, such as through the roll-out of a Behavior-Based
Safety program (Safestart®) at our production sites and a new program focused on integrating well-being and safety.
Process safety
Process safety refers to the safe operational design of our facilities. In 2022, our Process Safety Incident rate decreased
from 0.23 to 0.18, putting us on track to reach our target of <0.15 in 2024.
As with occupational safety, we focused on the sites that had the highest number of process safety recordable incidents in
2021 and reduced their number with 45%. A pareto analysis was made of the root causes of loss of primary containment
and for the most occurring root causes a self-assessment tool was developed to steer site improvements. Furthermore, the
continuing activities around our behavior-based programs and integration improvement programs for recent acquisitions
contributed to this improvement.
Frequency Index of Process Safety Incidents
In addition to the above, we continued to follow up on process safety incidents to capture lessons learned that will help
us avoid reoccurrences at other sites, as well as at recently acquired sites. We started a project to integrate all process
safety information within a single Process Safety Management system to improve quality and consistency. We continued to
monitor and manage the process safety life cycle, including promoting a ‘right-first-time’ approach and evaluating
effectiveness. We also continued to strengthen the development of regional and local competences. Together with our
Behavior-Based Safety programs and our Life-Saving Rules, these activities made a significant contribution to preventing
incidents.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 55
Quality
Quality has been accorded the same degree of scrutiny as safety, as we continue our strategic journey toward becoming a
leader in Health, Nutrition & Bioscience. Our products that find applications in health and nutrition reach millions of
consumers. For example, a single kilogram of vitamin A can fortify tons of infant formula used by thousands of babies and
infants, or hundreds of tons of animal feed used in the egg industry. As a consequence, the impact of our products, and
consequently the impact of their quality, is critical to the safety of our end-consumers.
Embedding quality in our organization
We focus on three areas to ensure that quality is embedded across our organization. As a first step, we run quality risk
assessments to identity and eliminate quality risks. Secondly, based on our risk assessments, we implement cross-
company quality standards, with a focus on continuous improvement of our technical standards, and the deployment of
technical solutions where needed. Finally, we have the objective to have a quality learning organization in which we share
feedback and alert each other about incidents and near misses and undertake a through follow-up. We aim to embed the
right mindset and behavior, ensuring that our colleagues understand why our quality requirements and procedures are
important.
It is the responsibility of our employees to ensure that quality is embedded in how we serve our customers. Trainings on
relevant quality standards are made available to all employees and are mandatory for target groups, to we embed the
right mindset and behaviors in our organization. In addition, we have a mandatory training on Root cause analysis for our
quality experts so that these are performed in a standardized way that is comparable to our approach within SHE (Safety,
Health and Environment). Through standardized root cause analysis, we bring our expertise to the next level and ensure
that the conclusions from an incident are translated into the right and impactful corrective actions. Through this, we build
a learning organization on quality.
Customer centricity and quality
Customer centricity and our approach to customer complaints and quality incidents is central to ensuring that our
products deliver the quality that is expected by our customers and end-consumers. We implement a structured process
around complaints and incidents to ensure agility and customer focus. This includes setting internal targets levels on
customer complaint ratios and complaint response times. Performance and related learnings from complaints are
regularly shared and discussed from the shop floor to the Executive Committee and Supervisory Board level.
Health & Well-being
Occupational health and industrial hygiene
Occupational health and industrial hygiene activities aim to prevent health issues caused by prolonged or repeated
exposure to potential health hazards, such as chemical, noise or biological hazards, or ergonomic risk.
In 2022, in addition to reporting on the number of occupational health incidents, we also started reporting the incident
rate with a corresponding target level. Our target is to reduce the occupational health incident rate to <0.07 by 2024. In
2022, we recorded an incident rate of 0.09, corresponding to 25 total cases. Workplace health hazards had more of an
impact on the number of health incidents in 2022 than in previous years due to changes in our portfolio via acquisitions
and divestments.
Over the past few years, most of the recorded cases have been related to ergonomic risk factors. To address this, we are
implementing a dedicated program that tackles both the behavioral and the technological aspects of ergonomics. A pilot
in 2022 proved successful and the program will be rolled out globally.
Besides ergonomics, we continued to minimize potential exposures to health hazards by focusing on standardization and
best practices. The internal Health Risk Assessment tool was updated in 2022 to reflect advances in risk assessment
practices and is being rolled out globally. Likewise, the internal standard on noise has been updated, setting new
requirements for the prevention of occupational hearing loss via more stringent measuring conditions and protection
requirements. Through the DSM Responsible Care Program, we aim to ensure regional access to global data and industrial
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 56
hygiene professionals, build leadership awareness of occupational health issues, and enhance the related reporting
infrastructure.
Employee health and well-being
As a Health, Nutrition & Bioscience company, we continuously invest in the health and well-being of our workforce. Our
strategy equips and empowers our employees to take care of their health and well-being in a sustainable way.
Well-being worldwide
On a global level, we focused on two key areas in 2022: creating optimal hybrid working conditions and promoting
approaches and tools to improve employees’ mental and physical health. As part of our continued adoption of hybrid
working practices, for instance, we invested in ensuring good ergonomic conditions for our colleagues at our sites and at
home. As well as providing appropriate equipment, we also focused on education and training. Meanwhile, we
implemented a program to improve nutrition for our workforce at our sites and launched an education initiative for
employees worldwide, which included changes to menus at some of our on-site canteens.
Besides this, we completed the year-long pilot of our Vitality program – part of #BoostYourImmunity – in the Netherlands
in 2022. With COVID-19 having emphasized the importance of immunity and vitality for everyone, we conducted a joint pilot
together with Zilveren Kruis (our health insurer in the Netherlands) and Just2Bfit, for our employees. The pilot aimed to
improve their immunity and vitality through healthy lifestyles, nutritional training and dietary supplements. Furthermore, it
examined the effects of sustainable, healthy behavioral changes on general well-being and motivation, blood vitamin
levels, and absence rates.
Over 12 months, a group of volunteers from our locations in the Netherlands received weekly healthy lifestyle training on
exercise, mindset, nutrition and recovery, completed regular online questionnaires on lifestyle and immunity, took periodic
blood tests, received daily nutritional supplements, and took part in online and telephone monitoring. External analysis
confirmed that the Vitality program motivated employees to follow a sustainable, healthy lifestyle. Furthermore, the results
suggested that the dietary supplements increased participants’ vitamin D levels by an average of 41% between the start
and the end of the pilot. The beneficial effect on absence rates that was found in the pilot group is still being investigated.
As part of our culture of health at work, we will roll out this Vitality program worldwide and will continue to research its
effects.
Local actions give targeted support
As well as global initiatives, we put in place a wide range of regional health and well-being programs to support our
people. In China, for instance, we remained focused on supporting DSM employees through COVID-19 lockdowns, thanks to
initiatives including grocery package deliveries and engaging online activities. Employees in India attended expert-led
health talks on post-COVID nutrition, women’s health and more, and across the Asia-Pacific region, a mobile app helped
colleagues expand their life skills and realize personal and professional goals through quizzes, guided exercises, articles,
and direct expert advice. In North and Latin America, we engaged in activities to improve the physical, emotional and
financial well-being of our people and their families through workshops, talk sessions and guided exercises.
In many DSM locations in Europe, we supported employees in balancing their mental and physical well-being. In
Switzerland, we held a series of mental health seminars, while colleagues in the UK benefited from free fruit supplies and
a free flu vaccination. In France, a ‘Let’s have a healthy summer’ campaign was organized, and dozens of employees took
part in a blood drive to help the wider community. Around the world, DSM’s Employee Assistance Program continued,
providing a 24/7 emotional and psychological support service for employees and their family members, and in October
2022, webinars on ‘Maximizing Your Resilience’ offered all DSM employees the chance to build this important trait.
Since the onset of war in Ukraine in February 2022, we also maintained a strong focus on supporting the health and safety
of our seven DSM colleagues in Ukraine, their families, and our colleagues who have loved ones in the region. Our local
leadership has been aided by our Global Response Team in its efforts, which include relocation support. In neighboring
Poland, our humanitarian actions include support for the families of our Ukrainian colleagues; the offer of Polish language
lessons, psychological support, and medical services; and assistance for family members looking for new employment.
Beyond supporting our DSM colleagues, we also implemented a dedicated employee donation scheme with our partners at
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 57
the World Food Programme (WFP) to provide food-based assistance to the people in Ukraine and refugees in neighboring
countries.
Employee survey results show the value of these initiatives: employee support was the second most frequently mentioned
response to the question of what factors contribute most positively to people’s experience at DSM. The mental and
physical care provided during the COVID-19 pandemic, the support offered during times of bereavement, and the warm
welcome given to new joiners were among the highlights mentioned by respondents.
Delivering on our P&O strategy
In 2022, we continued to execute our People & Organization (P&O) strategy, launched at the end of 2020. In alignment
with our wider business ambitions, the P&O strategy helps to guide the focus of our P&O function, define our priorities
when investing in our people, and steer the company toward a better employee experience.
Aspiration
2022
2021
Engagement Index¹ ²
>75%
by 2021
77%
76%
Participation Rate
89%
92%
.
Training
Training hours per employee³
8
8
1 All data presented in People are subject to the Non-financial reporting policy.
2 As the divestment of Engineering Materials was announced prior to the launch of the EES, people working for Engineering Materials completed a different
questionnaire. The scores cannot be aggregated in the total, therefore EES and associated metrics are reported excluding Engineering Materials. The 2021
Employee Engagement scores excluding Engineering Materials were: Employee Engagement Index 77% and Inclusion Index 77%.
3 Training hours includes developmental-focused trainings and our values trainings. It excludes compliance-related trainings.
As depicted below, our P&O strategy has four focus areas, which aim to enhance our approach to organization, people,
workplace, and leadership. These areas are enabled by the right rewards and employee analytics and listening practices.
Creating a flotilla-style organization
In 2022, we further embedded our flotilla-style organization, in which critical direction comes from the center, surrounded
by agile units that are empowered to achieve our common goals. Starting in January 2022, we activated a new operating
model for our global corporate and support functions. Across these corporate functions, we have adopted an agile,
incremental way of operating, with a rapid prototyping approach that enables us to develop fit-for-purpose digital
solutions more quickly. Within P&O, we implemented a learning journey on agile ways of working to ensure we could
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 58
support the rest of the organization with this core competence. We believe that embracing a flotilla-style approach and
integrating agile ways of working will help us to drive efficiency and impact, enabling us to respond more effectively to
external forces.
Empowering our people
With our world changing and our business transforming itself, we aim for DSM to provide an empowering work
environment that encourages all our colleagues to take ownership of their performance and development. We recognize
that everyone’s journey is different, and we support people in making a sustainable individual impact, no matter their role.
Our user-centric tools and solutions enable colleagues to customize their learning path within the DSM framework and
business context, as well as allowing individuals and teams to take charge of their professional development and growth,
while performing at their best.
In June 2022, we launched MyCareer Marketplace to DSM employees worldwide. This online platform, which is also
available as a mobile app, gives our people control over their career development. It allows colleagues to learn, share
their professional achievements, identify and develop skills to support their career goals, find job and project
opportunities and mentors, and drive their professional growth. MyCareer Marketplace also supports mobility within DSM.
Between June and December, more than 30% of relevant DSM employees used the tool.
Our Annual Performance Management cycle continued, with approximately 15,000 employees taking part during the year.
All other employees participated in performance discussions on paper or by means of local systems. We simplified the
performance management process in 2022 to give managers and employees more time to discuss their performance and
development needs – supporting our focus on developing our people now and for the future. We also started to move
toward a Continuous Dialogue approach that ensures our people have regular opportunities to receive feedback, reflect on
their development and aspirations, and set new goals.
This was also the first full year of our ‘Learn Together, Grow Together’ initiative, which was launched in late 2021 to inspire,
support, and guide our people in shaping their personalized learning journeys. Founded on four pillars – Own it, Find your
fun, Try something new, and Share what works – this campaign aims to make learning accessible, attractive, and fun. By
tapping into employees’ motivation to develop skills that interest them, Learn Together, Grow Together increases their
learning agility – a critical skill in fast-paced environments. This initiative also contributes to embedding our learning
culture throughout DSM and empowering our people to take ownership of their growth. Eight months after its launch in
2022, 51% of all our employees had visited the new Learn Together, Grow Together learning platform a total of 150,000
times. This frequency is already a greater proportion than had ever visited our previous learning platform. Next to this, the
number of employees that spend time (recurring) in the Bright Learning platform was 42% higher compared to 2021. As we
believe in sustainable learning, we plan to plant trees in ratio to the number of hours our employees spend learning. In
2023, we will plant 6,770 trees across the globe to recognize the time our people spent on digital learning in 2022.
Resetting the context for leadership
Our Culture Compass – established in late 2020 – continues to underpin our approach to leadership and the employee
experience. In 2022, global research company Gartner developed a case study on the Culture Compass, sharing this as a
best-practice model for other companies. Throughout the year, we continued to integrate the Culture Compass into the
employee experience:
- Onboarding: We developed a Culture Compass Virtual Experience for all employees onboarding remotely and
delivered a ‘Culture and DEI’ session for new trainees in our Group digital Services (GdS) team. In Switzerland, we
also embedded culture into onboarding processes via our ‘Leading through Culture’ workshop for new People
Managers
- Recognition: To strengthen DSM’s recognition program, in alignment with the Delivering Value element of the
Culture Compass, the Total Rewards team piloted a recognition platform, Brilliant, in Brazil and Singapore. The
outcome will be assessed through a recognition survey in the first quarter of 2023
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Royal DSM Integrated Annual Report 2022 59
Finally, P&O launched the Evolve Toolkit for People Managers. This Toolkit consists of resources to help our leaders
strengthen their teams’ resilience and performance, such as digital team exercises and templates, team development
sessions, facilitation of team dialogs, and masterclasses. Fourteen virtual masterclasses were conducted (seven Evolve
Ready and seven Igniting Team Performance), in which 184 colleagues participated. It received a rating of 4.44 out of 5 on
participants’ ability to apply their learnings to their role at DSM. In the coming months, we will measure the effectiveness
of this toolkit, and determine follow-up actions accordingly. To support the resilience of all DSM employees, we also
hosted 10 Maximizing Your Resilience webinars, in which 171 employees participated. Participants gave the question “I
would recommend this webinar to a colleague/friend” a 4.5 out of 5.
Creating a contemporary workplace
In 2022, we took the next step in our hybrid working strategy, working toward a 50:50 balance between remote and office
work for all office-based employees. For employees based in plants or labs, we continue to explore options for flexibility.
The intention is that this balance will enable colleagues to work flexibly and efficiently on individual tasks where needed,
while also facilitating collaboration, closer relationships, larger networks, and increased development opportunities
through in-person connections. Like many businesses around the world, we have found that some employees are hesitant
to return to the office, which is why we introduced creative initiatives to promote the value of in-office working, such as
the trial of ‘Teams-less Tuesdays’ toward the end of the year. Through this initiative, we aim to keep Tuesdays free of large
online meetings, thereby encouraging employees to use Tuesdays for face-to-face collaboration or on-site initiatives and
to consider alternatives to online meetings more generally. In 2023, we will evaluate this initiative and take appropriate
follow-up actions.
Tools and resources such as our Digital Guides, the TeamPact app, and Mapiq continue to support employees in taking an
innovative, tailored approach to team working. By suggesting alternatives to Teams meetings, helping to plan face-to-face
interactions through the Mapiq app, and taking employees’ working preferences into account through TeamPact, these
resources make it easier for teams to work in the way that best suits their situation.
Our regions also implemented various hybrid working initiatives throughout 2022. These included an integrated hybrid
working program in Latin America, events to celebrate returning to the office and hybrid-based plans for office spaces in
India and Asia-Pacific, and hybrid-focused DSM TV episodes in the Netherlands.
Modern, flexible rewards
Flexible rewards can enable our P&O strategic drivers by taking into account the diverse needs of our people and
businesses. To make these rewards programs as effective as possible, insights into employees’ needs and perspectives are
essential.
In 2022, we planned to undertake a broad compensation and benefits survey. This survey was postponed due to other
priorities, however we did increase our understanding of employees’ views on our rewards offerings in two ways. First, in
April, a P&O survey provided a first indicator that we need to make our short-term incentives and other rewards more
motivating and more widely available. Second, people often mentioned that they would like to talk about compensation
and benefits with us in the open-text comments of our 2022 Employee Engagement Survey (EES). In 2023, we plan to
further explore this topic and determine appropriate follow-up.
We also piloted our recognition program in Singapore and Brazil in the second half of 2022, after finalizing the underlying
Recognition Guideline in 2021. In early 2023, we will validate the pilot results.
We expanded our offering of flexible benefits programs in 2022. In July, DSM Brazil launched its Bright Benefits program,
which allows employees to select from a ‘menu’ of flexible benefits alongside certain fixed benefits. Bright Benefits was
well received by employees at all levels of the organization. In feedback from the Employee Engagement Survey,
colleagues highlighted the attractiveness of the benefits offered and how the choices help meet their personal needs. We
already run similar programs in countries such as the Netherlands and the US, and in the coming years, we hope to offer
flexible benefits to employees in more regions, in order to further strengthen our employee value proposition.
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Royal DSM Integrated Annual Report 2022 60
Employee experience and analytics
In 2021, we designed our Employee Experience Vision, which outlines our ambitions to create an environment in which our
employees feel taken care of, engaged, empowered, able to deliver, and able to grow. To better meet the needs of our
business and realize this Vision, we implemented the new P&O operating model in 2022 that was designed in 2021. This
included the launch of a P&O service desk as a new contact channel for our employees and the design of simpler and
more transparent P&O processes across the board. We also continued to develop our employee experience capabilities
with hands-on training sessions, intensive coaching, a supporting playbook, and other materials. Meanwhile, we began
measuring employee experience across P&O. This resulted in an increased focus on well-being for both P&O and the
company more widely, and we integrated well-being questions into all our global listening initiatives. Finally, we
introduced an easier-to-use platform for managing core P&O activities in Switzerland. In the coming years, we plan to roll
out this platform to other DSM countries.
We continue to work toward becoming an insights-driven P&O function, where all P&O colleagues can access the
information they need to make robust decisions. To this end, we implemented a more accessible and intuitive insights
platform in March 2022. This platform provides the entire P&O community with a single access point for our People data, a
step-up from our previous set-up of six unconnected dashboards. Across P&O, 30% of colleagues are now using it on a
regular basis. We plan to integrate this platform further with the Finance function by making FTE and cost-center data
available on the platform.
Furthermore, we have increased our efforts to develop a ‘data culture’ and build a new set of data literacy capabilities to
upskill our functions. These efforts have included training, working groups, and the establishment of a dedicated data
community. Together, these initiatives have enabled a shift in focus from ‘data crunching’ to data analysis and insight
collection, with everyone in our P&O function now equipped to generate insightful reports themselves. We plan to further
embed this shift in the coming years.
Employee listening
Listening to our people enables us to understand their needs, pain points, and motivations, and therefore to shape a
positive employee experience. In 2022, we established a new employee listening strategy that aims to:
- Focus on measuring what is purpose-led, performance-driven, and evidence-based
- Simplify and streamline our listening initiatives, balancing global standardization and local needs
- Optimize the use and integration of data sources and analysis
- Design our listening initiatives with action in mind
To support this vision, we redesigned our Pulse Surveys and Employee Engagement Survey to align with our strategic
objectives and continuously measure critical dimensions such as well-being, work engagement, and psychological safety,
alongside other topics relevant to our transformation to a flotilla-style organization (such as priority-setting, adaptability,
and customer focus). In comparison to our census-based annual Employee Engagement Survey, which provides us with a
detailed understanding of how our people are experiencing fundamental topics, our sample-based quarterly pulse checks
help us to gather employee feedback more regularly and take targeted actions more quickly. By analyzing our open-text
data in a more structured way, we also improved our ability to act on what our people are telling us, as we were able to
identify more accurately what is on people’s minds and what they think we should improve.
The annual Employee Engagement Survey, sent out to all our employees, remains a key source of employee feedback. The
results provide insights into employees’ views on topics such as preferred work locations and well-being. Despite the
considerable changes and challenges experienced in 2022, our overall DSM scores in the Employee Engagement Survey
remained largely the same, with no drop in any dimension scores compared to our 2021 scores on a like-for-like basis.
2
This includes our Employee Engagement score, which scored similar to last year (77%) and our response rate (89%). To
2 As the divestment of Engineering Materials was announced prior to the launch of the EES, people working for Engineering Materials completed a
different questionnaire. The scores cannot be aggregated in the total, therefore EES and associated metrics are reported excluding Engineering
Materials. The 2021 Employee Engagement scores excluding Engineering Materials were: Employee Engagement Index 77% and Inclusion Index 77%.
Royal DSM Integrated Annual Report 2022 61
Report by the Managing Board – People
ensure the most accurate comparison of our business to last year, scores of 2021 excluding Engineering Materials will be
reported in the remainder of this chapter.
In 2022, we measured a new topic called work engagement. Work engagement refers to people’s passion about their job
and is thereby different from employee engagement which refers to the commitment, pride, advocacy, and satisfaction
people feel towards the company. With a favorability score of 80%, we found that people are passionate about their work.
Our top three sub-category scores relate to the finding that our employees believe that DSM is a safe place to work (93%),
consider health and safety a top priority (92%), and find their work meaningful (86%). The scores for both inclusion (79%)
and managers (78%) rose slightly compared to 2021, by 2 p.p. and 1 p.p. respectively. Encouragingly, the gender gap on
employee engagement between male and female executives in 2021 (men scoring almost 9 p.p. higher than women) was
almost entirely closed (1 p.p.) in 2022.
At the same time, our results also brought to the forefront some improvement areas – with well-being scores being at the
lower end, with an average score of (70%). Based on these insights, our focus areas for 2023 and beyond are to build
further momentum on inclusion across DSM and support the well-being and ability to regularly re-energize among all our
employees.
Through advanced text analytics on the comments of the Employee Engagement Survey, we also examined the emotions
expressed in people’s comments and identified 48 topics, such as workload, innovation, and compensation and benefits.
This is an improvement versus 2021, where we only identified 17 topics and whether the sentiment was positive, neutral or
negative. Based on our 2022 analysis, we learned that the level of complexity and bureaucracy across our systems and
structures, a fear of failure when innovating, and the pressure of being part of an overstretched workforce are areas for
improvement. These insights will help us to further prioritize when redesigning our processes and structure in 2023 to
boost simplicity, innovation, and agility.
To ensure improvement conversations take place at all levels, our leadership teams across the globe will continue to
discuss the results, explore root causes behind low scores and prioritize targeted actions in 2023. In parallel, we support
our people managers with a toolbox containing tips, trainings, and templates to engage in a conversation with their team
about the results and determine meaningful follow-up actions.
Diversity, Equity & Inclusion
In 2022, we continued working to ensure that all our people feel included and cared for. Fostering and maintaining a
diverse, equitable, and inclusive workplace is key to helping our employees offer their best, most authentic contribution,
and is a prerequisite for achieving our ambitions and accelerating our strategic transformation. In 2022, we added
‘equity’ to our previously established Inclusion and Diversity strategy, which is now referred to as our Diversity, Equity,
and Inclusion (DE&I) strategy. Our DE&I strategy focuses on four existing initiatives: Human rights, Living wage, Pay
parity, and Hybrid working. We also accelerated progress on our five diversity pillars – Gender; Race, Ethnicity & National
Identity (REN); LGBTQ+; Disability; and Generations – through continued efforts on our three focus areas: recruitment,
development, and inclusion.
Aspiration
2022
2021
Inclusion index¹ ²
79%
77%
.
Internationalization & diversity
Female executives
30% by
2025
26%
23%
Under-represented nationalities
40% by
2025
29%
31%
1 All data presented in People are subject to the Non-financial reporting policy.
2 As the divestment of Engineering Materials was announced prior to the launch of the EES, people working for Engineering Materials completed a different
questionnaire. The scores cannot be aggregated in the total, therefore EES and associated metrics are reported excluding Engineering Materials. The 2021
Employee Engagement scores excluding Engineering Materials were: Employee Engagement Index 77% and Inclusion Index 77%.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 62
A regional approach to DE&I
Each pillar is key to an inclusive workplace and contains commitments that we strive to achieve by 2025. Since inclusion is
experienced in specific contexts, and at different maturity levels around our global workplaces, we have adopted a local
ownership approach. In April 2022, we organized a series of regional DE&I commitments workshops, where all the regions
were invited to create their DE&I roadmap to contribute to our global commitments. The regional roadmaps include goals
and ambitions per pillar to support workplace inclusivity, such as the period leave policy that has been implemented in
India and new benefits for our LGBTQ+ employees that have been implemented in North America. The global DE&I network
meets quarterly to review progress on these commitments, discuss challenges, and share best practices.
Our new DE&I hub
In August 2022, we set up a new online employee DE&I hub where all employees can learn more about our 2025
commitments through a range of educational resources and practical toolkits, such as guidelines on tips for inclusive
language for policy development. Through the DE&I hub, employees can join Employee Resource Groups and networks and
become co-creators of our DE&I journey.
DE&I governance framework
DSM’s governance framework for DE&I ensures ownership and steering by the executive and senior leadership, with
operational responsibility shared between the business and regions. For example, our DE&I commitments were agreed
upon by DSM’s Inclusion & Diversity (I&D) Council and jointly owned by our Executive Committee and Regional Presidents.
In 2022, we consolidated our DE&I governance, with our Co-CEOs chairing the I&D Council and each Executive Committee
member sponsoring one of the five diversity pillars. The direction of our DE&I strategy, along with our commitments, was
discussed and agreed upon by the Executive Committee. Our I&D Council, which helps to shape our DE&I strategy and
drives program activation, comprises Regional Presidents, business leaders, employee resource group leads, and DE&I
regional leads. Additionally, each region has nominated a focal point of contact for DE&I to support the global DE&I team
in implementing programs and initiatives.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 63
Our DE&I focus areas
Our global DE&I team undertook a wide range of initiatives within our focus areas of recruitment, development, and
inclusion, in close collaboration with regional teams and Employee Resource Groups. These initiatives aim to diversify our
current and future talent pools, improve development opportunities for underrepresented groups, and ensure a
psychologically safe and inclusive working environment where all our colleagues can be their authentic selves. Ultimately,
we are committed to providing workplaces where a diverse range of colleagues feel comfortable to contribute and can
truly thrive regardless of their background or characteristics. In 2022, we continued to invest in creating such a culture,
launching a new inclusion program, which is available on demand for all teams. Our efforts are reflected in the increase of
our Employee Engagement Survey inclusion score (+2 p.p.), which is even more evident in regions such as the Netherlands
(+4 p.p.) and Switzerland (+3 p.p.).
A strong DE&I network
Our DE&I network has continued to expand through Employee Resource Groups and regional DE&I teams. This network’s
initiatives and events continue to contribute to positive increases in inclusion scores. Examples of such initiatives include:
- Global workshops and webinars on our five DE&I pillars: Gender, REN, Generations, Disability, and LGBTQ+
- Signing the Declaration of Amsterdam, underlining our commitment to making DSM even more LGBTQ+ friendly
- Launch of ‘Hot Site’, an online sign language accessibility tool, in Latin America
- DE&I Week events in all regions, with activities focused on our five DE&I pillars
- Wo&Men’s development program, a program designed to facilitate career development for our female (and male)
talents
- Mentoring program for women in operations and supply chain
- Pride Month, with a variety of LGBTQ+ awareness sessions around the world
- Black History Month in the US
Our performance on our global diversity targets
Our DE&I commitments for 2022–2025 are:
- 30% of our executives to be female
- 40% of our executives to be from currently underrepresented nationalities
- Global business and functional leadership teams to be at least 30% diverse in gender and nationality
In addition, and in line with our broader commitments to the five DE&I pillars, the regions take ownership of progress via
local programs, following our overall focus on recruitment, development, and inclusion.
In 2022, we realized a 3 p.p. increase (from 23% in 2021 to 26%) in the percentage of female executives, reflecting changes
implemented in our talent acquisition, recruitment, and learning and development processes. A substantial increase and
accomplishment we can be very proud of. In addition to this, our Employee Engagement Survey results show promising
trends. Specifically, female executives feel more involved in decision making processes (+10 p.p.), have more development
conversations with managers (+17 p.p.) and are more satisfied with their career opportunities at DSM (+6 p.p.) compared to
last year. As a result, the gap between male and female executive scores has diminished in some areas and disappeared in
others.
Our percentage of executives from under-represented nationalities slightly dropped from 30% to 29%. These outcomes
show that we are making steady progress toward our 2025 targets for female executives (30%), but slower-than-desired
progress toward our 2025 targets for underrepresented groups (40%) at executive levels. Several factors influenced this
outcome, including the continued competition for high-profile candidates in a buoyant labor market and the fact that
many of our key executive roles are based in Europe.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 64
We conducted regional DE&I surveys in China and Asia-Pacific in 2022 to gather further insights into the composition of
our workforce. This offered employees the opportunity to self-identify on demographics we cannot track globally and
provided baseline data for identifying priority areas that need support from DSM policies or Employee Resource Groups.
This diversity data is collected and managed following all data privacy and GDPR guidelines, securing employees’
anonymity.
Based on these results and local factors, those regions have adapted their DE&I roadmaps and are implementing
programs such as improving access to employment for people with disabilities, ensuring equality in policies and benefits
for LGBTQ+ colleagues, and awareness and education initiatives.
Human rights
We strongly believe that it is our duty to respect internationally recognized human rights, including the rights of people
along our entire value chain. Human rights are integral to our purpose-led and performance-driven strategy. We believe
that the basic rights and freedoms to which all people are entitled should be understood, respected, and promoted by all
companies as the cornerstone of responsible business.
2022
2021
Gender pay gap (in favor of women)¹ ²
6%
7%
.
Living wage
Employees below lower-bound
0%
0%
Employees below higher-bound
0%
< 0.1%
1 All data presented in People are subject to the Non-financial reporting policy.
2 Percentage excludes Pentapharm (Switzerland and Brazil), Jiangshan, Twilmij and Erber.
Respecting human rights means that we follow international guidelines and implement the United Nations Guiding
Principles (UNGPs). We execute audits to monitor whether our codes and policies are followed within our own operations,
as well as use Human Rights Impact Assessments (HRIAs) on our own operations. This allows us to keep defining our
salient human rights areas and provide feedback on how we can further improve our efforts. We have elaborated on this in
our human rights policy, available on our company website, including our process on human rights due diligence.
Grievances relating to human rights are addressed according to the Code of Business Conduct and our whistleblower
procedure, DSM Alert.
In 2022, we continued to implement our due diligence structurally as part of our human rights approach. Our salient issues
are child labor, health and safety, living wage, forced labor, migrant workers, harassment, land acquisition and
resettlement, human rights defenders, and freedom of expression and rights issues from industrial agriculture. DSM is
continuously looking for ways to address and assess the impact of our operations. In 2022, we engaged with a strategic
supplier to assess our potential human rights impact in the fish oil value chain, and to develop an action plan as needed.
This engagement will continue in 2023, and the results of the assessment will be known in 2023. The results will also be
used for future guidance towards implementing the UNGPs.
Throughout 2022, we undertook an in-depth analysis of our internal risk management procedures to identify gaps between
existing and necessary management of human rights risks. In particular, our supplier due diligence was reviewed as part of
our sustainable procurement practices. The results have been prioritized and will be further implemented throughout
2023. DSM joined the UN Global Compact Business and Human Rights Accelerator Program that will start in early 2023. The
Business & Human Rights Accelerator is a six-month program that will further support DSM to move from commitment to
action on human rights and labor rights. Through identifying salient human rights impacts, establishing an ongoing due
diligence process and developing an actionable plan, the Business & Human Rights Accelerator will empower DSM to
further advance our human rights journey.
We recognize that other human rights may become greater priorities over time, and we will regularly review our focus
areas.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 65
Fair remuneration
DSM is committed to the principle of equal opportunities for all employees, which includes providing our employees with a
living wage. We align our calculations with the Anker methodology (Anker and Anker 2017). We also aim to reward our
employees for their overall contributions to the company, setting equal pay for men and women doing similar work that
requires equivalent qualifications and skills. Our Fair Remuneration Statement, available on our company website,
elaborates on our position.
Gender pay gap and equal pay
We continue to use the GRI 405-2 topic disclosure as guidance for calculating our gender pay gap. Our 2022 results showed
a gender pay gap of 6% in favor of women, (female:male pay ratio of 106:100), a narrowing of the gap by 1 p.p. compared to
2021. This is mainly due to changes in the average salary of both genders, particularly in North America where we say the
gap decrease by 2 p.p., and headcount fluctuations in the six regions.
This ratio is based on validated employee base pay data for locations where we have significant operations and covers
approximately 63% of our global employee base. These locations include Brazil, China, India, the Netherlands, Switzerland,
and the US, excluding our operations in Pentapharm (Switzerland and Brazil), Twilmij (Netherlands) and Hydrocolloids
(China). The pay gap can primarily be attributed to a higher proportion of male employees in lower-level positions, and it
does not necessarily indicate whether we pay men and women equally for doing similar work. While we strive to complete
an analysis on equal pay, a more holistic approach on employee data governance is required first. This is an area we plan
to further advance on in 2023.
Living wage
We are committed to paying a living wage to all our employees, based on WageIndicator’s benchmark methodology. When
analyzing our wage levels, we started with our locations where we have significant operations as defined above. In 2022, we
added six countries to the living wage reporting scope. The six countries are: Canada, Costa Rica, Malaysia, South Africa,
Egypt and UK. With the addition of these countries 68% of the total DSM workforce is covered. Of the workforce in scope,
we include all employees in the calculation that have been in active service for more than 1 year with the exception of
apprentices and interns.
We aim to further expand the number of countries included over the coming years. In 2022, we assessed wage levels
against WageIndicator’s typical family, with higher-bound (our target level) and lower-bound (for comparative purposes)
living wage figures. We apply the following definitions from WageIndicator’s methodology:
- The typical family is defined as two adults with a number of children derived from the national fertility rate
- The employment rate is defined as one adult working full time, while the employment rate of the other adult is
derived from the national employment rate
- The higher-bound living wage figure uses prices (for housing, food, and other indispensable goods or services) at
the 50th percentile (where 50% of people report higher prices), while the lower-bound figure uses prices at the
25th percentile (where 75% of people report higher prices)
Based on our assessment, no employees were paid below the typical family with higher-bound (and consequently, lower-
bound) living wage figures.
Report by the Managing Board – People
Royal DSM Integrated Annual Report 2022 66
Additional employee information
The following information is provided according to GRI 2-7 and GRI 2-8.
Employees
Employees by gender
Female
Male
Not disclosed
Unknown¹
Total
Total Headcount
6,129
13,362
22
1,169
20,682
Permanent / temporary
6,108 / 21
13,323 / 39
22 / 0
1,169
20,682
Full time / part-time
5,191 / 938
12,884 / 478
19 / 3
1,169
20,682
1 For indexes based on age, nationalities, gender, inflow and outflow, the companies that are not integrated into the HR systems (approximately 5% of the
total workforce) are not taken into account.
Employees by region
Netherlands
Switzerland
Rest of Europe
North America
Latin America
China
Rest of Asia
Rest of the world
Total
Total Headcount
2,642
2,232
4,211
2,618
2,302
4,591
1,742
344
20,682
.
Permanent
2,642
2,216
4,097
2,519
2,302
3,591
1,742
344
19,453
Temporary
0
16
44
0
0
0
0
0
60
Unknown
0
0
70
99
0
1,000
0
0
1,169
.
Full time
1,970
2,000
3,748
2,601
2,300
4,567
1,738
339
19,263
Part time
672
232
463
17
2
24
4
5
1,419
Contingent employees
Contingent employees are employees that are not on the DSM payroll but are paid via invoice, such as contractors. In 2022,
DSM employed on average 1,291 contingent employees per month.
Royal DSM Integrated Annual Report 2022 67
Planet
At a glance
- 35%
1
absolute reduction of scope 1 + 2 greenhouse gas emissions versus baseline 2016
- ~26% structural improvement of scope 1 + 2 greenhouse gas emissions versus baseline 2016
- 17% scope 3 greenhouse gas emissions intensity improvement versus baseline 2016
- 78% purchased electricity from renewable resources
- -0.4% energy efficiency improvement, year-on-year
- 7.2% water efficiency improvement in water-stressed sites versus 2020
We take our global environmental responsibilities very seriously. These extend beyond our own operations to include
those of our suppliers, customers and end-users. We fulfill our environmental responsibilities through our Brighter Living
Solutions Plus (BLS+) portfolio, our Safety, Health & Environmental (SHE) policy, and our position on issues such as
product stewardship and biodiversity. We focus on:
- Improving our own environmental footprint, as well as the value chains we operate in
- Enabling our customers to do the same through innovative products and solutions
- Advocating action on key environmental topics
At the end of 2022, our operations network spanned more than 110 commercial production facilities in 41 countries. Our
operational approach is guided by the DSM Responsible Care Plan, described below, and supports the Sustainable
Development Goals (SDGs), especially SDG 7 (Affordable and Clean Energy), SDG 12 (Responsible Consumption and
Production) and SDG 13 (Climate Action). Our Planet reporting addresses our performance on several material topics
identified in our Materiality matrix:
- Climate change mitigation
- Climate adaptation
- Raw materials & circularity, and Pollution & waste management, addressed in Waste & circularity
- Nature & biodiversity
- Water stewardship
- Product quality & safety, addressed in Product stewardship
Progress against our DSM Responsible Care Plan
We made good progress on our environmental ambitions, as defined in our DSM Responsible Care Plan (DRCP). The DRCP
defines our ambitions, targets and actions in the Planet-related fields of environmental footprint, value chain
sustainability and climate adaptation. Our new 2022–2024 DRCP fully aligns with our updated strategy and reflects the
industry’s standards and expectations. Key topics remain climate and safety, with other principal areas of focus being
product stewardship, industrial hygiene, employee health & well-being, water and waste and biodiversity.
Our key targets are our Science Based Targets
The key targets in the DRCP are our Science Based Targets (SBT), which represent our contribution to climate change
mitigation. In 2022, we again increased our ambition level based on our strong performance on greenhouse gas (GHG)
emissions reductions and to reflect the latest scientific insights from the Intergovernmental Panel on Climate Change
(IPCC). Our SBT are an absolute reduction of GHG emissions from our operations (scope 1 + 2) by 59% (increased in 2022
from previous ambition of 50%) and a value chain (scope 3) intensity reduction of 28%, both by 2030 versus our 2016
baseline. These are also the foundation for our net-zero-by-2050 commitment. The independent Science Based Targets
initiative (SBTi) reviewed and approved our targets and our plans to achieve them first in early 2019 and again for our
1 All data presented in Planet are subject to the Non-financial reporting policy.
Report by the Managing Board – Planet
Royal DSM Integrated Annual Report 2022 68
step-ups in ambition in 2021 and 2022. Our scope 1 + 2 target has been determined to be in line with the latest climate
science and in limiting global warming to 1.5°C.
Evolving our GHG targets to reflect the latest science
Our scope 1 + 2 target is supported by a renewable electricity target (100% of purchased electricity to be sourced from
renewables by 2030, increased in 2022 from our previous ambition level of 75%) and our annual average energy efficiency
improvement of at least 1% until 2030. A scope 1 + 2 reduction program drives progress, with multiple activities and
projects year-on-year. The scope 3 target is supported by the CO2REDUCE supplier engagement program.
Besides mitigating climate change, we are also working on climate adaptation. In 2020–2021, we conducted physical risk
assessments on our top 30 sites to improve the resilience of our assets against potential physical impacts of climate
change. In 2022, we established and piloted a process in our Business Groups to identify and assess the potential impacts
of the different speeds of transition to a net-zero world. We will expand and continue this work iteratively in the coming
years. More information on our risk assessment is provided in Risk management.
Our other company targets are driving improvements in the areas of water, waste, other emissions and substances of
concern. We will continue to implement the various water improvement plans that we identified during the water risk
assessments in the past years. We commit to reduce our water intake in water-stressed areas. Furthermore, we continue to
enhance our insights and capabilities to steer more circularity through waste reuse/recycling and we are further
developing action plans for selected products containing substances of concern, with the aim to set a target in 2023. We
regularly review progress on our plans and update our targets accordingly. Our target-setting process is underpinned by
the plans and measures needed for their realization.
In 2022, we made good progress on the key objectives of the DRCP as reported elsewhere in this section. Additional
information about our Planet performance is provided in the five-year summary – Sustainability tables, our Value creation
model and Stakeholder engagement.
Report by the Managing Board – Planet
Royal DSM Integrated Annual Report 2022 69
MAIN TARGETS
59%
28%
100%
67%
<0.20
GHG
Scope 1 + 2
Absolute
reduction by
2030 vs 2016
GHG
Scope 3
Intensity
reduction by
2030 vs 2016
Renewable
Electricity
From purchased
sources by 2030
Brighter Living
Solutions Plus
Safety
Frequency Index
of Recordable
incidents by
2027
SUB-TARGETS
>1%
10%
> 0%
50%
0.15
<0.07
TBD*
Energy
Average
annual
energy
efficiency
improvement
(EEI)
Water
Intake
efficiency
improvement
water-
stressed
areas by 2030
vs 2020
Waste
Total
process-
related waste
efficiency
improvement
Waste
Landfill
reduction in
2030 vs. 2020
Safety
Process
safety
incident rate
by 2024
Safety
Occupational
health
incident rate
by 2024
Product
Stewardship
*In 2023, set a
reduction
target for
Substances of
Concern
Climate change mitigation
In 2015, the Paris Agreement first established a common ambition to take urgent action on GHG emissions to limit
average temperature increases to well below 2°C. Later in 2018, the Intergovernmental Panel on Climate Change (IPCC)
provided a clear and compelling case to redouble efforts to limit warming to 1.5°C. Our fair share of this ambition
requires our emissions to reach net-zero by 2050 at the latest with a rapid acceleration of the rate of our emission
reductions over the coming decade. These are specified in our net-zero commitment and Science Based Targets (SBT).
Aspiration
2022
2021
Greenhouse gas scope 1 + 2 (market-based)¹
Absolute reduction (SBT) versus 2016
59% by 2030²
35%
27%
Estimated structural improvement versus 2016
approx. 26%
approx. 23%
Scope 1 + 2 emissions (million tons CO₂eq)
1.05
1.21
Recalculated baseline (2016, in million tons CO₂eq)
1.62
1.66
.
Greenhouse gas scope 3
Intensity reduction (SBT versus 2016)
28% by 2030
17%
8%
Scope 3 emissions (million tons CO₂eq)
9.9
11.7
.
Energy
Purchased electricity from renewable sources
100% by 2030
78%
72%
Energy efficiency improvement year-on-year
> 1%
-0.4%
6.0%
Primary energy use (PJ)
19.5
21.4
Final consumed energy (PJ)
17.4
18.8
Report by the Managing Board – Planet
Royal DSM Integrated Annual Report 2022 70
1 All data presented in Planet are subject to the Non-financial reporting policy.
2 Target level strengthened in 2022 from 50% by 2030.
Aligning our climate approach with science
Meeting our long-term ambition to reach net-zero GHG emissions aligned with climate science will require us to
structurally reduce emissions across our operations and value chains by at least 90% in absolute terms by 2050, if not
sooner. To neutralize any residual emissions, we will also eventually deploy permanent carbon removals. These removals
will need to meet the highest quality criteria and social and environmental safeguards. Our Science Based Targets are the
intermediate step to achieve this goal, supported by our ambitions regarding renewable electricity and energy efficiency,
and by working intensively with our key suppliers through our CO2REDUCE program. This requires transforming our
operations and value chains.
We are working with long-term innovation roadmaps that will bring us as close to zero emissions as possible in the
coming decades. This includes investments in a portfolio of solutions that can help our customers to do the same while
reducing our emissions through process, solutions and materials developments. Net-zero roadmaps are developed
simultaneously for key products, as well as deployment plans for key technologies that can be applied in process redesign
for multiple products. At the same time, we are exploring highest impact instruments for additional contributions to
accelerate global net-zero transition beyond our own value chain such as high-quality carbon credits or increasing the
avoided emissions for our customers. These contributions are not claimed against our own emissions. Our net-zero
activities are guided by the SBTi NetZero Standard and Business Ambition for 1.5°C commitment framework.
“We regularly evaluate how we can go further and faster on our route
to net-zero. In 2022, we again updated our scope 1 + 2 GHG reduction
targets, and I’m proud that the Science Based Targets initiative has
validated DSM’s ambition level of a 59% reduction by 2030 as 1.5°C
aligned.”
Dimitri de Vreeze, Co-CEO, Royal DSM
Business measures supporting our climate approach
In support of our ambition to substantially reduce our carbon footprint, we have introduced key measures which we apply
to all growth projects. Since 2019, business growth projects must either be GHG-neutral or else be compensated for within
the same site/business. In addition, to encourage investments in low-carbon and carbon-free technologies, we use an
internal carbon price (ICP) of €100/t CO
2
eq in the valuations of key investment projects. This increases the visibility of, and
encourages accountability for, the impact of carbon emissions on the business.
Ownership of climate actions is at Executive Committee level
The DSM climate agenda and transition plan brings together our key climate actions addressing
the three pillars of improve, enable and advocate. The progress of the agenda, including the
implementation of the Taskforce on Climate-related Financial Disclosures (TCFD)
recommendations, the GHG reduction program, our portfolio developments and efforts to
advocate accelerated transition with partners, are managed and actively reviewed by the
Executive Committee several times a year under various workstreams. Our climate change
strategy received an A rating from CDP in 2022.
Scope 1 + 2 GHG emissions
On track with our scope 1 + 2 target
We are well on track to deliver our increased ambition of an absolute reduction of 59% by 2030. Our scope 1 + 2 market-
based GHG emissions improved by 35% (compared to 27% in 2021) versus our recalculated 2016 baseline. The estimated
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Royal DSM Integrated Annual Report 2022 71
structural improvement is ~26%. Total scope 1 + 2 emissions were 1.05 million tons of CO
2
eq in 2022, a decrease of nearly
150 kt CO
2
eq compared to 2021. Our GHG efficiency (year-on-year) improved by 5.1% in 2022.
Scope 1 + 2 reductions versus recalculated baseline
Recalculating our baseline in 2021
Our baseline GHG emissions figure was recalculated to 1.62 million tons of CO
2
eq. This adjustment is due to the inclusion
of 22 acquired sites in our reporting scope in the period 2017–2022, the divestment in 2021 of Resins and Functional
Materials and associated businesses, the divestment of DSM Protective Materials in 2022 (pro-rata), and the impact of
methodology changes. Five newly built sites were also added to the reporting scope; however, as they were constructed
after 2016, they have no impact on the baseline.
2016 GHG Baseline recalculation
In thousand tons CO
2
eq
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Royal DSM Integrated Annual Report 2022 72
Our GHG reduction program
In order to achieve the targeted absolute GHG reduction by 2030, we continued our dedicated program to help our key
locations implement an appropriate energy transition, as well as energy efficiency measures. We use performance
diagnostics as well as self-assessments that are carried out at key sites to identify GHG emission reduction opportunities.
The learnings from these sites are shared across all sites to enable further roll-out of improvement projects.
Our greenhouse gas (GHG) emission reductions are driven by a rigorous energy transition program, comprising the
following elements:
- Reduction of total energy consumption through energy efficiency improvement measures
- Energy transition to increased use of energy from renewable sources, comprising both purchased and self-
generated renewable electricity, and renewable fuel and heat
- Driving smart electrification, combined with energy efficiency improvements that enables a shift to the use of
electricity from renewable sources instead of burning fossil fuels
Projects finalized in 2021 began delivering full benefits in 2022, further reducing 2022 emissions by approximately 20 kt
CO
2
eq. These projects are of various natures: improving energy efficiency in steam generation and distribution, cooling and
compressed air utilities, installing solar panels, minimizing heat losses through heat integration and heat pumps or, for
instance, reducing energy required for water separation by using membranes. These projects often also deliver additional
benefits such as cost and/or water savings.
Among the more than 40 projects executed in 2021 to save energy, significant improvements were realized in Jiangshan
(Jiangsu province, China) with the implementation of new technology for product concentration, the internal recycling of
solvent, investments in chiller improvements and many other operational improvements leading to more than 10 kt CO
2
eq
savings. On top of the projects in 2021, we also saw operational improvements leading to greenhouse gas emissions
reduction, especially at one of our recently acquired sites. In 2022, we also saw the benefits of our first efforts in 2021 to
bring two digital solutions helping our sites better optimize equipment energy use and reduce energy losses: Energywise,
our energy dashboard (applying, for example, model predictive analysis) allowing sites to steer the energy consumption of
key assets, and steam trap monitoring technology, which allows us to identify in real time leaking or malfunctioning steam
traps, thus enabling faster repair and maintenance.
In 2022, we again strengthened our efforts with even more energy-saving projects compared to 2021. Among the most
noticeable projects were a new membrane project in Jiangshan (Jiangsu province, China) saving more than 10 kt CO
2
eq; the
implementation of a high efficiency, state-of-the art cooling system in Xinhuo (Shanghai province, China), applying – head
of local legislation – low global warming potential (GWP) refrigerants; and the further deployment of the above-mentioned
digital technologies in Seclin (France), Village-Neuf (France) and Belvidere (New Jersey, USA) for Energywise, and Sisseln
(Switzerland), Dalry (UK), Village-Neuf (France) and Kingstree (South Carolina, USA) for steam trap monitoring.
Renewable energy
We are a proud member of the Climate Group’s RE100, comprising leading companies that have committed to 100%
electricity from renewable sources at the earliest possible opportunity. In 2022, we increased our purchased renewable
electricity target to 100% by 2030 at the latest.
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Royal DSM Integrated Annual Report 2022 73
Purchased renewable electricity
In 2022, we once again made significant steps toward achieving our purchased renewable electricity target. The percentage
of purchased electricity from renewable sources increased globally from 72% in 2021 to 78% in 2022, achieving our previous
target eight years ahead of schedule and putting us firmly on track toward our new target level. The progress in renewable
electricity is mainly due to a step-up in China.
Progress on purchased renewable electricity in China
For 2022, we concluded several renewable electricity contracts in China, increasing the share of electricity from renewable
sources to 32% from 16% in 2021. This includes the sites Jiangyin, Jiangshan, Yantai, Yimante and Wuxi. In addition, we
concluded purchasing agreements to provide renewable electricity for 2023 that will further increase the share of
electricity from renewable sources.
Purchased renewable electricity in Europe and North America
For our operations in Europe, we maintained 100% renewable electricity through existing agreements combined with pre-
production guarantees of origin (GOs) and production of electricity from a Power Purchase Agreement (PPA) in Spain. The
wind park of the latter PPA commenced operations in late 2021, while the solar assets are currently under construction.
Furthermore, a new hydro agreement for 2022 was concluded in Switzerland to replace a contract that terminated at the
end of 2021.
In the US, we have three PPAs in place. The first is already operational and produces electricity from wind, while the assets
for the other two are yet to be built and will provide solar-powered electricity. The production from the first agreement
combined with pre-production renewable energy certificates (RECs) from the two other agreements means we had 100% of
purchased electricity from renewable sources in the US and Canada in 2022.
Renewable electricity in the rest of the world
Besides Europe, North America and China, almost 90% of our purchased electricity in Brazil is from renewable sources, and
we have several local renewable electricity contracts at smaller sites around the world. The amount of purchased non-
renewable electricity in the rest of the world represents less than 5% of our total purchased electricity.
Working on the decarbonization of heat
We continued making progress to reduce the use of fossil fuels in the production of steam and heat using low-carbon and
biomass heat sources. Besides the already concluded biomass cogeneration project in Sisseln (Switzerland) and the
purchase of steam from local biomass residues in Chifeng (Inner Mongolia, China), our vitamin E production site Yimante
(Hubei province, China) has significantly reduced its consumption of coal-based steam by purchasing by-product heat
from a neighboring company. By concluding this contract with Nengtai, DSM Yimante was able to realize an absolute
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Royal DSM Integrated Annual Report 2022 74
reduction of 7.5 kt CO
2
eq versus 2021 (2022 was the first full year of contracted heat). Other sites continue to work on
various initiatives to decarbonize their operations. The search for low-carbon heat solutions is becoming more prominent
in our GHG reduction program: we are working to optimize the use of waste streams and are actively screening the market
for opportunities to collaborate with external partners.
Energy efficiency improvement
Our energy efficiency (on primary energy) was slightly negative versus 2021 (-0.4% year-on-year), below our target of an
average annual improvement of 1%. This is mainly due to negative production volume and product mix influences at
several important sites, compensating the executed energy-saving projects in 2022. Next to that, we see an effect of several
shifts from fuel to electricity, negatively impacting the primary energy (due to a lower generating efficiency of purchased
electricity compared to on-site generation of electricity from fuel). This is reflected in a more positive energy efficiency
improvement of consumed energy of 0.8% from 2021 to 2022.
Energy efficiency
2
Scope 3 GHG emissions
Our scope 3 emissions
Our absolute scope 3 GHG emissions amounted to 9.9 million tons of CO
2
eq in 2022, which is a significant decrease compared
to emissions in 2021. The decrease is primarily driven by lower sourced volumes compared to 2021 and an improved carbon
footprint for Niacin in Animal Nutrition & Health. In the Materials cluster, we saw main contributions from DSM Engineering
Materials, benefiting from higher volumes of caprolactam from our supplier Fibrant/HighSun, which offers a greatly improved
carbon footprint. As a result, the Scope 3 GHG intensity improved 17% versus our 2016 baseline.
2 All data presented in Planet are subject to the Non-financial reporting policy.
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Royal DSM Integrated Annual Report 2022 75
Other scope 3 categories reported comparable figures in 2022 compared to 2021.
Scope 3 GHG emissions
1
in CO
2
eq, million tons
1 Due to rounding, the numbers presented above may not add up to the total scope 3 emissions.
Engaging with our suppliers through our CO2REDUCE program
In 2022, the supplier engagement program
CO2REDUCE continued to build on supplier emissions reduction action plans
and progressed as planned, with a key focus on the main contributors to the emissions related to our Nutrition products.
Company-wide scope 3 emissions reduction roadmaps are being developed through our cross-functional teams, and in
2022 we identified the first wave of our products where additional reduction initiatives may be possible by applying a
value chain approach. These will be further validated in 2023. Collaboration with key suppliers for key contributing raw
materials continues and reduction action plans are being further developed. We continued to explore new opportunities
for scope 3 emissions reductions through multiple supplier emissions plans.
Calculation and tracking of our scope 3 emissions developed further in 2022. Digitalization of the reporting and improved
insight into the value chain emission factors enable further transparency and better program steering. The reported
emissions reflect the latest insights and are based on an increased share of supplier-specific emissions, instead of using
industry average figures.
In 2022, we continued to actively share our experiences from the CO2REDUCE program in peer-group platforms such as
Together for Sustainability. These platforms aim to define best practices in supplier engagement and scope 3
calculations within the industry, while also serving as an inspiration to improve the program further. At the time of
writing, the CDP Supplier Engagement Ratings for 2022 had not been published.
Avoided emissions, supporting our customers with their emissions targets
Our products can enable our customers to transition to a low-carbon economy through an inherently lower carbon
footprint, or by helping our customers and end-users reduce their own emissions. The latter are referred to as ‘Avoided
emissions’ — emissions-related environmental benefits that occur downstream in the use phase of our products. While
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Royal DSM Integrated Annual Report 2022 76
avoided emissions do not count toward our own Science Based Targets or net-zero target, they result in reduced
emissions for others in our value chain.
The rapid reduction of methane emissions from energy, agriculture, and waste is increasingly recognized as the most
effective near-term climate mitigation measure, to limit global warming to 1.5˚C. In 2022, 150 countries signed up to the
Global Methane Pledge, a collective effort launched at COP26 in 2021, to reduce global methane emissions at least 30%
from 2020 levels by 2030.
Customers for our animal nutrition business have increasing commitments for emission reduction, for example, through
the Global Dairy Platform and Global Roundtable for Sustainable Beef and the Science Based Targets Initiative. Our
innovative solution Bovaer® is a feed additive that reduces enteric methane emissions, by suppressing the enzyme that
combines the metabolic hydrogen and carbon dioxide generated by cows from digesting tough, fibrous food.
According to the latest meta-analysis based on 14 independent studies, Bovaer® can save about one ton CO
2
eq per dairy
cow every year. Bovaer® is authorized and available for sale in over 45 countries, including the EU/EEA, Australia, Brazil,
Chile, Argentina, Mexico, Pakistan, Thailand, Switzerland, and Turkey. Our on-farm trials and up-scaling pilots cover already
more than 15 countries and are published in more than 50 peer-reviewed scientific studies. Through these trials alone,
Bovaer® has already saved more than 20 kt CO
2
eq.
In November 2022, we reached another milestone, with the groundbreaking of the new large-scale production facility for
Bovaer® in Dalry, Scotland. This plant will scale up the methane reduction impacts Bovaer® can realize.
Climate adaptation
The warming climate is already severely impacting people and the environment, with consequences ranging from health
hazards to disruptions in water, food, and energy supplies, to damage and loss caused by floods, droughts, and other
extreme and erratic weather events. The consequences of climate change will only intensify over the next few decades
due to the current and near-term emissions, even if the world achieves the Paris Agreement goal of limiting the global
average temperature increase to 1.5°C.
As a complement to our efforts on climate change mitigation – reducing and stabilizing greenhouse gas emissions to
combat the cause of the problem – we also deploy an integrated strategy of climate adaptation measures. These measures
reduce the vulnerability of our assets and value chains to emerging climate-related physical risks and prepare us for a
changing business environment.
Following a similar approach to our activities contributing to climate mitigation, our climate adaptation agenda is
organized to:
- Improve our resilience and future-proof our business
- Enable societies to adapt better to the adverse effects of climate change, particularly in the context of food
systems
- Advocate adaptation action, as well as better collaboration and sharing of information on climate risk between
actors in society
Our physical climate risk assessment process involved mapping our top 30 sites for five emerging hazards and long-term
impacts, using three climate scenarios and three-time horizons. In 2022, we started to expand this work to our key supply
chains. We also established and piloted a process for our Business Groups to identify and assess the potential impacts of
the different speeds of transition to a net-zero world using the three scenarios used in the physical risk assessment. This
work will expand and continue iteratively in the coming years. More information on our climate risk assessments is
provided in Risk management.
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Royal DSM Integrated Annual Report 2022 77
Waste & circularity
We are committed to securing the future availability of natural resources and unlocking more value from the limited
resources we have. We monitor and improve our own operational impact through resource efficiency improvements,
enabling our customers to deliver sustainable and circular solutions, and advocating the transition to a circular, bio-
based economy.
Aspiration
2022
2021
Renewable & secondary raw materials¹
Renewable raw materials (% of spend)
15%
15%
.
Waste
Total process-related waste efficiency improvement
> 0%
3.0%
7.5%
Absolute landfill reduction versus 2020²
-50% by 2030
44%
-
Waste recycled
91%
86%
Non-hazardous process-related waste (kt)
110
109
Hazardous process-related waste (kt)
73
86
1 All data presented in Planet are subject to the Non-financial reporting policy.
2 First year of reporting. No comparative figure is available.
Following the exponential increase in material consumption over the past fifty years, humanity has reached a point at
which the Earth’s limited resources can no longer meet the growing demand. Earth Overshoot Day was on 28 July 2022,
marking the date when humanity has used all the biological resources that planet can regenerate for the entire year. As
our global economy is only 8.6% circular, it is necessary to move away from linear production and consumption systems
and work together to build sustainable food and production systems. Bridging the gap to a circular economy will support
the health of the global population of tomorrow and improve livelihoods and the natural environment. A circular economy
for food mimics natural systems of regeneration so that waste is treated instead as a valuable feedstock for another cycle.
We enable our customers to transition toward a circular and bio-based economy by focusing on the following drivers:
- Reduce the use of critical resources throughout the value chain
- Replace scarce, hazardous, and potentially harmful resources with safe and renewable alternatives
- Extend the lifetime of products by means of improved durability or shelf-life
- Recover waste streams by viewing waste as a resource
Renewable & secondary raw materials
We are accelerating our efforts to replace finite fossil resources with renewable (bio-based) raw materials, as well as
secondary (recycled) materials. Replacing finite resources with alternative renewable resources can also have
environmental co-benefits, such as reducing the carbon footprint of our solutions.
Our progress on renewable & secondary raw materials
The renewable raw materials we use include waste from agriculture, yeasts and enzymes, carbohydrates and natural oils,
and acids. In 2022, the share of our spend on renewable raw materials remained stable at approximately 15%. Overall
volumes of renewable raw materials decreased, in line with production volumes.
Development of bio-based alternative to anti-aging ingredient
To meet the growing consumer demand for more sustainable ingredients, the personal care value chain is continuously
looking to increase its share of renewable and bio-based materials in its product portfolio. By substituting a fossil-fuel-
based solvent with a plant-based solvent derived from coconut and/or palm kernel oil and a natural antioxidant from
soybean oil, we were able to increase the natural content of a retinol product from 0% to more than 50%.
Successful implementation of bio-based canthaxanthin
The demand for canthaxanthin, a natural carotenoid used to make food healthier and more attractive, is growing every
year. To meet this increasing demand and reduce impact on our environment, we have been exploring biotech-based
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Royal DSM Integrated Annual Report 2022 78
production through fermentation. This new route to manufacture bio-based canthaxanthin is expected to start up at
production scale in early 2023 and offers a significantly lower carbon footprint compared to the mainstream product
available in the market.
More information on how we approach sustainable biomass is available in our position paper on Sustainable Biomass on
the company website.
Waste
Our waste management approach consists of a continuous improvement cycle concerning our total process-related waste
and driving more circular ways of waste treatment. Progress is steered as part of dedicated site improvements programs.
We pay careful attention to meeting local waste management legislation.
As of 2022, we aim to improve our linear waste management further with a new target of 50% absolute landfill reduction by
2030 versus 2020. In 2022, we made significant progress in reducing our absolute landfilled waste. Our main manufacturing
sites implemented reduction activities, resulting in a landfill reduction of 44% in 2022. The main routes to reduce
landfilling and improve circularity is to turn waste into useful products, such as repurposing it as organic or mineral
fertilizer. Such solutions were developed for example in Piura (Peru), Dalry (UK), Pecem (Brazil) and Kingstree (South
Carolina, USA). In addition, our Premix activities in the US started a program by reducing waste at source through
operational improvements as well as through developing new outlets for by-products. As a result of our landfill reduction
efforts and other operational improvements, our total waste recycled increased to 91% of process-related waste in 2022, a
step-up compared to 2021 (86%).
Waste breakdown by type and destination
in thousand tons
In 2022, our process-related waste efficiency improved. The was mainly due to a large improvement versus 2021 at one of
our recently acquired sites. There was also a significant reduction in 2022 in hazardous waste, which was mainly due to
business fluctuations on the larger sites.
Our hazardous waste mainly consists of mixed chemicals and solvents. We follow the waste hierarchy to divert hazardous
waste from landfill, we minimize hazardous landfill as part of our SHE requirements, and 92% of our hazardous waste is
already recovered off-site or incinerated with heat recovery. Less than 2% of our hazardous process-related waste is
landfilled, due to specific regulatory constraints and countries with limited alternative means of disposal.
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Royal DSM Integrated Annual Report 2022 79
Nature & biodiversity
Like every business in the world, we both impact and depend on nature and biodiversity. The healthy functioning of the
world’s atmosphere, oceans and freshwater systems supplies us with oxygen, food, clean air and water, along with a host
of other ecosystem services. It also helps mitigate the effects of climate change by absorbing carbon. We acknowledge
our role to protect and restore nature and biodiversity, and fully support the ambitions of the UN Convention on
Biological Diversity.
1 All data presented in Planet are subject to the Non-financial reporting policy.
2 Percentage restated based on additional validation performed with the IBAT tool.
Biodiversity
Biodiversity loss is driven by human activity. According to the Intergovernmental Science-Policy Platform on Biodiversity
and Ecosystem Services (IPBES) Global Assessment, one million of the eight million animal and plant species are now
threatened with extinction. We address our impacts on biodiversity and natural ecosystems across the value chain through
our DSM Responsible Care Plan, tackling the main drivers of loss, especially through our GHG emissions reduction, water
stewardship and waste management programs, as well as through our commitment on deforestation-free supply chains
for our primary raw materials.
Monitoring biodiversity across our value chain
At DSM, we assess and monitor areas of high biodiversity around our sites. In 2022, 34% of all our production sites in scope
were in or adjacent to protected areas or areas of high biodiversity. The increase is due to acquisitions that were added to
the reporting scope.
DSM is committed to protecting biodiversity, with conservation and restoration actions encouraged and initiated at the
local site level. In 2022, sites all around the world celebrated Earth Day by organizing awareness raising activities such as
clean ups, or planting trees and other local fauna and flowers for pollinators in or around sites. Our site in Belvidere (New
Jersey, USA) engaged with the National Audubon Society, an American NGO dedicated to the conservation of birds and
their habitats, to conserve a native area in front of the facility.
To address biodiversity risks in our supply chain, we strive to responsibly source high-risk raw materials through
recognized certification schemes, where available. These raw materials include palm oil derivatives, wood-based materials,
fish oils and sugar. We have committed to a deforestation-free primary supply chain by 2030 at the latest. This
commitment relates to our Tier 1 supply chain for deforestation-risk crops: sugarcane, direct soy- and corn-based
products, and palm-oil derivatives. More information on how we work with the sourcing of these raw materials can be
found in Food System Commitments, our Sustainable Biomass position paper and in our statement on the responsible
management of forest resources on the company website.
In 2022, we continued to evaluate our impacts on biodiversity along our value chain to help identify risks and
opportunities using our Brighter Living Solutions Plus (BLS+) program. As a member of the Science Based Targets
Network’s Corporate Engagement Program, we provided feedback to the Network on their upcoming guidance for setting
science-based water targets.
Supporting our customers on biodiversity
We enable our customers to develop more sustainable products through BLS+. For example, the use of DSM feed additives
such as phytases helps to increase the digestibility of phosphorus, reducing the amount of phosphorus released into the
environment and the subsequent damage that happens through eutrophication, which causes loss of biodiversity in
2022
2021
Protected Areas¹
Sites in or adjacent to protected areas
34%
28%
Sites in registered protected areas
2%
2%²
.
Volatile Organic Compounds (VOC, x 1,000 tons)
4.6
4.1
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Royal DSM Integrated Annual Report 2022 80
freshwater ecosystems. Another example is our Veramaris® natural algal oil: 1 ton of Veramaris®
3
saves 60 tons of wild fish
from having to be caught to produce salmon feed, protecting marine biodiversity in our oceans. Similarly, DSM's
life’s®OMEGA, the first and only commercially available plant-based omega-3, ideal as a vegetarian and vegan alternative,
delivers the benefits of EPA and DHA omega-3 fatty acids in a single, quality source and is derived from marine microalgae,
which reduces pressure on global fish stocks.
Taking a position on biodiversity
Lastly, we advocate for the protection and restoration of biodiversity worldwide. The year 2022 was an important year for
biodiversity internationally with the second meeting of the COP15 on Biodiversity taking place in December, in Montreal,
Canada. We lent our support by signing Business For Nature’s COP15 Business Statement calling on heads of state to ‘Make
It Mandatory’ for all large businesses and financial institutions to assess and disclose their impacts and dependencies on
nature by 2030. As a supporter of transparency and disclosure, we continued our engagement on the development of
nature-related guidances and frameworks for target-setting and disclosure, with the Science Based Targets Network and as
a member of the Taskforce on Nature-related Financial Disclosures Forum. We also continued our membership in One
Planet Business for Biodiversity (OP2B), which aims to scale up regenerative agriculture and restore ecosystems to prevent
further biodiversity loss through collective member actions.
For more information, see our position paper on Biodiversity on the company website.
Other emissions to air
Our reporting on ‘Other emissions to air’ focuses on volatile organic compounds (VOCs), as these are the most significant
emissions in this area. We continue to report our nitrous oxide (NO
x
) and sulfur dioxide (SO
2
) emissions in the five-year
summary – sustainability tables and via the company website. However, these emissions are not material due to
improvement actions executed in the past.
We continue to work on our VOC emissions
Our objective is to continuously reduce our VOC emissions. In 2022, our VOC efficiency improvement was slightly lower
than in 2021. This is mainly due to negative production volume and product mix influences at several important sites,
compensating the executed improvements in 2022. An example is the improvement program at our location in Mairinque
(Brazil), where studies were initiated in 2021 and implemented in 2022 to better quantify and understand the mechanism
of ethanol formation during fermentation. This understanding allowed us to optimize the fermentation process
parameters and enabled us to test more breakthrough solutions.
Our absolute VOC emissions increased from 4.1 kt to 4.6 kt in 2022 versus 2021. This is mainly due to a production increase
at our Yimante site (Hubei province, China). VOC optimization measures for this site are being investigated.
3 Veramaris® is a trademark owned by Veramaris V.O.F, a joint venture between DSM and Evonik.
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Royal DSM Integrated Annual Report 2022 81
Water stewardship
Fresh water is a finite natural resource that needs to be used and managed in a responsible and sustainable way. Water
stress is becoming increasingly important to the world, accelerated by climate-related extreme weather, and impacting
biodiversity. Our operations rely on stable supplies of high-quality freshwater for utilities and production. Our goal is to
ensure its use without disturbing the local balances.
Aspiration
2022
2021
Water Use (million m³)¹
Water withdrawal in water-stressed areas²
10.6
10.9
Water withdrawal for non-OTC
26
26
Consumptive Use
5.5
5.3
.
Sustainable water management
Water withdrawal efficiency improvement
> 0%
-7.0%³
8.0%
Water withdrawal efficiency improvement – water-stress sites
versus 2020
10% by 2030
7.2%
7.8%
.
Emissions to water
Chemical Oxygen Demand (COD, kt)
1.9
2.0
1 All data presented in Planet are subject to the Non-financial reporting policy.
2 Water stress is defined as the ratio of total water withdrawals to available renewable surface and groundwater supplies. We perform water risk screening
using WRI Aqueduct Tool and WWF Water Risk Filter to identify water stress sites, which are sites located in an area with >40% water stress currently or in
2030.
3 The decreased efficiency is due to providing additional water management services at one large site (executed for a neighboring company) leading to a
significant increase in water withdrawal, combined with lower production volumes.
Commitments, policy and governance
DSM is a signatory of the CEO Water Mandate, a UN Global Compact initiative to
advance water stewardship and drive progress on SDG 6 (Clean Water and Sanitation).
We commit to measuring, monitoring and reporting relevant performance indicators
for water. We disclose our progress via the CDP Water Security questionnaire. In 2022,
our CDP Water Security rating was an A, in recognition of our ongoing efforts in
sustainable water management.
Water security is an integral part of our risk mitigation and environmental impact
reduction strategies. Our water policy is part of our SHE policy and specifies the goal,
governance and management standards on water management.
Impacts and dependencies
Water is not a primary ingredient in our products. Our primary water use is in utility systems, as a process medium and for
cleaning purposes. Water is also used in our upstream supply chain, for agriculture-related as well as industrial raw
materials.
A large proportion of our total water withdrawal (approximately 75%) is used for once-through cooling (OTC) purposes in
low water-stress areas. The risk exposure and environmental impact of OTC are limited. The other 25% of our water
withdrawal is for non-OTC purposes: this is the focus of our key performance indicators and targets on water. According to
our water risk screening in 2022, 40% of our non-OTC withdrawal is from a current water-stressed area, or a water-stressed
area in 2030.
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Royal DSM Integrated Annual Report 2022 82
Water withdrawal
in million m
3
Water-related targets
We strive to continuously improve water withdrawal efficiency for our production facilities. In early 2021, we announced a
context-based water reduction target to improve water withdrawal efficiency in water-stressed areas by 10% by 2030
versus 2020. We started a water reduction program covering 22 sites in an existing or future water-stressed area. Several
large sites in water-stressed areas improved their site-level water balance in 2022, through better leakage detection and
prevention.
Our overall water efficiency versus 2021 was negatively influenced by providing additional water management services on
one large site (executed for a neighboring company), leading to a significant increase in water withdrawal. This was
combined with lower production volumes, resulting in a lower water efficiency in 2022 compared to 2021.
Some sites also executed water reduction projects, often in close collaboration with energy reduction projects. For
example, in our Chifeng site (Inner Mongolia province, China), improvements were made to optimize the site cooling water
system, allowing both GHG savings and more than 40,000 m
3
water saving, improving site resilience to increasing water
stress. Unfortunately, the executed water efficiency projects were compensated by negative production volume and
product mix influences at several important sites in 2022, resulting in a slightly lower water efficiency improvement than in
2021.
For effluent management, our sites set site-specific pollution reduction targets, based on business context and current
and future regulatory requirements. For example, our site in Lalden (Switzerland) significantly reduced its use of acetic
acid, thereby reducing the quantity of COD in effluents.
Risk management
All sites with water withdrawal materiality and sites in water-stressed areas are required to conduct a site-level water risk
assessment (WRA). The frequency of the assessment is specified in DSM’s water management standard. In 2022, we
reached a WRA coverage of 96%, evaluating 5 sites newly identified to be in a water-stressed area based on the 2021 water
risk screening.
Water quality remains the most important water-related risk, often related to enabling business growth or increasingly
stringent regulatory requirements. For identified high risks, the site defines short-term measures to address the
immediate issue(s) and/or long-term measures including technical projects to reduce pollutant level at source or
upgrades of the wastewater treatment facility. For example, we are executing a capacity expansion project for the
wastewater treatment plant (WWTP) in Village-Neuf (France), including upgrades to add additional treatment steps.
In our value chain, we monitor the water impact of our largest suppliers through value chain engagement programs such
as Together for Sustainability (TfS) and the Ecovadis water specific questions.
Report by the Managing Board – Planet
Royal DSM Integrated Annual Report 2022 83
Product stewardship
Product stewardship manages and minimizes the environmental, safety and health impacts of substances in our products
in line with international regulations from raw materials selection, production process, during use, until end of life. It is
about knowing the substances we use and produce, being able to explain why we use them, taking the appropriate risk
control measures, and sharing this information with relevant and interested stakeholders. We apply a risk-based
approach, using safer alternatives whenever feasible, and always when required.
Substances of concern
DSM defines substances of concern as substances that either fulfill a certain regulatory hazard criteria (e.g., carcinogenic)
or are listed by recognized organizations for their (potential) serious health or environmental risk which are not directly
visible via the product. This includes substances which are classified for their proven carcinogenic potential or that are
persistent, bio-accumulative and toxic.
In our Brighter Living Solutions Plus (BLS+) program, product stewardship is a minimum requirement. The presence of
substances of concern in products is assessed and only accepted in case of strictly regulated situations or use under
strictly controlled exposure conditions. Without fulfilling these criteria, a product cannot be classified as BLS+.
Regulatory developments
Product stewardship is about sustainable business and ensuring compliance with the various global chemical legislations
is a foundational element of that.
In the European Union, business awaits a challenging regulatory agenda as result of the Chemical Strategy for
Sustainability, published in October 2020 as part of the European Green Deal. The first major change is the expansion of
the rules for classification and labelling of substances and mixtures. The coming years, DSM will reassess all its substances
and products and update product labels and customer documentation (e.g., safety datasheets) where needed. The revision
of REACH is the next item of legislation with potentially major impact that will follow. We closely monitor these regulatory
developments and assess the impact on our product portfolio. In principle we support the starting points of the Chemical
Strategy for Sustainability and as part of our advocacy efforts, we continue to engage in European discussions to drive
reasonable actions and timelines. Furthermore, we share our experiences to shape the concept of ‘safe and sustainable by
design’.
Chemical legislation is expanding rapidly outside the European Union as well. In 2022, first registrations were made in
Turkey, Republic of Korea (South Korea), and the United Kingdom as part of the introduction of new chemical legislative
frameworks in these countries.
Product stewardship roadmap 2021–2024
In a world characterized by increasing interest in the health of people, animals, and the planet, product stewardship
contributes to the value proposition of our business. Awareness of the importance of product stewardship is growing.
Since the beginning of 2022, our businesses have been supported by a single integrated product stewardship organization
to anticipate the rapidly increasing product stewardship challenges across the globe. Together with the different
businesses the team works on the long-term product stewardship strategy for DSM and implements the product
stewardship roadmap 2021–2024, which focusses on the following five themes:
- Further increase the awareness of product stewardship across the organization
- Improve our master data management
- Improve our use of digital tools
- Further embed ‘safe and sustainable by design’ principles
- Adjust our governance when needed
For more information on product stewardship, see the company website.
Royal DSM Integrated Annual Report 2022 84
Profit
At a glance
- +15% Sales from continuing operations versus 2021, with organic sales +8% in Health, Nutrition & Bioscience
- +1% Adjusted EBITDA from continuing operations versus 2021, with Health, Nutrition & Bioscience +2%
- €310 million Adjusted net operating free cash flow from continuing operations, -50% versus 2021
- €555 million Adjusted Net profit from continuing operations, -3% versus 2021
Overall financial results
Strategy
DSM’s purpose-led, performance-driven strategy has sustainability and innovation as key growth drivers of our long-term
focused plan, underpinned by ambitious targets across People, Planet and Profit. More about the strategy of DSM is in the
Strategy section of this report.
In September 2021, we announced the acceleration of our strategic journey with a reorientation of our Health, Nutrition &
Bioscience activities into three market-focused businesses: Animal Nutrition & Health, Health, Nutrition & Care, and Food
& Beverage. This structure, which came into effect on 1 January 2022, enables us to leverage our strong combination of
scientific competences and growing portfolio of nutrition and health solutions. At the same time, it allows us to harness
the latest advancements in digital technology and bioscience, to address the significant environmental and societal
challenges associated with the global food system.
We simultaneously announced a review of strategic options for our Materials businesses and, on 20 April 2022, confirmed
we had reached an agreement to sell DSM Protective Materials to Avient Corporation for an enterprise value of €1.45
billion. The transaction was successfully completed on 1 September 2022.
On 31 May 2022, we announced that we also had reached an agreement to sell DSM Engineering Materials to Advent
International and LANXESS for an enterprise value of €3.85 billion. DSM expects to receive about €3.5 billion net in cash
following closing, after transaction costs and capital gains tax. Completion of the transaction, which is subject to
customary conditions and approvals, is expected in the first half of 2023.
On the same day, DSM and Firmenich jointly announced that we had entered into a business combination agreement for a
merger of equals to establish the leading creation and innovation partner in nutrition, beauty and well-being. All related
information can be found at www.creator-innovator.com.
Financial results
This section includes an overview of the key financial metrics of the company in respect of the performance of its
continuing operations in 2022 and 2021, except where otherwise indicated.
Health, Nutrition & Bioscience was confronted with an increasingly inflationary environment during the year, exacerbated
by ongoing supply chain volatility. The increases in the cost of energy and raw materials were partially offset by multiple
price increases.
Demand in the markets in which DSM operates remained resilient overall. Sales volumes were solid considering tough
prior year comparison (+8%), especially in Animal Nutrition & Health.
Health, Nutrition & Bioscience reported +2% Adjusted EBITDA, with +7% contribution from M&A and foreign exchange
effects. The underlying performance was the result of the price-cost gap, with limited operational leverage contribution
from volume growth (+1%). Lower vitamin prices impacted the results negatively from September 2022.
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 85
The business recorded an Adjusted EBITDA margin of 17.9%, with around half of the 260bps decline coming from the price-
cost gap and the remainder from the dilutive mathematical effect (higher sales and therefore relatively lower margin
percentage) of the price increases and foreign exchange effects.
Income statement and key data
x € million
2022
2021
Change
Continuing operations
Net sales
8,390
7,269
15%
Adjusted EBITDA
1,395
1,379
1%
EBITDA
1,304
1,288
1%
Adjusted operating profit
767
808
-5%
Operating profit
682
711
-4%
Adjusted net profit
555
583
-5%
APM adjustments
(80)
247
-132%
Net profit from continuing operations
475
830
-43%
Adjusted net operating free cash flow
310
626
-50%
ROCE (in %)
7.3
8.7
Adjusted EBITDA margin (in %)
16.6
19.0
.
Total group
Net profit for the year
1,715
1,680
2%
Net profit available to equity holders of Koninklijke DSM N.V.
1,700
1,676
1%
Adjusted net operating free cash flow
425
941
-55%
Net sales and Adjusted EBITDA
At €8,390 million, net sales from continuing operations in 2022 were 15% higher than in 2021 (€7,269 million). Organic
growth in 2022 was 7%. Volume in 2022 was similar to 2021, while price/mix had a 7% positive effect on growth compared to
2021. Exchange rate fluctuations had a positive impact of 7%, and acquisitions contributed another 1% to sales.
High-growth economies together currently represent 47% of our sales (49% when Africa is included), which is the same as
in 2021. The share of sales in these economies as a proportion of our total sales gives us a well-balanced global footprint.
The Adjusted EBITDA (Adjusted operating profit before depreciation and amortization) from continuing operations
increased by 1%, or €16 million, from €1,379 million in 2021 to €1,395 million in 2022. Adjusted EBIT (Adjusted operating
profit) from continuing operations decreased from €808 million in 2021 to €767 million in 2022, down 5%. This is mainly
caused by higher amortization and depreciation costs, largely due to the recent acquisitions.
Net sales
Adjusted EBITDA
x € million
2022
2021
%
change
2022
2021
%
change
Animal Nutrition & Health
3,788
3,347
13%
546
Health, Nutrition & Care
2,939
2,516
17%
676
Food & Beverage
1,546
1,256
23%
266
Other
46
47
-2%
2
Total HNB
8,319
7,166
16%
1,490
1,467
2%
Corporate Activities
71
103
-31%
(95)
(88)
8%
DSM, continuing operations
8,390
7,269
15%
1,395
1,379
1%
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 86
Net profit
Adjusted net profit from continuing operations of €555 million was down by 5% versus 2021. Net profit available to equity
holders of DSM increased by €24 million to €1,700 million. This increase was mainly a result of the net book profit of €1,018
million on the sale of Protective Materials (in comparison with 2021, where we had the net book profit of €570 million on
the sale of Resins & Functional Materials and the net book profit of €303 million on the sale of DSM’s share in AOC).
Expressed per ordinary share, net earnings from continuing operations amounted to €2.64 in 2022 (2021: €4.76). This
decrease was mainly caused by the net book profit on the sale of DSM’s share in AOC in 2021.
Financial income and expense decreased by €12 million year on year to a net expense of €88 million. This was mainly
caused by the impact of the accounting for renewable energy contracts.
The total effective tax rate over taxable result 2022 for continuing operations was 21.0% (2021: 20.1%). This was mainly
caused by the geographical spread and changes in tax rates. Excluding APM adjustments this was a decrease from 20.9% to
20.2%.
Adjustments made in arriving at DSM’s Alternative performance measures (APM adjustments)
Total APM adjustments from continuing operations for the full year amounted to a loss of €80 million (2021: a profit of
€247 million), consisting of a loss in EBITDA of €91 million (including restructuring costs of €87 million and
acquisition/divestment/integration costs of €4 million), reversals of impairments of -€6 million, financial expenses of €8
million, a related tax impact of -€15 million, and a loss of €2 million relating to associates and joint ventures.
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 87
Net sales by destination Net sales by origin
in % in %
Net sales by business segment Net sales by end-use market
in % in %
Net sales bridge 2022 Adjusted EBITDA margin
x € million in %
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 88
Cash flow statement
x € million
2022¹
2021¹
Cash and cash equivalents at 1 January
1,561
871
Cash provided by operating activities
965
1,427
Cash from / (used in) investing activities
876
208
Cash from / (used in) financing activities
(645)
(984)
Effect of exchange differences
(2)
39
Cash and cash equivalents at 31 December
2,755
1,561
1 The cash flow statement includes an analysis of all cash flows, including those related to discontinued operations.
Cash provided by operating activities of €965 million mainly consists of the EBITDA for the year (€2,646 million), excluding
the net book profit on the sale of Protective Materials of €1,018 million (recognized under investing activities) and the
change in working capital of -€497 million. Overall, the full-year operating cash flow decreased by €462 million, mainly due
to the higher working capital, partly caused by the high inflation in 2022 (see also Consolidated financial statements).
The cash from investing activities consisted mainly of the proceeds from the divestments (€1,366 million, mainly from the
divestments of Protective Materials), partly offset by capital expenditures (-€644 million).
The cash used in financing activities included the dividend paid (-€345 million) and the repurchase of shares (-€210
million).
For the full cash flow statement, see the primary statement in the Consolidated financial statements.
Balance sheet
The balance sheet total (total assets) reached €17.4 billion at year-end (2021: €16.0 billion). Equity increased by €1,448
million, which was attributable to the net profit of €1,715 million, the exchange rate impact on foreign operations of
€245 million, offset partly by the dividend payments of -€459 million and the repurchase of shares of -€210 million. Equity
as a percentage of total assets increased from 59% to 62%.
Compared to year-end 2021, net debt decreased by €932 million to €87 million, mainly due to the divestment of Protective
Materials. The gearing at year-end was 0.8%, which was considerably lower than the gearing of 9.7% at year-end 2021.
Capital expenditure on intangible assets and property, plant and equipment amounted to €636 million for continuing
operations in 2022 (€644 million on a cash basis). Including new leases the additions to intangible assets and property,
plant and equipment was €658 million, which was roughly the same as the level of amortization, depreciation and
impairments.
Total working capital from continuing operations amounted to €1,992 million compared to €1,551 million at year-end 2021.
This represents 23.8% as a percentage of annualized fourth-quarter 2022 sales (2021: 20.1%). Cash-wise, the operating
working capital (OWC) from continuing operations increased €414 million compared to last year, which is mainly
attributable to inflation and higher inventory. The OWC percentage increased from 26.1% at year-end 2021 to 29.0% of
annualized sales at year-end 2022.
Cash and cash equivalents came to €2,755 million at the end of the year; including current investments, this amounted to
€2,880 million (2021: €2,050 million). Besides the regular cash flow elements, this increase was mainly due to divestment of
the Protective Materials business (€1,363 million), offset partly by the repurchase of shares (-€210 million) and the paid
dividend (-€345 million).
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 89
Balance sheet profile
2022
2021
x € million
in %
x € million
in %
Intangible assets
5,147
30
5,309
33
Property, plant and equipment
3,576
21
3,964
25
Other non-current assets
552
3
617
4
Cash and cash equivalents
2,755
16
1,561
10
Other current assets
5,373
30
4,569
28
Total assets
17,403
100
16,020
100
Equity
10,845
62
9,397
59
Provisions
124
1
164
1
Other non-current liabilities
3,904
22
4,097
25
Other current liabilities
2,530
15
2,362
15
Total equity and liabilities
17,403
100
16,020
100
“DSM delivered a solid performance in 2022 against a background of
continued global supply chain challenges and significantly higher
energy and raw materials costs, consolidating the strong growth of
2021. Pricing actions to counter higher costs supported top-line
growth, however with a price-cost gap impacting near-term margins,
especially in Animal Nutrition & Health.”
Geraldine Matchett, Co-CEO, Royal DSM
Outlook 2023
Given the proposed merger process is advanced, it is intended that DSM-Firmenich will provide an outlook for 2023 once
DSM and Firmenich have been consolidated and the combined business plan is approved.
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 90
Key business figures at a glance
With effect from January 2022, our activities are grouped in three operating segments: Animal Nutrition & Health (ANH),
Health, Nutrition & Care (HNC) and Food & Beverage (F&B). We report separately on Corporate Activities. Results presented
in this section (and elsewhere in this Report) relate to consolidated activities only (therefore non-consolidated
partnerships are excluded).
Net sales
x € million
2022
2021
Animal Nutrition & Health
3,788
3,347
Health, Nutrition & Care
2,939
2,516
Food & Beverage
1,546
1,256
Other
46
47
Total HNB
8,319
7,166
Corporate Activities
71
103
Total continuing operations
8,390
7,269
Discontinued operations
2,090
2,199
Total
10,480
9,468
Adjusted EBITDA
x € million
2022
2021
Animal Nutrition & Health
546
Health, Nutrition & Care
676
Food & Beverage
266
Other
2
Total HNB
1,490
1,467
Corporate Activities
(95)
(88)
Total continuing operations
1,395
1,379
Discontinued operations
330
463
Total
1,725
1,842
Adjusted EBITDA margin
in %
2022
2021
Animal Nutrition & Health
14.4
Health, Nutrition & Care
23.0
Food & Beverage
17.2
Total HNB
17.9
20.5
Total continuing operations
16.6
19.0
Discontinued operations
15.8
21.1
Total
16.5
19.5
Adjusted operating profit (EBIT)
x € million
2022
2021
Animal Nutrition & Health
351
Health, Nutrition & Care
428
Food & Beverage
136
Other
1
Total HNB
916
951
Corporate Activities
(149)
(143)
Total continuing operations
767
808
Discontinued operations
304
359
Total
1,071
1,167
Capital employed at 31 December
x € million
2022
2021
HNB
10,639
10,011
Corporate Activities
21
3
Total continuing operations
10,660
10,014
Discontinued operations
813
1,005
Total
11,473
11,019
ROCE
in %
2022
2021
HNB
8.7
10.3
Total continuing operations
7.3
8.7
Discontinued operations
31.1
34.1
Total
9.3
11.1
Capital expenditure
x € million
2022
2021
HNB
511
476
Corporate Activities
61
67
Total continuing operations
572
543
Discontinued operations
64
71
Total, accounting based
636
614
Non-cash items
8
(44)
Total, cash-based
644
570
In % of net sales
6.0
6.0
Report by the Managing Board – Profit
Royal DSM Integrated Annual Report 2022 91
R&D expenditure (including associated IP expenditure)
x € million
as % of net sales
2022
2021
2022
2021
Total continuing operations
345
315
4.1
4.3
Workforce at 31 December
Headcount
2022
2021
Continuing operations
18,731
18,402
Discontinued operations
1,951
2,956
Total
20,682
21,358
Royal DSM Integrated Annual Report 2022 92
Review of business
Animal Nutrition & Health
At a glance
- €3,788 Net sales versus €3,347 in 2021 (in millions)
- €546 Adjusted EBITDA (in millions)
Highlights 2022
- Extended approval for marketing Bovaer®, building on first-ever EU authorization of a feed additive with
environmental benefits
- Entered into a strategic alliance with Elanco Animal Health Incorporated to maximize opportunities for Bovaer® in
the US market and, subject to regulatory approval
- Began construction of a new manufacturing facility for Bovaer® at our site in Dalry (Scotland)
- Acquired Prodap, a Brazilian animal nutrition and technology company, representing another step forward in our
Precision journey and allowing farmers to make their sustainability performance visible and actionable
- Received International Organization for Standardization (ISO) Standard lifecycle assessment assurance for our
intelligent sustainability service Sustell™
- Received FDA approval of FUMzyme®, the first US mycotoxin-degrading ingredient for poultry
About Animal Nutrition & Health
For many years, Animal Nutrition & Health has supplied the feed value chain with products and solutions that are
fundamental to the health and well-being of animals, the profitability of farmers, and the safeguarding of our
environment. A pioneer since the earliest days of feed additives, we apply cutting-edge science to provide a portfolio of
innovative and sustainable nutritional solutions that runs from vitamins through carotenoids to unique mycotoxin risk
management solutions, feed safety diagnostic solutions, gut heath technologies, and feed efficiency solutions. We have
also recently developed a new strand to our business, our Precision Services offering, which uses independent data
analysis and diagnostics to pinpoint animal health issues together with environmental footprint, on a completely bespoke
basis.
Following the successful acquisition of the Erber Group in 2020, Animal Nutrition & Health operated with effect from 1
January 2022 as an expanded and fully integrated organization. The result of the integration of Biomin is a business with
the capacity and capabilities to lead globally in facilitating sustainable animal protein production. This reconfigured
business has an unparalleled network of more than 55 premix and additives plants and a unique portfolio of highest-
quality core vitamins, premixes, carotenoids, (feed) enzymes, microbes and eubiotics to address the challenges facing the
animal farming community today. With scientific centers of excellence in Switzerland and Austria, and worldwide R&D
capabilities and technical expertise, Animal Nutrition & Health combines global thought leadership with the advantages of
local knowledge and connections.
We are committed to leading an achievable worldwide transformation in sustainable animal protein production as part of
our ‘We Make It Possible’ initiative. Our aim is to make animal farming more sustainable by reducing its associated
greenhouse gas (GHG) and other emissions and their negative effect on the environment and biodiversity. At the same
time, we strive to ensure that farmers can earn a decent living and that people have access to affordable animal proteins.
Further information on our Animal Nutrition & Health strategy and how we make animal farming more sustainable can be
found in Strategy.
Review of business – Animal Nutrition & Health
Royal DSM Integrated Annual Report 2022 93
Trends in Animal, Nutrition & Health
Our Animal Nutrition & Health business addresses significant trends that influence the health of people and of the planet
by two principal areas of engagement: enabling the sustainable production of animal protein and protecting food security.
Enabling the sustainable production of animal protein
Animal-based proteins are highly nutritious and form a key part of a balanced, healthy diet. Their consumption is also
central to many cultures, and animal-source foods and other animal-source products play an important socio-economic
role in those cultures. However, livestock production comes at a cost. This cost is increasingly evident. Rising demand for
animal protein is driving up greenhouse gas (GHG) emissions and piling pressure on natural resources. In some cases, this
pressure has already transgressed accepted planetary boundaries, including the Earth’s tolerance thresholds in terms of
GHG emissions, biochemical flows, water quality and quantity, land use, and biodiversity.
The agrifood sector is one of the major contributors to global GHG emissions, and almost a third of wild fisheries are
overexploited. The sustainability of animal protein production is now front and center in the minds of many, with
widespread calls for change from the value chain, policy makers and associated stakeholders.
The world’s population is projected to reach 9.7 billion by 2050. At the same time, demand for healthier, balanced, and
more nutrient-dense diets is increasing — driven not only by the growth of the world’s population but also by changing
health awareness and consumer expectations. The possibilities created by a growing range of plant-based alternatives to
protein will go some way to filling this gap, although for many in the world these are less accessible and affordable than
animal proteins. Demand for animal-source foods is therefore still expected to grow as many populations need to raise
their animal protein intake to attain a level of balanced, healthy nutrition. Enabling sustainable animal production is
therefore of paramount importance.
Our solutions
We strongly believe in, and advocate, a radical transformation of animal farming and food systems to ensure a sustainable
future. We are convinced that the livestock industry can transform itself from within to deliver solutions to the challenges
facing society and the animal protein industry.
We are well positioned to play a key role in this transformation. That is why in Animal Nutrition & Health, we focus on the
following six sustainability platforms to support our customers, the livestock value chain and other stakeholders to
address the environmental challenges facing our planet:
- Improving the lifetime performance of farm animals
- Making efficient use of natural resources
- Reducing emissions from livestock
- Helping tackle antimicrobial resistance
- Reducing our reliance on marine resources
- Improving the nutritional quality of meat, milk, fish and eggs while reducing food loss and waste
To tackle these challenges, we have an extensive portfolio structured into Essential Products and Performance Solutions
complemented by Precision Services.
Our Essential Products provide our customers with the highest-quality core vitamins, premixes and carotenoids that are
essential for life and crucial to an animal’s healthy development, all delivered in the most flexible and tailored way.
Covering enzymes, microbes and eubiotics, our Performance Solutions combat mycotoxins and tackle antimicrobial
resistance. They also optimize gut health, feed conversion and feed efficiency, thereby reducing emissions from livestock.
As a result, fewer natural resources, such as land and water, are needed for the production of animal protein.
Through our Precision Services, meanwhile, we support our clients with data analysis to measure animal health and
environmental footprint on farm level and feed safety. Greater precision in animal farming is key to a more sustainable
Review of business – Animal Nutrition & Health
Royal DSM Integrated Annual Report 2022 94
and profitable future. Our Precision Services use the latest data analytics and diagnostics to improve animal health,
lifetime performance, resource use and environmental footprint, while mitigating risks and unlocking more value.
In addition to our Essential Products and Performance Solutions, we are also successfully rolling out our methane-
reducing feed additive for ruminants, Bovaer® and further extending our capabilities in precision nutrition, building on the
foundations of our globally recognized OVN Optimum Vitamin Nutrition® concept.
Protecting food security
The war in Ukraine significantly disrupted the supply of grain and corn during 2022, resulting in sharp increases in both
food and feed prices worldwide. In the world of animal farming, these increases have complex repercussions for livestock
farmers and feed manufacturers alike, placing yet more pressure on already slim operating margins. They also have the
effect of driving up meat prices, thereby making animal-source foods less accessible for many people in the world who are
already struggling to afford a balanced diet. With feed price inflation a continuing problem for the entire animal
production sector, our extensive portfolio of feed solutions can deliver value to hard-pressed farmers by ensuring the
safety of feed raw materials and also enabling the extraction of more value from both traditional and alternative sources.
Combating mycotoxin contamination
Mycotoxin contamination presents a further threat to already compromised animal feed stocks. Mycotoxins are toxic
compounds that are naturally produced by certain types of molds (fungi). Molds that can produce mycotoxins grow on
numerous foodstuffs such as cereals, dried fruits, nuts and spices. Even in low concentrations, mycotoxins can have major
health and performance outcomes for animals, negatively impacting their growth and weakening their immune systems.
To maximize the long-term availability of healthy protein, our society needs to make every grain of feed count – and we
are currently some way from realizing that ambition. Last year, in the US alone, an estimated USD 5 billion was lost due to
mycotoxin-contaminated corn. Mycotoxins are very much a global problem, however: a recent DSM study found that
mycotoxin contamination is particularly acute in many developing grain-growing regions, including the Middle East, North
Africa and Southern Africa. These findings are especially concerning in view of the current prices of corn and soy.
The biotransformation of mycotoxins
Climate change adds an extra layer of complexity to the problem. Droughts, floods and other extreme weather events
create conditions favorable for the proliferation of mycotoxin-producing fungi, and farmers will increasingly need effective
mycotoxin risk management solutions to safeguard feed supplies.
The biotransformation of mycotoxins — a process that renders them biologically harmless – can make affected food safe
for livestock to eat, minimizing waste. At Animal Nutrition & Health, we have ascertained that enzymes that deactivate
mycotoxins are more effective than traditional binders, which simply bind to mycotoxins and prevent them from being
absorbed through the gut into the bloodstream. Traditional binders (absorbents and clays) have the additional
disadvantage of absorbing not just mycotoxins but also other ingredients in the diet and rendering these unavailable for
digestion. By contrast, Mycofix® – the world’s most advanced and innovative mycotoxin management solution – uses a
combination of unique technologies to provide the most complete protection against mycotoxins. We are the only player
in the animal value chain to possess this technology.
More information on our solutions for sustainable animal farming can be found in the case study in this Report.
Review of business – Animal Nutrition & Health
Royal DSM Integrated Annual Report 2022 95
“Against a challenging economic background, we showed resilience
in 2022 and continued to drive the sustainability transition for the
animal production industry.”
Ivo Lansbergen, President Animal Nutrition & Health Royal DSM
Performance 2022
The year 2022 saw the unwinding of the exceptional 10% volume growth of 2021 that had been driven by COVID-19-related
supply chain disruptions. With a modest decline for the full year, the resulting average rate of growth over the past three-
year period of around 4.5% is in line with DSM’s long-term growth rate. As farmers continue to focus on optimizing feed
efficiency yields, DSM’s performance solutions, such as enzymes, gut health solutions and mycotoxins, showed good
growth.
Continuous pricing actions were taken through the year to mitigate rising cost inflation. Overall, the business realized a 7%
price increase for the year, albeit with a continued price-cost gap as energy and raw materials cost inflation accelerated.
Lower vitamin prices impacted pricing as from September.
Demand for animal protein overall remained resilient. Poultry and eggs performed well, while pork improved in the course
of the year, helped by the normalization of the swine market in China. Ruminants and aquaculture saw more challenging
conditions, owing to their relatively high price points against weakening consumer purchasing power.
The business realised an Adjusted EBITDA of €546 million with a full-year Adjusted EBITDA margin of 14.4%, which includes
a dilutive mathematical effect from rising prices (higher sales and therefore relatively a lower margin percentage) and
foreign exchange effects. Margins in the fourth quarter were further negatively impacted by lower vitamin prices and
inventory reduction actions.
x € million
2022
Net sales from continuing operations
3,788
Adjusted EBITDA
546
Adjusted operating profit
351
Adjusted EBITDA margin (in %)
14.4
The year in focus
Poultry production performed well overall despite multiple challenges
The poultry industry continued to face multiple challenges in 2022 with increased feed costs driven by raw material cost
and shipping challenges, on top of COVID-19 and inflationary pressures. Production volumes rose in the US due to
increased market demands. Meanwhile, production in China did not recover as expected due to the pressure placed on
margins by feed costs and stringent COVID-19 lock down measures. Margins in Brazil and EMEA, however, were favorable
due to increased exports and stabilization of broiler meat prices, respectively.
We launched our ‘Protect, Perform, Promote’ campaign in 2022, showcasing the benefits of our feed enzyme solutions for
saving on feed costs, our mycotoxin risk management solutions for improving raw material quality, and our eubiotics
solutions for protecting bird health. We also launched an updated edition of our OVN Optimum Vitamin Nutrition®
Guidelines 2022 for Poultry, while the launch of our Verax™ precision service created collaborative opportunities with the
world’s two largest broiler producers, in the area of helping to predict performance challenges.
Championing sustainability in egg production
Egg consumption increased in 2022, reflecting the fact that eggs are a relatively cheap protein option in times of high meat
prices, and our business in this sector performed well overall. Increased feed costs, COVID-19, inflationary pressures, and
Review of business – Animal Nutrition & Health
Royal DSM Integrated Annual Report 2022 96
avian influenza challenged margins, although egg prices increased in the US and EMEA. Our ‘Protect, Perform, Promote’
campaign outlined how to make egg production more sustainable by lowering emissions. Our intelligent sustainability
service Sustell™ was introduced by Cal-Maine Foods and CP, two of the world’s largest egg producers, to quantify ammonia
and phosphorus emissions.
We established ourselves as a sustainability thought leader in the industry through our role as a founding sponsor of the
Vision 365 campaign. A new international initiative launched by the International Egg Commission (IEC), Vision 365 initiative
involves a 10-year plan to accelerate global average egg consumption to 365 eggs per person, per year.
Pick-up in pork sector during challenging year
The beginning of the year 2022 was challenging for pork, with producers in the world’s main markets, China and Europe,
losing significant money per head of pig, especially as demand for pork was impacted by COVID-19 lockdowns in China,
causing lower out-of-home consumption. Business conditions improved in the year, helped by the normalization of the
swine market in China. Pork prices saw an increase as of the third quarter but rising energy prices and softening pork
prices affected profitability in Europe and led to a reduction in sow numbers in many key countries including France,
Germany and Poland.
African swine fever (ASF) continued to be problematic in China and parts of Asia and disrupted markets in other parts of
the world too. It led to a ban on pig exports from Germany, consequently depressing prices in Europe, and posed a
constant threat to markets such as Brazil and North America. As a result, VevoWin® experienced considerable growth in
North America as a viral mitigant strategy against porcine reproductive and respiratory syndrome (PRRS) and the threat of
ASF. The power of the VevoVitall® brand as the cornerstone of piglet gut health programs was demonstrated very
effectively, with customers continuing to support this proven solution in the face of significant price rises by sticking with
the product.
This year saw the launch of two dedicated swine campaigns, ‘Shaping the Future of Piglet Care’ and ‘Sow Protection You
can Trust’, as well as our updated new OVN Optimum Vitamin Nutrition® Guidelines 2022 for Swine. These campaigns
created a strong narrative for our customers, outlining how we can support them with our comprehensive portfolio of
solutions and services, helping them to reduce reliance on antibiotics and therapeutic zinc oxide in their piglets and
improve sow retention by mitigating the risk of mycotoxins.
Challenging conditions in beef sector
The global beef market faced increasingly challenging conditions in 2022 due to the relatively high price of beef and the
weakening of consumer purchasing power during the year.
Brazil saw export volumes fading during the year combined with a weak domestic demand driven by inflation, among other
factors, which started to put pressure on live cattle prices during the second half of the year. The prices of beef and milk
that farmers could charge fell, while at the same time production costs rose due to the effects of global inflation and the
war in Ukraine. Brazilian beef production saw a decline in 2022. In the US, beef production grew slightly in 2022, while
cattle prices performed positively. In China, beef consumption and imports continued to increase, although at a slower
pace, benefiting Brazilian exports. In Europe, by contrast, beef production and consumption have both gradually declined
over the past decade.
In dairy, we updated our portfolio in 2022, including more products with Performance Solutions and exchanged the vitamin
D
3
content in some of our products for Hy•D®. Our pure and proprietary vitamin D
3
metabolite, Hy•D® enables more
efficient uptake of calcium from the diet, leading to improved skeletal health and performance in dairy cows. We also
launched Mycofix® Risk Management solutions in the dairy and feedlot markets for improving raw material quality and
combating high raw material costs.
Continued commercialization of Bovaer®
Bovaer® is our novel methane inhibitor solution for ruminants and is currently authorized and available for sale in more
than 45 countries, including the EU/EEA, Argentina, Australia, Brazil, Chile, Pakistan, Switzerland, Turkey and Uruguay.
Across the globe, we continued to work with partners from the beef and dairy value chain in 2022 to introduce Bovaer®
into the market. These activities included large-scale programs to gain further practical on-farm experience.
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Royal DSM Integrated Annual Report 2022 97
In the EU, Bovaer® received landmark market approval at the start of the year, confirming its capacity to reduce methane
emissions and its safety for animals, consumers and the environment. This positive momentum continued during the year,
with numerous pilots being established with organizations such as FrieslandCampina, the world’s largest dairy co-
operative.
In April, we entered into a strategic alliance with Elanco, a leading animal health company, granting it exclusive licensing
rights to develop, manufacture and commercialize Bovaer® in the US. This enabled us to maximize the opportunity for
Bovaer® in the US market. Elanco assumed responsibility for the US approval process, commercialization strategy and
product supply, as well as supporting DSM supply in markets outside the US.
In November, we began construction of a new manufacturing facility at our site in Dalry (Scotland). The plant will
significantly increase global production of Bovaer®, with first production expected in 2025. In an official groundbreaking
ceremony, attended by the First Minister of Scotland, Nicola Sturgeon, and our Co-CEO Dimitri de Vreeze, we marked the
next step in our plan to use Bovaer® to reduce global methane emissions and contribute to worldwide methane reduction
targets.
Further development of sustainable aquaculture solutions
Aquaculture saw somewhat challenging conditions, as inflationary pressures caused a cool-down in major import markets
including the US and the EU in the second half of the year. Feed millers also faced unprecedented price pressures,
primarily as a result of increased raw material and energy costs.
To support our customers, we focused strongly on our enzyme portfolio for optimizing feed costs and launched a ‘Protect
your profits’ campaign. We also positioned mycotoxin risk management as a feed insurance policy that combats the
increasing risk of inferior-quality grains entering the feed chain. The 2020 acquisition of Biomin was central to the
development of our ‘Shrimp Robustness’ program, making DSM a one-stop-shop for aquaculture solutions. In 2022, we also
launched revised OVN Optimum Vitamin Nutrition® Guidelines 2022 for Aquaculture to maintain our leadership position in
the vitamin and premix space.
Significant increase in sales of Veramaris® algal-based omega-3
Despite the challenging economic environment in 2022, our algal-based omega-3 Veramaris® enjoyed significant growth,
particularly in the second half of the year. Veramaris, our 50:50 partnership with Evonik, saw a strong upswing in demand
for sustainable algae-derived omega-3 for salmon farming, while also benefiting from increased interest for applications in
pet food and human nutrition.
Observing increasing interest in our sustainable omega-3 proposition, we further expanded in all geographies and species,
expanding our presence in warm water fish, shrimp, salmonids and pets. Output at our Veramaris facility in Blair
(Nebraska, USA) ramped up, with yield and potency improvements. We also witnessed a strong response to our Optimum
Omega Nutrition (OON) guidelines, a thought leadership protocol prepared by Veramaris experts to help fish farmers meet
the appropriate omega-3 requirements and improve product quality while lowering the negative marine impact of farmed
shrimp, salmon and other marine species.
Sustell™ launched for aquaculture
Sustell™, our intelligent sustainability service that supports precision animal farming, introduced its digitally-enabled farm-
level solutions offering to the aquaculture industry. Sustell™ can help producers meet the increasing need to demonstrate
that they have accurate, reliable and transparent methods to measure and credibly reduce the environmental footprint of
farmed animal protein, thereby assisting the aquaculture industry in its efforts to protect marine biodiversity.
Vitamin E production by Yimante
Having reached our targeted utilization rate by the end of 2021, our vitamin E plant in China, Yimante (owned 75/25 with
Nenter) operated fully as planned in 2022.
ISO standard lifecycle assessment assurance for Sustell™
Our Animal Nutrition & Health business brings together digital tooling, consultancy services, and innovative farm-level
products in the form of our Verax™ animal health management system and our Sustell™ sustainability service, as well as
Review of business – Animal Nutrition & Health
Royal DSM Integrated Annual Report 2022 98
our risk management solutions. In 2022, we received International Organisation Standard (ISO) assurance from accredited
third-party certification body DNV for our intelligent sustainability service Sustell™.
Next step in Precision Services with acquisition of Prodap
In September, we completed the acquisition of Prodap, Brazil’s leading animal nutrition and technology company. Prodap
combines technology offerings, consulting services, and customized nutritional solutions to drive efficiency and
sustainability in animal farming. Harnessing the power of Prodap’s digital solutions allows us to take another step forward
in our Precision journey, enabling smarter nutritional decision-making thanks to Artificial Intelligence and other tools.
Prodap also complements our deep knowledge of animal nutrition and our advisory capabilities with its extensive
consultancy capabilities, facilitating an even higher level of customer experience.
Mycotoxins
Mycotoxins naturally contaminate feed crops, posing threats to farm animal health and decreasing the sustainability of
food production. The threat of mycotoxin contamination to livestock globally remained high, as documented in the DSM
Mycotoxin Survey data of feed and crop samples. The disruption of some raw commodity markets due to the conflict in
Ukraine led many feed and animal protein producers to include lower quality or alternative ingredients into livestock feed,
raising the risk of livestock exposure to mycotoxins, while high feed prices reinforced the economic rationale for animal
protein producers to apply mycotoxin deactivators.
In 2022, we extended the availability of our market-leading mycotoxin deactivators by securing US FDA approval of our
fumonisins esterase for poultry and swine. As a result, FUMzyme®, the only purified enzyme that detoxifies fumonisins,
became the first product ever approved for mycotoxin degradation in the US.
In recognition of the scientific merit of our commercial mycotoxin degradation capabilities, DSM was awarded the Austrian
State Prize for Innovation 2022 for our ZENzyme® technology. ZENzyme® is the only purified enzyme that degrades
zearalenone, a mycotoxin associated with health and reproductive challenges in livestock, fast, specifically and irreversibly
into non-toxic and non-estrogenic metabolites, thereby protecting farm animals and helping to ensure sustainable,
profitable food production.
Commitment to enable double-digit on-farm livestock emission reductions
Food systems and the climate crisis are intrinsically linked. Our strategic Food System Commitments therefore contain a
commitment to enable a double-digit on-farm reduction of livestock emissions by 2030.
Putting our customers at the heart of our business
A worldwide transformation of our industry to bring about sustainable animal protein production will only be possible
through the active involvement of the customers we serve. We therefore put our customers at the center of everything we
do. Our goal is to make doing business with DSM easy and enjoyable. We create touchpoints that deliver a unique
customer experience, aiming to encourage DSM brand preference and loyalty among our customer base.
We measure customer loyalty and satisfaction through the Net Promoter Score (NPS) methodology, which captures the
‘voice’ of the customer on a two-yearly basis. This gives us valuable insights into how best to continuously improve our
product and service offering.
In November 2022, we ran the NPS survey among our customers. For the first time, we here report the response among
customers of Animal Nutrition & Health only; in previous Integrated Annual Reports, an overall score for DSM as a whole
was published. The NPS for Animal Nutrition & Health decreased slightly from 67 to 62 in 2022, among a survey group 34%
larger than in 2020. With high scores for product quality, technical service, reliability and customer care, this is a much
stronger result than our performance in 2018 (51) and 2016 (56) and is consistent with a generally positive trend over the
past six years.
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Royal DSM Integrated Annual Report 2022 99
Innovation and R&D
Following the successful 2021 launch of Sustell™, the first of our Precision Services, we continue to focus on the
development of a digital farm ecosystem that taps into the farm-level data stream. To maintain its contribution to meeting
the nutrition requirements of the world’s rapidly growing population, animal farming must become more efficient and
sustainable while at the same time enabling higher levels of animal welfare and constituting a profitable endeavor for
farming families and communities worldwide. Precision animal farming facilitates more efficient use of resources, reduces
environmental impact, improves animal welfare management, and enhances farm-level operations. By leveraging precision
farming technologies, the industry can gain deeper and broader insights into the opportunities and challenges it faces and
can steer toward more accurate interventions.
In building our Precision Services, we are exploring and developing technologies such as artificial intelligence and deep
learning systems that help to correlate the animal and environmental input into the ecosystem with the corresponding
output with a view to maximizing health, nutrition and environmental value creation. Our Precision Services open up new
horizons in farm-level transparency and data management, supporting areas of challenge and opportunity for farming
operations.
In 2022, we accelerated the customer adoption of our Precision Nutrition platform, Verax™. The product of a partnership
with Flagship Pioneering (MA, USA), Verax™ is a decision-making tool that enables data-driven optimization of nutrition in
order to improve the health, performance and environmental footprint of livestock. It uses algorithms, blood biomarkers,
data from trials, and scientific papers to provide nutritional recommendations on how to prevent diseases and optimize
nutrition in poultry, swine and ruminants.
Our rich and diverse portfolio of innovation requires our research centers to develop state-of-the-art capabilities. In
addition to developing the expertise of our people, we also invested on next-generation omics with new mass
spectrometers and advanced in silico and in vitro modeling in our Research Centers in Tulln (Austria) and Bazhou (Hebei
province, China). Additional investments were made in digitalization of our trial facilities for animals and environmental
data collection. While those investments put DSM at the forefront of a digital-enabled science and microbiome
technologies, they also expand our portfolio of services while translating the science into tangible outcomes in health,
nutrition and sustainability for livestock producers.
Partnerships and joint ventures
We have many partnerships that support and accelerate innovation in Animal Nutrition & Health, for example:
- The world-leading Feed Enzymes Alliance of DSM and Novozymes, a partnership that leverages the
complementary competences and technologies of our two companies to deliver game-changing innovation in
feed enzyme solutions
- Veramaris, our 50:50 joint venture with Evonik, which produces an algal oil rich in the omega-3 fatty acids EPA and
DHA for the aquaculture and pet food sectors without making use of wild-caught fish
- Our 75:25 partnership Yimante (Hubei province, China), with Nenter, which gives us a strong position in vitamin E,
a key ingredient in our animal nutrition premix solutions
- Our new strategic alliance with Elanco Animal Health Incorporated to maximize opportunities for Bovaer® in the
US market
Royal DSM Integrated Annual Report 2022 100
Health, Nutrition & Care
At a glance
- €2,939 Net sales versus €2,516 in 2021 (in millions)
- €676 Adjusted EBITDA (in millions)
Highlights 2022
- Implemented sustainable packaging for micronutrient powders with 80% less aluminum
- Creation of ‘Health of the Gut’ platform, to meet increasing consumer demands for better gut health
- Launch of ampli-D® – our advanced and potent form of vitamin D for the dietary supplement market – in Latin
America, with ANVISA approval
- Obtained additional regulatory approvals for human milk oligosaccharides (HMOs) in several countries and also
expanded our customer portfolio
- Continuing positive consumer response our i-Health products in the US and China due to growing interest in self-
care and immunity
About Health, Nutrition & Care
Health, Nutrition & Care provides solutions for the early life nutrition, dietary supplement, pharmaceutical, medical
nutrition, personal care and aroma, and biomedical materials markets. We also serve the nutrition improvement sector,
providing affordable and accessible food & beverage fortification solutions for some of the world’s most vulnerable
populations. We serve these industries with:
- A portfolio of high-quality products covering vitamins, nutritional lipids, minerals, carotenoids, nutraceuticals,
digestive enzymes, probiotics and prebiotics (including human milk oligosaccharides, HMOs), active
pharmaceutical ingredients (APIs), and sunscreen filters, as well as a range of biomedical solutions
- A suite of customized solutions (premix, Market-Ready Solutions, and personalized nutrition)
- A range of expert services (e.g., regulatory affairs and formulation expertise, along with customized solutions)
Trends in Health, Nutrition & Care
Our Health, Nutrition & Care business addresses significant trends that influence the health of people and of the planet.
We do this by leveraging the potential of personalized nutrition and improving the nutritional value of essential foods.
Heightened relevance of personalized nutrition
The turbulent economic conditions of 2022 impacted consumers around the world, influencing purchasing behaviors as
consumers sought to reconcile their health and wellness aspirations with curtailed domestic budgets. According to a 2022
report, 72% of global consumers were concerned about rising living costs in their country of residence, while a similar
proportion (63%) sought to reduce their spend on food and drink. Despite the constraints on domestic spending, the
unsettled conditions that marked 2022 further strengthened consumer awareness of the link between nutrition and health
that had been highlighted so clearly during the COVID-19 pandemic. Furthermore, 46% of consumers worldwide said that
they intended to improve their mental well-being over the coming 12 months, while 41% stated that they aspired to
enhance their energy levels. Immune health was identified by 66% of consumers as the top health area they wished to
address in the coming year, with digestive health in second place (with 56%) and heart health in third (with 53%).
Review of business – Health Nutrition & Care
Royal DSM Integrated Annual Report 2022 101
Crucially, 64% of consumers described their approach to health as proactive, and an only slightly lesser proportion (57%)
said that they paid increased attention to high-quality, trusted ingredients when purchasing food and drink. In short, the
majority of consumers want to feel that they are in control of their nutritional intake and to feel informed about the
ingredients contained in the products they purchase.
In this context, the demand for personalized nutrition — science-based, data-driven nutritional solutions tailored to
consumers’ specific health goals and needs – is greater than ever. It allows individuals to make dietary choices tailored to
their specific needs, reducing their susceptibility to a wide range of non-communicable diseases and at the same time
helping to lower healthcare costs.
Our solutions
Our portfolio of nutritional ingredients covers an extensive spectrum of products essential for good nutrition, including
food enzymes, nutritional lipids, carotenoids, cultures, human milk oligosaccharides (HMOs) and hydrocolloids. As a global
pioneer in the industrial production of vitamins, we cover the entire range of critical micronutrients, offering innovative,
science-based nutritional solutions to support health and well-being.
From insights to the final product, we draw on our cutting-edge science and robust global partnerships to offer our
customers end-to-end support from product concept development to product launch. Our Market-Ready Solutions offer
fast-tracked innovation that can be personalized for any consumer group.
Intensified demand for nutrition improvement
One of our Food System Commitments is to close the micronutrient gap of 800 million vulnerable people by 2030. The
turbulent economic conditions that marked 2022 heightened the significance of this commitment. According to the UN
World Food Programme, in 2022 more than 3 billion people worldwide could not afford a healthy diet, while 2 billion were
affected by one of more forms of micronutrient deficiency, including 32 million pregnant or lactating women.
Supplementation of the diet through the fortification of foods with essential nutrients – nutrition improvement – has a
vital role to play in addressing this urgent need.
Our solutions
As one of the world’s leading manufacturers of vitamins, nutritional ingredients and food fortification technologies, we
develop and deliver better nutrition for people deficient in essential nutrients. We provide a range of nutrient-rich foods
ranging from micronutrient powders to fortified rice while working in partnership with humanitarian organizations, food
companies and social enterprises to reach broad populations at scale.
In 2022, a report by The Lancet Global Health concluded that the decades-old estimate that 2 billion people worldwide
suffer from micronutrient deficiencies is a major underestimate. The Lancet reported additionally that one in two pre-
school aged children and two out of three women of reproductive age worldwide suffer from at least one micronutrient
deficiency. In the words of the Centers for Disease Control and Prevention (CDC), the consequences of micronutrient
deficiencies include “serious birth defects, undeveloped cognitive ability, and reduced productivity. Severe micronutrient
malnutrition contributes to maternal and infant deaths and childhood blindness.”
Against this background, our essential micronutrients (vitamins and minerals) are now fortifying the diets of almost 650
million people every year. Vitamins and other micronutrients, such as nutritional lipids, are highly sensitive to changes in
temperature and humidity. Micronutrient powders therefore need protection against these external influences if they are
to remain stable prior to usage and to be fully bioavailable when added to foods and beverages.
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Royal DSM Integrated Annual Report 2022 102
After years of research, we have successfully developed a packaging solution that fully protects our micronutrient powders
and – crucially – is more sustainable than the original version. The product used to consist of 30 aluminum sachets or
‘stick packs’ (the primary packaging), packed into one non-reusable aluminum pouch (the secondary packaging). Our more
sustainable solution was achieved in collaboration with our long-standing partners SAES Coated Films, Novamont
and Gualapack. Like the original version of the product, it comprises both primary and secondary packaging. However, the
new primary packaging is a fully compostable stick pack which is made from more than 65% bio-based material and has a
proven absence of ecotoxic effects. The new secondary packaging, meanwhile, now takes the form of a re-usable
aluminum pouch with a seal. Overall, the combined solution (both primary and secondary packaging) contains 80% less
aluminum than before.
The fact that the secondary packaging is now re-usable and re-sealable helps to reduce waste and pollution. Highly
resistant, it can also be safely reused to protect staple foods such as rice and flour from insects, contamination, humidity,
and spoilage – which can all be significant issues in low- and middle-income countries. Tested under challenging heat and
humidity conditions, the packaging solution gave the same level of protection to the vitamins and minerals present in the
micronutrient powders as the industry standard.
More information on our solutions for Health, Nutrition & Care can be found in this case study.
“The turbulent conditions of 2022 created new opportunities for our
Health, Nutrition & Care portfolio and further underlined the need for
our capabilities in nutrition improvement.”
Philip Eykerman, President Health, Nutrition & Care Royal DSM
Performance 2022
The business had a good year, with strong organic sales growth of 9%, driven by strong price momentum through the year
(+7%).
The dietary supplements market was soft predominantly in North America, as demand for immunity-boosting supplements
moderated from the elevated levels seen during the COVID-19 pandemic. At the same time, demand for other dietary
supplements for gut health and women’s health products (i-Health) remained resilient. Pharma and Medical Nutrition
performed well, while Biomedical had a very strong performance.
Early Life Nutrition saw a good recovery after a soft 2021 with good interest in its human-milk oligosaccharide (HMO)
products, buoyed by expectations of further regulatory approvals around the world.
Personal Care & Aroma delivered strong growth, driven by high demand for skin, sun and hair care as well as fine
fragrances owing to greater international mobility and high demand for bio-based aroma ingredients.
Health, Nutrition & Care delivered €676 million Adjusted EBITDA with a full-year Adjusted EBITDA margin of 23%, which
includes a dilutive mathematical effect from rising prices (higher sales and therefore relatively a lower margin percentage)
and foreign exchange effects.
x € million
2022
Net sales from continuing operations
2,939
Adjusted EBITDA
676
Adjusted operating profit
428
Adjusted EBITDA margin (in %)
23.0
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Royal DSM Integrated Annual Report 2022 103
The year in focus
Continued growth in pharmaceutical sector
Our activities in the pharmaceutical sector saw continued growth in 2022, supported by an increasing number of medicinal
registrations of over-the-counter and prescription drug products. We supported our customers’ growth and geographical
expansion plans by efficiently assisting their regulatory filings in all major geographies, by applying alternative business
models, and by expanding our portfolio offering and innovation platform – for example, by the addition of capabilities to
support early-phase development of cannabinoid-based drug therapies.
Continued growth in medical nutrition sector
The medical nutrition sector continued to perform well in 2022, driven mainly by the growing proportion of the elderly in
the world’s population and the accompanying rise in chronic diseases. Demand for new health care solutions remains
high, as does awareness of the value of nutrition in the medical treatment of patients of all ages, and of the elderly in
particular. Our expertise in developing science-based, condition-specific concepts, our customized premix capabilities, and
our expert services – from concept to market access – helped our customers to serve the most vulnerable population
groups.
Market-Ready Solutions
In 2022, our Market-Ready Solution (MRS) capabilities and strong customer relationships facilitated strong uptake of
ampli-D® – a calcifediol-based form of vitamin D supplement that acts three times faster than normal vitamin D.
Consumers are increasingly looking for holistic solutions that deliver proven health benefits including stress management,
improved sleep quality, and healthy gut functionality. To maintain the momentum in the uptake of vitamin D and at the
same time provide effective differentiation to customers in a commoditized space, we launched ampli-D® – our advanced
and potent form of vitamin D for the dietary supplement market – in Latin America, with ANVISA approval.
The year 2022 also saw the creation of our ‘Health from the gut’ platform, which was designed to meet growing consumer
demand for better gut health. Our ‘Health from the Gut’ offering, which will be commercially launched in 2023, will offer
scientifically proven health benefits coupled with easy application and novel product formats. Based on a holistic
approach to the human microbiome, it will deliver clinically proven, multi-ingredient products featuring our industry-
leading brands, including our next-generation Humiome™ pre-, pro- and postbiotics, GlyCare™ Human Milk
Oligosaccharides (HMOs), Tolerase® digestive enzymes, Quali® vitamins, and more.
Change in demand pattern for dietary supplements
The softening of demand for dietary supplements, which occurred mainly in North America and reflected the fall in
demand for immunity-boosting supplements in the wake of the COVID-19 pandemic, was offset by resilient demand for
other dietary supplements for gut health and for women’s health products (i-Health).
‘Sea the Difference’ with life's™OMEGA
We launched our ‘Sea the Difference’ global campaign, designed to drive awareness of our life's™OMEGA portfolio, made
up of 100% algal-sourced nutritional lipids, as an alternative to fish oil. life's™OMEGA provides consumers with a
sustainable solution for obtaining omega-3s that does not intervene in our marine ecosystem.
Beyond this, we enabled our customers to get new products to market faster with our premix and Market-Ready Solutions,
which are strongly supported by our end-to-end service model. Finally, we solidified our position as a leader in the dietary
supplements space by working with key opinion leaders and developing new immunity campaigns that capture the latest
science and consumer trends.
Good recovery for early life nutrition
The early life nutrition segment saw a good recovery after a soft 2021. Low birthrates persisted in China, offset by an up-
tick in the US and parts of Europe. The industry also faced an unforeseen development involving infant formula shortages
in the US. This led US manufacturers to source supplies from all over the world, presenting opportunities that we were
able to capture.
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Royal DSM Integrated Annual Report 2022 104
Human milk oligosaccharides (HMOs) saw good customer interest, buoyed by expectations of further regulatory approvals
around the world. We continued to make progress by obtaining additional regulatory approvals in several countries and by
expanding our customer portfolio. We also strengthened our leading position in lipids by demonstrating to our customers
the importance of algal-sourced versus marine-sourced microbial lipids and by demonstrating our capabilities in
developing innovative maternal nutrition solutions.
Further progress in nutrition improvement
Leveraging our partnerships in the public and private sectors, we continued our efforts to create and implement
affordable, aspirational and accessible nutritional solutions to improve the quality of life of those most in need. As part of
our strategic Food System Commitments, we undertook to enable by 2030 the closure of the micronutrient gap for 800
million vulnerable people worldwide, who suffer from micronutrient deficiencies. Fortified staples, Ready to Use
Therapeutic Foods, Micronutrient Powders for children and Multiple Micronutrient Supplements for pregnant women have
a key role to play in this initiative. For more information, see our Food System Commitments.
Innovative new offerings from Hologram Sciences
Launched in 2021, our personalized nutrition pioneer Hologram Sciences, Inc. combines proven science, powerful
technology and the promotion of habit-building to create personalized nutrition solutions designed to help consumers
optimize their health and well-being.
The company’s first concept, d.velop™, a personalized vitamin D solution that is absorbed by the body three times faster
than alternative vitamin D formulations, was launched in 2021. This innovation has since helped 97% of customers who
tested with suboptimal vitamin D levels to see an increase in levels of this essential vitamin. Hologram Sciences signed its
first license for the d.velop™ brand in 2022, expanding its global reach via an agreement with Maeil Dairies Co. Ltd., a
company based in South Korea and principally engaged in the manufacture and distribution of dairy products.
In 2022, Hologram Sciences entered into its first strategic partnership with Momentous, a leading provider of human
performance products, to provide digital, diagnostic, and personalized supplement solutions.
Hologram Sciences launched a new consumer brand, Phenology™, which offers advanced at-home diagnostics, hormone
tracking and custom insights for women in the menopause. Users can follow a targeted wellness program with appropriate
supplements and science-backed, naturally powerful health and beauty essentials. Users can also access one-on-one
coaching and expert advice to unlock timely relief throughout their menopause journey.
Growth in i-Health
Our i-Health products continued to see positive consumer response in the US and China thanks to increased interest in
self-care, immunity, and overall health and wellness. Our Women’s Health portfolio, including the AZO® and Estroven®
brands, delivered growth due to impactful new communication campaigns and new product launches including AZO®
Women’s Dual Protection Probiotics, AZO® D-Mannose, and Estroven® Complete. The AZO® brand was also launched in
China, with promising early results. Recent customer surveys and in-depth consumer interviews were conducted in the US
and China to better understand women’s journeys through the various stages of their lives and offer insight into the
symptoms and conditions associated with intimate and hormonal health. The information from this research is helping us
to identify the critical factors that inhibit women from taking action in respect of their intimate and hormonal health. It
informs our product innovation pipelines as well as our communication activities aimed at addressing those barriers.
Our Culturelle
®
probiotic range saw continuous strong consumer interest, driven by the introduction of larger pack sizes
and new innovative Culturelle® products covering consumer needs in Women’s Health, Kids’ Immunity, and Kids’ Gummies.
The brand was also recently launched in Brazil, where it started to gain traction despite the challenging market conditions
caused by the COVID-19 pandemic. We leverage a variety of digital data, including ratings, reviews and social listening, to
ascertain trends and inform a fast-follower strategy for new ingredients (for example, boric acid, which is used to help
treat yeast infections of the vagina, and ashwagandha, a herb used in the traditional medicine of India and best known for
its anti-anxiety and stress-relieving effects) as well as vaginal health diagnostics.
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Royal DSM Integrated Annual Report 2022 105
We also introduced an innovation in the gummy product market, incorporating our lutein-based, vision-health product,
FloraGLO® into a new Culturelle® gummy product for children, combining for the first time vision health with probiotics
and vitamins to support immunity, digestion and vision.
Biomedical
In 2022, our Biomedical business delivered very strong performance as it successfully transitioned from its original home
within the former DSM Innovation Center to a new one within Health, Nutrition & Care. The upturn was driven mostly by
increased volumes of elective surgical procedures, which had been suppressed by the effects the COVID-19 pandemic and
which reverted to pre-pandemic levels during 2022. Our running business grew, stimulated by the launch of various new
customer products containing our materials, with this growth being particularly strong in China.
Our international growth in 2022 gave rise to a number of transformational commercial agreements, especially in the
global orthopedic and cardiovascular markets. Our industry-leading medical coatings platform technology enabled one of
our key strategic partners to successfully compete in this market, generating significant growth in our coatings revenue.
Our polyethylene materials platform also allowed another of our global strategic cardiovascular partners to successfully
launch a next-generation structural heart device in Europe. One of our pharmaceutical and drug delivery partners, Svelte
Medical, received FDA approval to commercialize the SLENDER IDS
TM
fixed-wire and DIRECT RX
TM
rapid-exchange drug-
eluting stent (DES) system for the treatment of coronary artery disease in the US. This DES system is enhanced by DISCREET
bioresorbable coating technology based on our proprietary TheraPEA™ polyesteramide (PEA) bioresorbable polymer.
Within our natural biomaterials portfolio, we successfully introduced our technologies into Latin America, expanding our
global presence and bringing our healing technologies into strategic markets such as orthopedics and dental. Lastly,
innovations within our polyurethanes portfolio generated strong customer interest in 2022, leading to commitments on the
part of multiple partners to utilize our polyurethanes in human clinical trials for next-generation continuous glucose-
monitoring devices in the field of diabetes management.
Strong growth in Personal Care & Aroma
Building on a record sales year in 2021, Personal Care & Aroma delivered strong growth, driven by high demand for skin,
sun and hair care as well as fine fragrances. This demand was attributable to greater international mobility in the wake of
the COVID-19 pandemic, along with high demand for bio-based aroma ingredients.
These strong sales results are attributable to the effective execution of our strategy, which offers proven, high-
performance, cosmetic ingredients as part of broader customer solutions, complemented by our suite of services and
sustainable practices. These solutions encompass, for example, trend-informed market concepts, such as our
‘microbiome-friendly’ range or our practical UV protection solutions. We continuously work to improve the social and
environmental impact of our products and in 2022 partnered with the US Skin Cancer Foundation, joining them on their
roadshow to raise awareness of sun safety and the benefits of using sunscreens. We were able to support our customers
in their sustainability journey by providing information on the environmental and social footprint, traceability and identity
(including naturality index) of our key ingredients, along with any applicable eco-certifications based on life cycle analysis
(LCA).
Sustainability
Sustainability is an increasingly critical issue for our customers. In 2022, we integrated sustainability fully into our strategy,
started to create better tools to give full transparency and insight about sustainability benefits at product level, and
developed a more efficient and effective process for dealing with customer requests in this area. We engaged in more than
20 strategic dialogues with customers on the topic of sustainability.
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Royal DSM Integrated Annual Report 2022 106
Innovation and R&D
Innovation in Health, Nutrition & Care enjoyed good momentum in 2022, driven by four factors.
The first was the very strong continued performance of our Personal Care & Aroma business unit across aroma,
photoprotection and personal care ingredients. Our Biomedical business also performed well, while our innovation
ingredients such as lutein and ampli-D®, helped deliver a strong performance by our B2C and Personalized Nutrition
businesses, i-Health and Hologram Sciences. Finally, innovation performed well in both the pharma segment and the Early
Life Nutrition segment.
Innovation in Nutrition focuses on establishing novel, science-based health solutions in the market such as human milk
oligosaccharides (HMOs), algal nutritional lipids, cannabidiol (CBD) and ampli-D®, our proprietary and advanced form of
vitamin D. Drawing on cutting-edge science and the latest consumer insights, we deploy our innovation capabilities to
create a more comprehensive offering for customers in the form of our premix capabilities and Market-Ready Solutions.
In Personal Care and Aroma, our consistent growth in 2022 stemmed from our effective substantiation of new product
claims and our regulatory efforts in support of existing products, especially for the Skin Care market, in combination with
the launch of a new range of UV filters. The garnering of global awards at trade shows for our product innovations testified
to the successful deployment of our scientific capabilities. Awards were received for PEPHA®-TIGHT CB, our biotechnology
innovation that harnesses the many benefits of lab-grown algae for healthy looking skin, and for Quali®-B, our biotech-
based pink vitamin B
12
for sensitive and fatigued skin, produced by non-GMO bacterial fermentation.
Our Biomedical business drives innovations to address important needs in healthcare and personal care by harnessing
the innovation potential of sustainable science. Our customer-centric innovation activity in this segment focuses on
launching new solutions, based on our IP-protected priority materials technology platforms: Polyethylenes, Collagen,
Polyurethanes, and Coatings & Drug Delivery.
Partnerships and joint ventures
We have many partnerships that support and accelerate innovation in Health, Nutrition & Care, for example:
- Working with Panaceutics, Inc. and Wellmetrix, LLC in the personalized nutrition area, combining the competences
of these two companies with our world-class nutrition science, products and solutions. We aim to be the partner
of choice for dietary supplements as well as food & beverage brand owners that wish to offer personalized and
healthy nutrition
- Our partnerships with the World Food Programme (WFP), UNICEF and World Vision to combat hunger and
malnutrition
Royal DSM Integrated Annual Report 2022 107
Food & Beverage
At a glance
- €1,546 Net sales versus €1,256 in 2021 (in millions)
- €266 Adjusted EBITDA (in millions)
Highlights 2022
- Strong sales growth, with good contributions from all business segments
- Continued momentum in plant-based dairy, meat and fish alternatives, leveraging full range of capabilities and
portfolio, including First Choice Ingredients and Vestkorn, and launch of Vertis™ CanolaPRO®
- Core dairy business continues to perform, with a notable increase in the number of plant-based dairy alternative
products
- Increasing market traction for palatability and texture solutions alongside micronutrient offering in Pet Food
- Increasing interest in beverages that deliver proven health benefits, leveraging full range of nutritional solutions,
texture portfolio and regulatory expertise
About Food & Beverage
At the start of the year, we introduced our new integrated Food & Beverage operating structure, which unified the former
Food Specialties, Hydrocolloids and elements of the Nutritional Products Business Groups into a single, focused Business
Group. This strategic decision allowed us to bring together our full range of ingredients, expertise and sustainable
solutions that improve taste, texture and health into a one-stop-shop ‘powerhouse’ organization serving producers of
consumer packaged goods.
With this unified approach, Food & Beverage supports its customers to innovate, improve and grow with stand-out food
and beverage products across dairy (fresh dairy, cheese and plant-based); bakery, cereals and bars; savory foods;
beverages and brewing; confectionery and fruit; plant-based meat and fish alternatives; and in petfood. Our ingredients
and solutions are widely used to create a broad range of food products, from grocery favorites such as cereals, yogurt,
cheese and soups to specialized products. These include gluten-free bread and beer, plant-based meat and dairy
alternatives, lactose-free milk and dairy products, sports and performance nutrition, and sugar-reduced foods and
beverages.
We have more than 150 years’ experience in biosciences and fermentation, and draw additionally on DSM’s portfolio of
solutions for taste, texture and health. We help food and beverage manufacturers better support the health of people and
planet, lowering the environmental impact of food production while also boosting the nutritional value of their products.
Trends in Food & Beverage
The global food system faces a number of interconnected challenges. We need to be able to provide sufficient, high-
quality and affordable food and beverage products to feed a growing global population, while at the same time alleviating
pressure on the world’s finite natural resources. Our food and beverage choices need to be produced and consumed more
sustainably. The way that dietary choices impact health and personal well-being is coming into sharper focus every day,
and we face the paradox of over-consumption in some parts of our societies and deprivation in others, with some
populations struggling to access even a basic diet. Coming on top of the drive to reduce salt, sugar and trans-fats, the
COVID-19 pandemic has further accelerated consumer demand for functional foods and ingredients that offer health
benefits. Functional foods and drinks need to be delicious and appealing; consumer acceptance and brand preference
starts with great taste, texture, and a pleasing appearance.
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Royal DSM Integrated Annual Report 2022 108
Meanwhile, producers must anticipate and respond to fast-evolving consumer trends in order to stay relevant and
differentiate themselves successfully. They increasingly look for partners to help them speed new product development
cycles and get to market faster and more effectively. At the same time, business imperatives – including the need to
reduce their operational footprint and also manage the volatility of input costs – means that food producers seek to boost
production and resource efficiencies and to lower their energy use.
Growing demand for plant-based alternatives
Interest in more plant-forward diets and plant-based choices alongside animal-sourced foods continues to grow around
the world, with an estimated 30% of consumers in major markets identifying as flexitarian. However not all consumers of
plant-based products are satisfied with the options on the market, which some perceive as falling short in terms of taste,
texture, or health benefits. As consumer and societal expectations rapidly become more sophisticated and demanding, the
industry is challenged to step up its game in turn to optimally capture the plant-based opportunity. And with producers
aiming to convince consumers to convert their curiosity more consistently into repeat behavior, the race is on to develop
next-generation plant-based products and experiences. Whether striving for more nature-like analogs, or differentiating by
means of distinctive new formats and applications, producers of meat, fish and dairy alternatives know that they need to
stand out on the shelf and on the plate.
Our solutions
We provide a uniquely broad range of ingredients, expertise, and solutions for plant-based products. For meat- and fish-
alternative applications, this starts with the plant proteins themselves, which we offer through our Vertis™ portfolio,
unveiled during 2022. This features Vertis™ CanolaPRO®, our innovative, high-quality canola protein isolate; plant protein
concentrates; and textured vegetable proteins (TVP) based on peas and faba beans, which came into the DSM portfolio
with the acquisition of Vestkorn Milling in 2021. It also includes the world’s only TVP that contains all nine essential amino
acids, has unique textural benefits, and is soy-free, dairy-free, and gluten-free. Together with our scientific capabilities,
application expertise, and innovation competence, as well as a broad range of taste, texture, and nutrition and health
solutions, the Vertis™ plant protein portfolio enables us to lead the market as an end-to-end partner for the creation of
plant-based food and beverages that deliver a positive impact for products, people and the planet.
Our offering also encompasses ingredients, expertise, and solutions for dairy alternatives, including plant-based drinks,
the most mature segment of the plant-based market, and cheese alternatives, one of the newer application areas. Within
dairy alternatives, oat drinks are far and away the fastest-growing segment of the alt milk market. Our enzymatic solutions
help producers carefully tailor taste and texture in their oat beverages, at the same time reducing throughput times and
boosting efficiencies, while texturizing hydrocolloids such as gellan help deliver a homogenous, smooth-tasting product.
The industry is also making strides in innovating in cheese alternatives, where compelling texture and mouthfeel are just
as important as authentic dairy taste. In this segment, we are making full use of the excellent synergies with the First
Choice Ingredients portfolio to help producers improve the quality of their offerings.
There is growing understanding that plant-based products must compete on nutritional value and perceived health appeal
as well as on taste and texture. With our deep knowledge of nutrition science and our nutritional premix capabilities,
backed up by expert understanding of regulatory requirements around the globe, we are well positioned to assist plant-
based producers to close nutrient gaps with traditional options and to differentiate on-shelf with substantive front-of-
pack claims.
Growing demand for functional foods and drinks
Consumers worldwide are adopting a more proactive approach to their diets in support of their health and well-being
aspirations. On the one hand they are looking to cut down on their intake of salt, sugar, saturated fats, and other less
preferred ingredients such as artificial colors, flavors, and additives (supported by ‘food minus’ and clean-label claims
such as ‘free from’, ‘low’, or ‘no added’). On the other hand, they are seeking foods and ingredients associated with health
benefits, including fortified and enriched products (which can be differentiated with ‘food plus’ claims such as ‘good
source of’ and ‘high in’) as well as specific concepts in support of immunity, cognitive function, eye health, sports recovery,
and energy, to name but a few. Functional foods and drinks are therefore increasingly becoming a complimentary solution
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Royal DSM Integrated Annual Report 2022 109
for consumers as part of a healthy, balanced diet. Nevertheless, health-conscious consumers still face several hurdles.
Thirty-three percent of consumers say they find the taste of healthy food bland and boring, while 26% say a lack of time
means they often turn to convenience foods. Skepticism over health claims on labeling is also a turn-off for consumers,
who want functional products they can trust to fulfil a variety of claims about active ingredients and benefits.
Our solutions
As the world’s largest manufacturer of micronutrients, we have the expertise in bioscience and nutritional science to help
our customers navigate the complex world of vitamins, minerals, nutritional lipids, and probiotics, as well as plant
proteins. This includes leveraging our application and (re)formulation know-how and advising on production
considerations (such as when and how to add ingredients and ensure they remain stable throughout their shelf-life), as
well as our regulatory expertise, with strategies for successful front-of-pack claims across product categories and
geographies. Combined with our taste and texture capabilities, we can help our customers’ brands ensure that the healthy
choices they offer are also great-tasting choices that will have consumers coming back for more.
More information on our health benefit solutions for Food & Beverage can be found in this case study.
“With DSM, our customers get more than a supplier. They get a
purpose-led partner that understands their business needs and will
help them innovate, improve and grow. The result is delicious food
and beverage products that are good for people and good for the
planet too.”
Patrick Niels, President Food & Beverage Royal DSM
Growing demand for sustainable food production
The third key trend that is impacting the food and beverage industry – from purchasing through new product development
all the way to the board room – is associated with efficiencies, resilience and truly sustainable operations. Recent
macroeconomic volatility has exacerbated food industry players’ need to look for new ways to help mitigate inflationary
forces, shorten and diversify supply chains, and support margins, all the while continuing to deliver the food & beverage
industry’s essential service: providing the food and drink on which we all rely. At the same time, our industry faces the
imperative to chart a clear course to net-zero while protecting biodiversity and radically reducing food loss and waste
throughout the value chain, all the while nourishing a growing global population. Consumers are making conscious efforts
to choose more sustainable food and beverage brands. According to a recent survey, nearly six in 10 US consumers say it is
important that the foods they buy are produced in an environmentally sustainable way.
Our solutions
With every grain of wheat, drop of milk, liter of vegetable oil, and joule of energy at a premium, the need to maximize
process and resource efficiencies across the production, distribution, and consumption of foods and beverages has never
been so clear. Our ingredients, expertise and solutions help maximize production and process efficiencies such as yield or
throughput time, helping to simultaneously manage unit costs and carbon footprint. An excellent example is presented by
our fast-acting lactase enzymes, which allow dairies to accelerate throughput and therefore reduce cooling time, saving
energy and costs. Business resilience and business results can also be boosted by means of improved resource
efficiencies, as well as by having the flexibility to diversify to new raw materials and input streams – as long as the quality
of the finished product remains undiminished. Our baking enzymes and application expertise help bakeries adjust their
ingredients and recipes without sacrificing the quality consumers expect in the final product. Meanwhile our bioprotective
and antioxidant solutions help prolong dairy shelf life and reduce food loss and waste.
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Royal DSM Integrated Annual Report 2022 110
Performance 2022
Food & Beverage had a good year with strong organic sales growth of +10%. Pricing initiatives (+7%) could only partly offset
inflation, leaving the business with a price-cost gap throughout the year. Volume growth of 3% was a good performance,
taking into account high single-digit growth in previous year. Dairy, Baking and Beverages performed well. Savory was
solid, while Hydrocolloids delivered a very strong performance. Pet food performed well, with increased interest in
palatability offering and texture alongside nutritional functionality.
First Choice Ingredients, consolidated since October 2021, which develops clean-label fermented dairy and dairy-based
flavor for various applications in savory as well as dairy, performed well in its full first year as a part of DSM, delivering €82
million sales.
The business delivered an Adjusted EBITDA of €266 million with a full-year Adjusted EBITDA margin of 17.2%, which
includes a dilutive mathematical effect of the price increases (higher sales and therefore relatively a lower margin
percentage) and foreign exchange effects.
x € million
2022
Net sales from continuing operations
1,546
Adjusted EBITDA
266
Adjusted operating profit
136
Adjusted EBITDA margin (in %)
17.2
The year in focus
Fresh dairy, cheese and plant-based dairy alternatives
Our business in dairy performed well in 2022. Continued interest in health and well-being remains a driver for growth in
fresh dairy worldwide, with milk and fermented products recognized as a valuable source of quality – and enjoyable –
nutrition. Lactose-free options continue to gain favor, with our recent research indicating that 40% of global consumers
expect to purchase more lactose-free products in the next 3–5 years. Dairy drinks are also seen as an attractive category
for products fortified with vitamins, probiotics and protein, with health benefits tailored to appeal to the needs of different
age groups. In 2022, we introduced Delvo®ONE, our first portfolio of all-in-one cultures for fermented milk, created using a
pioneering AI collaboration platform. The Delvo®ONE portfolio includes five different culture combinations all offering
taste, texture and health benefits – and all with built-in bioprotection. A first of its kind, the platform improves the
accuracy and speed of dairy producers’ new product development by reducing trial complexity during the culture selection
process.
The plant-based dairy space continues to develop dynamically across all formats, with a notable increase in the number of
cheese-alternative products hitting supermarket shelves. In 2022, we launched a new portfolio of solutions to help plant-
based cheese producers deliver more authentic and compelling dairy taste and texture experiences in cream cheese,
sliced and grated applications, leveraging the strong synergies with First Choice Ingredient’s leading capabilities in this
area. In alternative drinks, oat drinks continue to outpace other starch sources, and we introduced a new one-step
enzymatic solution to help oat drink producers simplify and speed up their production process.
Baking and brewing
Bakers, millers and bakery manufacturers have had to contend with unprecedented volatility impacting supply chains, raw
material availability and energy costs. There has been commensurate interest in our enzymatic solutions to help
reformulate recipes to reflect new raw material inputs or to reduce reliance on price-volatile ingredients such as
emulsifiers and wheat gluten, while maintaining the end-product quality and characteristics that consumers demand. In
support of this trend, we broadened our portfolio in 2022 with the launch of Panamore® Xtense, a label-friendly lipase
which is a more sustainable alternative to the common emulsifier DATEM. Moreover, our freshness solutions were in strong
demand throughout the year, and our business in the baking sector performed well as a whole.
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Royal DSM Integrated Annual Report 2022 111
Our activities serving the brewing sector likewise performed well. The brewing sector continues to seek a reduced
environmental footprint, using more diversified supply chains with a greater proportion of locally available raw materials,
as well as driving production efficiency improvements and, crucially in the current environment, doing everything possible
to drive down energy costs. Our enzymatic solutions help brewers to boost efficiencies and lower cooling time and costs,
while helping to satisfy fast-changing consumer demand for new beverage experiences.
Savory and meat and fish alternatives
Demand for our savory taste ingredients remained robust, buoyed among other things by continued growth in plant-based
meat and fish alternatives and delivering a solid performance for us over the course of the year. As options for plant-
based meat and fish alternatives become more mainstream, there is an increasing awareness that producers will need to
continually improve their offerings to keep savvy consumers satisfied. This starts with great taste and texture, and we
further expanded our market reach with our comprehensive portfolio of integrated solutions, leveraging our full range of
capabilities in taste, texture and health. Our online Fortifull™ tool helps manufacturers to analyze their products’
nutritional profiles and optimize their recipes. Furthermore, our vegan EPA and DHA omega-3 fatty acids were approved for
use in the EU during the year, allowing manufacturers to further increase the nutritional value of their plant-based
alternatives – without impacting the marine ecosystem.
The First Choice Ingredients business continued to progress well in its first full year in DSM, with its dairy and dairy-like
flavors and concentrates enjoying robust demand across application segments.
We further expanded our plant-based offering through a new solution combining Maxavor® vegan fish flavours with our
nutritional lipids life’s™OMEGA, our vegan EPA and DHA omega-3 fatty acids capability. The product combines taste and
fortification for the fast-growing fish alternative segment, allowing manufacturers to further increase the nutritional value
of their plant-based alternatives without impacting the marine ecosystem.
Our savory taste and flavor solutions based on our yeast extract and process flavor technology platforms continued to
enjoy good demand despite a challenging operating environment.
Pet food
Pet foods are subject to many of the same trends that shape the human food and beverage industry – not least because it
is the same consumers who make the purchasing decisions on behalf of their beloved companion animals. We performed
well in this segment, with increased interest in our palatability and texture capabilities alongside our nutritional
ingredients.
Beverages & More
Our premix capabilities and the depth of our understanding of nutritional science, combined with our breadth of portfolio,
application expertise and consumer and market insights, allow us to bring value to our customers that goes beyond our
ingredients alone. Increasing consumer interest in health benefits in categories such as energy drinks, for example in
support of mental as well as physical energy and performance, offers customers exciting headroom for growth, and we saw
continued strong traction in this space.
Building a strong portfolio of plant proteins
The acquisition of Vestkorn Milling in December 2021 provided DSM with an established presence in the market for plant
proteins, increasing our relevance as an end-to-end partner for the creation of plant-based food and beverages that
create a positive impact for products, people and the planet. We took a number of actions to further strengthen this
strategic presence during 2022, including introducing a differentiating positioning for our complete plant protein portfolio
under the Vertis™ brand.
We launched Vertis™ CanolaPRO®, our high-quality canola protein isolate – a complete protein containing all nine
essential amino acids required for good health, and free from major allergens. This milestone follows more than 10 years
of research and development at DSM to unlock the healthy protein from the canola seed and produce it at scale for the
food industry. Furthermore, we introduced a world-first solution in the form of Vertis™ Textured Pea Canola Proteins, the
world’s only textured vegetable protein that contains sufficient levels of all nine essential amino acids to be a complete
protein, has unique textural and functional benefits and is soy-free, gluten-free and dairy-free. Vertis™ Textured Pea
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Royal DSM Integrated Annual Report 2022 112
Canola Protein will help producers create even more realistic and nutritionally appealing meat alternatives or plant-
forward applications.
Sales of Vertis™ plant proteins will contribute to DSM’s commitment to reach 150 million people with its ingredients and
solutions for nutritious, delicious, and sustainable plant-based food and beverages by 2030. This forms part of our Food
System Commitments.
Further growth for fermentative Stevia
Avansya, our 50:50 joint venture with Cargill for fermentative Stevia, continued to build its sugar reduction business with
the sustainably produced EVERSWEET® Stevia sweetener. Numerous reduced- and zero-sugar consumer end-products
incorporating EVERSWEET® were successfully launched by customers across our target segments, as new product
development continued to bounce back after the COVID-19 pandemic amid increased consumer interest in healthier foods
and beverages. EVERSWEET® received further approvals for use in additional markets worldwide, with registrations in the
EU and elsewhere also underway.
Strong demand for hydrocolloids
Hydrocolloids are thickeners and stabilizers that dissolve, disperse or swell in water to provide a broad range of important
functionalities and physical attributes including gelling, texture, mouthfeel, viscosity and suspension. Our hydrocolloids
are primarily delivered in the form of plant-extracted pectin and fermentation-derived bio-gums, notably gellan. Both are
used as gelling and stabilizing agents in a variety of foods and beverages. We saw strong demand for our hydrocolloids in
2022, resulting in a very strong performance for this business, with many new important wins in biogums among key food
& beverage customers as part of our total solution. Beyond the food & beverage sector, our hydrocolloids continued to
enjoy demand in new and sustainable applications such as vegetarian soft-gel capsules. Finally, particular interest in
pectin was evident in markets outside China, accelerated by the ‘one-stop-shop’ approach made possible by our focused
Food & Beverage ‘powerhouse’ set-up.
Innovation and R&D
Capturing new scientific and business opportunities relies increasingly on the effective deployment of advanced digital
technologies. In 2022, we continued to step up our investments in the digital transformation of our science and innovation
capabilities, accelerating our digital journey with a clear focus on FAIR data management – the management of data in
accordance with the principles of findability, accessibility, interoperability, and reusability. This approach ensures that the
data generated from our R&D activities is easily accessible and can be shared across different teams and departments.
In 2022, we embarked on a joint research program entitled 'AI for Biosciences' (‘AI4b.io’) with Delft University of Technology
(TU Delft). AI4b.io aims at long-term innovation in AI with the aim of accelerating the development of bio-based products
and optimizing bio-based production technologies. This involves exploring and implementing advanced AI technologies
including full factory scheduling (the production management process whereby raw materials, intermediates and
production capacity are efficiently allocated to meet demand); digital twin (virtual modelling) operations; autonomous
laboratories, known as self-driving labs, for the development of microbial strains for natural products; and advanced
microbiome research for the application of supplements to support human and animal health.
We built on the breakthrough creation of AlphaFold, a cutting-edge AI technology launched by DeepMind in 2022 that can
predict the 3-D structure of every known protein. This capacity is crucial for understanding the mechanisms of human
health and nutrition. The application of AlphaFold is enhancing our understanding of our own enzyme products and
informing the development of innovative product formulations, facilitating the creation of new microbial strains, and
permitting new processes that are both faster and more sustainable.
We launched Delvo®ONE, our first portfolio of all-in-one cultures for fermented milk, created through the use of our
pioneering AI Culture Co-Creation Platform. Delvo®ONE’s full-service portfolio comprises five cultures offering taste,
texture and health benefits, all with built in bioprotection. Combining our industry-leading expertise with machine
learning, the new platform enables us to collaborate with yogurt manufacturers on the development of unique solutions
that deliver on multiple product targets at the same time.
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We announced a multi-year license and collaboration agreement with LabTwin GmbH, creators of the leading voice-
powered digital lab assistant technology of the same name. LabTwin is designed to enable real-time data capture and will
be applied in several of our Science & Innovation laboratories around the world. Introduced to speed up innovation cycles
both for ourselves and for our customers, LabTwin offers a ‘Siri’-like experience in the lab, with many options for further
advancing our lab operations – from guiding our scientists through laboratory protocols to interacting with labware and
storing data and observations in a smart, hands-free way.
In 2022, we also successfully initiated a Translational Sciences program, bridging real-world evidence (RWE) and laboratory
research on multiple fronts to include the use of natural language processing (NLP). NLP algorithms can understand and
analyze large volumes of unstructured data, such as scientific papers and research reports. These algorithms can help our
researchers identify trends and patterns that would otherwise be difficult to discern. We are now leveraging natural
language processing to extract insights from unstructured text data and to develop personalized nutrition
recommendations using recipe builders and other tools.
Partnerships and joint ventures
We have many partnerships that support and accelerate innovation in Food & Beverage, for example:
- Avansya, our partnership with Cargill to bring sustainably produced, great-tasting, zero-calorie, cost-effective
fermentation-produced sweeteners to market at scale
- Olatein, our partnership with Avril to produce the high-quality, nutritionally complete and sustainably sourced
rapeseed protein isolate CanolaPRO®
Royal DSM Integrated Annual Report 2022 114
Materials
About DSM Materials
As part of our strategic repositioning as a company focused on Health, Nutrition & Bioscience, in 2021 we commenced the
process of selling our Materials businesses, comprising DSM Protective Materials and DSM Engineering Materials. The first
step in this process involved the sale of our Resins & Functional Materials and associated businesses to the specialty
materials player Covestro AG. This was completed in 2021.
DSM Protective Materials and DSM Engineering Materials produce a high-quality portfolio of specialty materials for global
end-markets including electrical components and electronics, automotive, food packaging, medical, personal protection,
commercial marine, and apparel. Through their advanced and sustainable solutions, these two businesses help meet
demand for safer materials, greater efficiency and improved environmental performance.
Completion of sale of DSM Protective Materials
On 20 April, we reached an agreement to sell our Protective Materials business to Avient Corporation. The sale was
completed on 1 September for an enterprise value of €1.45 billion.
The transaction included all of DSM’s Protective Materials activities, chiefly consisting of Dyneema®, the world’s strongest
fiber™. The business represented €335 million of DSM’s total annual net sales and €105 million of DSM’s total Adjusted
EBITDA for 2021. DSM posted a book profit of around €1 billion and received approximately €1.35 billion net in cash. The
transaction, which is strategically attractive for all parties, creates a business with considerable growth synergies. It will
benefit customers as well as employees of DSM Protective Materials as Avient helps the business deliver on its
outstanding potential. Avient will continue investing in innovation and sustainable solutions, further accelerating the
remarkable impact and possibilities of the business and Dyneema® brand.
Announcement of sale of DSM Engineering Materials
On 31 May, we reached an agreement to sell our Engineering Materials business to Advent International and LANXESS for
an enterprise value of €3.85 billion.
DSM Engineering Materials represented €1.5 billion of DSM’s total annual net sales and €334 million of DSM’s total
Adjusted EBITDA for 2021. DSM expects to receive about €3.5 billion net in cash following closing, after transaction costs
and capital gains tax. DSM Engineering Materials will become part of a newly created joint venture, together with LANXESS’s
High Performance Materials business, which will be co-owned by Advent International (>60%) and LANXESS (<40%). This
will create a new global specialty materials company with the focus and investment that can drive the development of
customer-focused innovation, in particular for the industry’s transition to bio-based and circular solutions. The transaction
will create a platform for further growth for DSM Engineering Materials and its people. Completion of the transaction,
which is subject to the customary conditions and approvals, is expected in the first half of 2023.
Royal DSM Integrated Annual Report 2022 115
Corporate Activities
Any consolidated activities within continuing operations that are outside the three Business Groups are reported as
Corporate Activities. These comprise operating and service activities, as well as a number of costs that cannot be allocated
directly to the Business Groups. While this segment reports net sales to third parties from its service units, it normally has
a negative operating result.
Corporate Activities includes various holding companies, regional holdings and corporate overheads. The most significant
cost elements are corporate departments and the share-based compensation for the company.
Corporate Activities
x € million
2022
Net sales from continuing operations
71
Adjusted EBITDA
(95)
Adjusted operating profit
(149)
DSM Insurances
We retain a limited part of our material damage, business interruption, (product) liability and other risks via our captive
insurance company. In 2022, the total retained damages were €15 million (2021: €27 million).
Corporate research
We centrally invest in a focused number of clearly defined disruptive technology platforms, managed by our Senior
Science Fellows, through which we aim to create greater differentiation over the long-term. These underpin early-stage
innovation projects that are co-funded with the relevant business, following the principles of co-leadership, milestone-
based funding, and assumption-based working, in order to provide market-ready scientific breakthroughs in the future.
Share-based payments
Executives participate in the Long-Term Incentive (LTI) scheme. This links their compensation to the long-term interests of
our company's stakeholders. It also provides a vehicle for the attraction and retention of suitable employees.
As shares / share units have become more prevalent in the market, we replaced stock options with shares / share units in
2017. This resulted in better alignment with the LTI vehicle already in place for the Managing Board and the Executive
Committee. The use of shares / share units also targets yet closer alignment with the interests of our stakeholders. For
detailed information, see Note 27 of the Consolidated financial statements.
Royal DSM Integrated Annual Report 2022 116
Reporting policies
Financial and reporting policies
As a basis for, and contribution to, effective risk management and to ensure that we are able to pursue our strategies,
even during periods of economic downturn, DSM aims to retain a strong balance sheet and limit our financial risks.
Our strategy has ambitious targets, as outlined in Strategy. Within the context of this strategy, we aim to maintain a strong
investment grade and a strong long-term credit rating.
Most of our external funding needs are financed through long-term debt. Debt covenants are not included in the terms
and conditions of outstanding bonds and financing arrangements. We aim to spread the maturity profile of outstanding
bonds in order to have adequate financial flexibility.
An important element of our financial policy is the allocation of cash flow. We primarily allocate cash to investments
aimed at strengthening our business positions and securing stable, and preferably rising, dividend payments to our
shareholders. Remaining cash flow is used for acquisitions, targeting investments predominantly in Nutrition and in line
with our strategy. Share buy-backs will be considered in the absence of value-creating M&A opportunities.
We continuously monitor and assess risks arising from currency exposures. It is our policy to hedge 100% of the currency
risks resulting from sales and purchases at the moment of recognition of trade receivables and payables. Additionally, we
may opt to hedge currency risks from firm commitments and forecast transactions. The currencies giving rise to these risks
are primarily the US Dollar, the Swiss Franc, the Brazilian Real and the Chinese Renminbi.
We acquire businesses and enter into partnerships that add value in terms of technological or market competences. In
addition, these businesses and partnerships are required to contribute to our cash earnings per share, as well as our
profitability, sustainability and growth requirements. In the case of small innovative growth acquisitions, we consider their
potential to contribute to these requirements in the future.
Our policies in the finance function are strongly oriented toward solidity and reliability of reporting, as well as the
protection of cash flows. The finance function also plays an important partner role to the business and supports business
steering.
For detailed information on our tax policies, see Taxation at DSM on the company website.
Royal DSM Integrated Annual Report 2022 117
Non-financial reporting policy
Reporting policy and justification of choices made
In this Integrated Annual Report, we report for the calendar year 2022. We report on People, Planet and Profit information
in such a Report on an annual basis. The previous DSM Integrated Annual Report was published on 2 March 2022. We
publish our Report exclusively in a digital format. It is available as an online version and as a pdf.
In the Report by the Managing Board section, we explain our vision and policy with respect to sustainability practices and
report on our activities in this field during 2022. In addition to disclosing data and developments in the categories of
People, Planet and Profit, we also report on the global societal megatrends that drive our strategy, sustainability
governance framework, stakeholder engagement activities, and management approach on material topics.
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.
We proactively seek out the views of key stakeholders on issues of material importance to the company and assess to
what extent sustainability aspects become material to our company and our stakeholders. In the event that specific
indicators become relevant to the company’s sustainability performance, appropriate actions are taken that allow the
necessary data to be collected in order to disclose progress in the future.
The basis for the non-financial reporting in the Report by the Managing Board is Book 2 of the Dutch Civil Code. Non-
financial reporting requirements are further defined in the EU Non-financial Reporting Directive (2014) and the EU
Corporate Sustainability Reporting Directive (in effect as of 2024), including the EU Taxonomy (partially in effect as of 2022)
and the proposed EU Sustainability Reporting Standards (in effect as of 2024). It is also based on voluntary non-financial
reporting guidelines such as:
Global Reporting Initiative (GRI)
DSM has reported in accordance with the GRI Standards for the period January 1, 2022 to December 31, 2022. 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. In 2022, DSM changed from the GRI Standards (2016) to the GRI Standards
(2021). This change is reflected in the GRI table. DSM provides information on the Management of material topics (GRI 3-3)
for its most material topics only. DSM does not provide detailed information on the Management of other topics as the
company does not believe they are material enough to do so.
UN Sustainable Development Goals (SDGs)
We have also aligned our strategy with the Sustainable Development Goals (SDGs). We are familiar with the opportunities
and responsibilities that the SDGs represent for our business. Based on our mapping, we believe that we contribute to all
of them, and have chosen to focus on the goals which most closely align with our strategic ambitions. In this Report, we
continue to include the SDGs into our reporting process, for example by mapping SDG reporting priorities in our value
creation model, our material topics, and the solutions that we highlight.
The Taskforce on Climate-related Financial Disclosures
The recommendations from the Taskforce on Climate-related Financial Disclosures (TCFD) are a set of voluntary, climate-
related financial disclosures for use by companies to provide information to their stakeholders. This Report contains our
TCFD-relevant disclosures on Governance, Strategy, Risk Management, and Metrics and Targets. For more information on
how we report against the TCFD recommendations, see Note 3 Taskforce on Climate-related Financial Disclosures (TCFD) of
the Sustainability statements.
Other reporting frameworks
We align with the recommendations of the International Integrated Reporting Council <IR> Framework where possible. The
intention of the <IR> Framework is to provide additional guiding principles and content elements for an integrated report.
Reporting policies – Non-financial reporting policy
Royal DSM Integrated Annual Report 2022 118
We use this framework to present an integrated view of how the company creates value for stakeholders in People, Planet
and Profit, as well as the interconnection between these three dimensions.
We map our disclosures to other standards and frameworks to support our stakeholders who are using these. You can find
how our disclosures map to the Sustainability Accounting Standards Board framework and the WEF IBC metrics and
disclosures in Note 4 SASB and WEF IBC mapping of the Sustainability statements.
UN Global Compact
We have been a signatory to the UN Global Compact since 2007 and commit to annually report on progress in
implementing The Ten Principles of the UN Global Compact in the areas of human rights, child and forced labor, the
environment and anti-corruption. Our Code of Business Conduct, our Sustainability, Human Resources, and Safety, Health
and Environment (SHE) policies, and our Supplier Sustainability Program are the foundations on which we apply the
standards of the Global Compact.
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 our company and various stakeholders. On the basis of the principle of materiality (using the
GRI Standards), we distinguish between topics whose importance warrants publication in this Report (relevant to both DSM
and stakeholders), and topics whose importance warrants publication on the company website only (topics important to
either DSM or stakeholders). The sustainability data in the Integrated Annual Report is 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 reported on in Stakeholders, with the management approach in Note 1 Management approach for material
topics of the Sustainability statements. We report on External recognition in Stakeholders.
Scope
The People and Brighter Living Solutions Plus (BLS+) data in this Report cover all entities that belong to the scope of the
Consolidated financial statements. Planet reporting covers manufacturing units where commercial production by DSM
occurs.
Acquisitions and divestments
The People data for newly acquired companies are reported from the first full month after the acquisition date.
The Safety, Quality and Health & well-being (People), Environment (Planet) and BLS+ data for companies acquired in the:
- First half of a given year (‘year x’) are included in the reporting scope of the year after acquisition (‘year x+1’)
- Second half of a given year (‘year y’) are included in the reporting scope of the year following the first full year
after acquisition (‘year y+2’)
Divested companies
Planet and BLS+ data are reported until the moment control of the company is transferred, and People data until the end
of the month in which control of the company is transferred. As the updated BLS+ methodology was presented after the
announcements of the intention to divest the Materials businesses, these businesses have been excluded from the BLS+
methodology. The date in 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.
People methodology
People data are collected per Business Group and consolidated at corporate level. Metrics on workforce and workforce
composition, and inflow and outflow are reported based on the year-end figures. Employee engagement and the Inclusion
index are measured on an annual basis. Safety and health metrics are reported on a 12-month rolling average.
Divestments are included in the rolling average 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.
Reporting policies – Non-financial reporting policy
Royal DSM Integrated Annual Report 2022 119
Planet methodology
Our progress on the key environmental performance indicators is collected and evaluated twice a year for all DSM sites.
The data are based on these sites’ own measurements and calculations, which in turn are founded on definitions,
methods and procedures established at corporate 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 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. Whenever impact is relevant, this is stated in the Report. Details for the regions, as
well as the methodology and calculations, are published on the company website, together with an explanation of the
definitions used.
Sustainable Portfolio Steering / Brighter Living Solutions Plus (BLS+)
DSM applies a Sustainable Portfolio Steering methodology to identify, and further develop sustainable, innovative
solutions that deliver sustainability benefits within the value chain, whilst having no recognized, measurable, urgent
negative performance signals.
BLS+ methodology
Those products that clearly create sustainable value for our stakeholders are identified as BLS+, and are assessed by a
standardized, holistic product assessment across 11 impact drivers related to social and environmental impacts.
BLS+ are products, services and technologies that, considered over their life cycle, offer a benefit recognized by key
stakeholders, underpinned with substantiating evidence, whilst having no urgent negative signals. Three performance
levels are defined, where the product is:
- ‘Outperforming’, with better comparative performance to the mainstream reference solution within the market
- ‘Performing’, by providing recognized benefits within the market
- ‘In Transition’, to identify products that either do not meet the DSM minimum requirements, or where an urgent
negative signal has been identified, or products that have not yet been assessed
In addition to the regular product sustainability assessment, any ‘Outperforming’ classification must be substantiated with
a full comparative life cycle assessment versus the Mainstream Reference Solution (MRS).
A sustainability benefit is a positive performance on one of the 11 impact drivers. Do no significant harm means that the
product has no urgent, negative signals. These signals are relevant negative performance impacts in any of the 11 impact
drivers, which are expected to manifest within the next 3 years. Applying the Sustainable Portfolio Steering methodology
requires judgment or assumptions by management, in particular within the processes related to PSA, LCA and the
selection of MRS.
Mainstream Reference Solution (MRS)
The MRS is the product or service with which the DSM solution is compared and is determined based on the marketing
strategy. It is the competing dominant solution in the same application. It can be either a similar solution from another
supplier or a solution using an alternative technology to fulfil the same function, or, if the solution and its application are
new to the market, or the marketing strategy is focused on market growth, the solution should be compared with the
benchmark situation without using the solution.
Product Category Sustainability Review
As part of the Sustainable Portfolio Steering methodology, we conduct an annual ‘Product Category Sustainability Review’
for all product categories. This review identifies the validity of environmental and social impact differentiators and risks
for each of our product categories and confirms the mainstream reference solution where applicable. The Product
Sustainability Assessments (PSA) to support the qualification for BLS+ are required to be made by internal Life Cycle
Reporting policies – Non-financial reporting policy
Royal DSM Integrated Annual Report 2022 120
Assessment (LCA) or sustainability experts and are critically reviewed using the four-eyes principle by at least one
competent independent reviewer.
BLS+ reporting
The BLS+ indicator represents the third-party net sales related to the sum of the products that are defined as
Outperforming and Performing, as a ratio of total third-party net sales. The percentage of BLS+ is reported twice per year
within the business portfolio. The financial data are validated by the finance function, consolidated by the Corporate
Sustainability department as the DSM BLS+ KPI, and reviewed by Group Control & Accounting.
All legacy products under the former BLS methodology will be reevaluated during a change-over period. In the intervening
period, these products will be classified as Outperforming (where an LCA is available) or Performing (where an expert
opinion is available). These products are not screened for negative urgent signals.
Food System Commitments
The Food System Commitments are a set of measurable commitments that make the company’s societal impact explicit.
The commitments are aimed at addressing urgent societal and environmental challenges linked to how the world
produces and consumes food. The Commitments are grouped into the areas: Health for People, Health for Planet, Healthy
Livelihoods.
Health for People
- Help close the micronutrient gap of 800 million vulnerable people by 2030
- Support the immunity of half a billion people by 2030
Health for Planet
- Enable double-digit on-farm livestock emission reduction by 2030
- Reach 150 million people with nutritious, delicious, sustainably produced plant-based foods by 2030
Healthy Livelihoods
- Support the livelihoods of 500,000 smallholder farmers by 2030
Our Basic Commitments are Deforestation-free in our primary supply chains by 2030 and Good workforce nutrition for all
employees by 2030.
The impact of the commitments is based on scientific or other third-party evidence demonstrating a link between the
products and services provided by DSM to its customers and the substantiated societal impact of the commitment. The
calculation of the level of impact is based on estimates and assumptions. The required level of supporting evidence for
estimates and assumptions is assessed using a risk-based approach, looking at objectivity, sensitivity, and the underlying
basis of the estimate. The assessment and supporting evidence for the estimates and assumptions are documented and
are updated annually.
More information on the Food Systems Commitments can be found on the company website.
Royal DSM Integrated Annual Report 2022 121
Corporate governance and risk
management
Corporate governance
Koninklijke DSM N.V. (Royal DSM) is a company limited by shares listed on Euronext Amsterdam. It is managed by a
Managing Board together with an Executive Committee and an independent Supervisory Board. Members of the Managing
Board and the Supervisory Board are appointed (and, if necessary, dismissed) by the General Meeting of Shareholders.
The company is governed by Dutch law and by its Articles of Association, which can be consulted on the company website.
The General Meeting of Shareholders decides on any amendment to the Articles of Association by an absolute majority of
the votes cast. A decision to amend the Articles of Association may only be taken at the proposal of the Managing Board,
subject to the approval of the Supervisory Board.
At DSM, we fully inform our stakeholders about our corporate objectives, the way our company is managed, and our
company’s performance. In doing so, we aim to pursue an open dialogue with our shareholders and other stakeholders.
Our company has an organizational structure built around Business Groups that are empowered to perform all short- and
long-term business functions. In this, they are assisted by support and corporate functions, as well as by regional
organizations.
Managing Board and Executive Committee
The Executive Committee was installed to enable faster strategic alignment and operational execution by increasing our
focus on the development of our business, innovation and people.
The Executive Committee comprises the Managing Board members as well as eight senior executives with responsibility
respectively for Animal Nutrition & Health (Ivo Lansbergen), Health, Nutrition & Care (Philip Eykerman), Food & Beverage
(Patrick Niels), Materials, Strategy & Digital (Helen Mets, until 1 December 2022), Science (Patricia Malarkey), People &
Organization (Cristina Monteiro), Operations (Luca Rosetto), Global Products & Strategic Alliances (André Bos). Upon Helen
Mets leaving the company, the Co-CEOs took over her responsibilities. The senior executives serving on the Executive
Committee are appointed by the Co-CEOs after consultation with the Supervisory Board. The Executive Committee focuses
on topics such as our company’s overall strategy and direction, review of business results, functional and regional
strategies, budget-setting, and people and organization. The statutory responsibilities of the Managing Board remain
unchanged.
The Managing Board is ultimately responsible for our company’s strategy, portfolio management, the deployment of
human capital and financial capital resources, the risk management system, financial performance, and performance in
the area of sustainability. The Managing Board is thus also accountable to the Supervisory Board for our strategy and
management. The Executive Committee attends the Supervisory Board meetings in full for topics such as safety, quality
and financials and individually in connection with the topics for which they are personally responsible. The full Executive
Committee also attends the annual site visit of the Supervisory Board.
The Managing Board consists of two or more members, to be determined by the Supervisory Board. The Managing Board
currently consists of Co-CEOs Geraldine Matchett and Dimitri de Vreeze; more details can be found in Supervisory Board
and Managing Board Royal DSM. Since the introduction of the Dutch Corporate Governance Code in 2004, members of the
Managing Board have been appointed for a period of four years.
Corporate governance and risk management – Corporate governance
Royal DSM Integrated Annual Report 2022 122
The members of the Managing Board are collectively responsible for the management of DSM. In addition to this collective
responsibility, Managing Board members have individual responsibility for certain tasks, businesses, functional areas and
regions. The distribution of these tasks is published on the company website.
The remuneration of Managing Board members is determined by the Supervisory Board based on the remuneration policy
approved by the General Meeting of Shareholders. The remuneration policy for the Managing Board can be found on the
company website.
The functioning of and decision-making within the Managing Board and the Executive Committee are governed by the
Regulations of the Managing Board, which are in accordance with the Dutch Corporate Governance Code and can be found
on the company website.
In 2022, the Managing Board and Executive Committee held 31 formal meetings. Half of these meetings were held face to
face and the other half were held virtually. No Managing Board member had to be excused from meetings during the year.
Four times in 2022 an Executive Committee member was excused for personal reasons. In all cases, the Executive
Committee members gave advance input in writing or via other members. The Executive Committee and Managing Board
take the time for an evaluation at the end of every meeting. This evaluation can be about topics that have been discussed
during that meeting, but may also reflect on meeting dynamics and individual or collective performance. Where possible,
the Executive Committee also takes the opportunity to organize informal moments such as a collective dinner at the end
of a full-day meeting. Once a year, the Executive Committee and Managing Board take the time to get together and discuss
their performance as a team.
Supervisory Board
The Supervisory Board comprises at least five members. Its current composition can be found in Supervisory Board and
Managing Board Royal DSM. Supervisory Board members are appointed for a period of four years, after which they may be
reappointed for a further four years. A Supervisory Board member may subsequently be reappointed for a period of two
years, and this appointment may be extended by at most two years. For reappointments after an eight-year period,
reasons must be provided in the report by the Supervisory Board.
All current members of the Supervisory Board are independent in accordance with the Dutch Corporate Governance Code.
The remuneration of Supervisory Board members is determined by the General Meeting of Shareholders. The functioning
of and decision-making within the Supervisory Board are governed by the Regulations of the Supervisory Board, which are
in accordance with the Dutch Corporate Governance Code and can be found on the company website.
The Supervisory Board supervises the policy pursued by the Managing Board, the Managing Board’s performance of its
managerial duties, and the company’s general course of affairs, taking the interests of all the company’s stakeholders into
account. When the Executive Committee was established, the Supervisory Board also took on responsibility for ensuring
that the checks and balances that are part of the two-tier system are still given due consideration, paying specific
attention to the dynamics between Managing Board and Executive Committee. The Supervisory Board is enabled to do so
through the information provided by the Managing Board.
The annual financial statements are approved by the Supervisory Board and then submitted to the Annual General
Meeting of Shareholders (AGM) for adoption, accompanied by an explanation from the Supervisory Board as to how it
carried out its supervisory duties during the year under review.
In line with the Dutch Corporate Governance Code, the Supervisory Board has established from among its members an
Audit Committee, a Nomination Committee, a Remuneration Committee, and a Sustainability Committee.
The task of these committees is to prepare the decision-making of the Supervisory Board. These committees are governed
by charters drawn up in line with the Dutch Corporate Governance Code. They can be found on the company website.
Corporate governance and risk management – Corporate governance
Royal DSM Integrated Annual Report 2022 123
Diversity
At DSM, we strongly value diversity, and we endeavor to reflect this in our Board memberships. The Supervisory Board has
formulated diversity policies for the Supervisory Board, the Managing Board and the Executive Committee. These policies
seek a balanced composition of the respective body, taking into account gender, age, knowledge, experience, and
nationality / cultural background. In addition, for the composition of the Supervisory Board, the tenure structure is taken
into consideration.
In terms of gender diversity, we aim for at least 30% of the positions in our Supervisory Board, Managing Board and
Executive Committee to be held by women and at least 30% by men — percentages which reflect Dutch legislation. To
ensure a balanced composition in terms of nationality / cultural background, our aim is to have not more than 50% of the
members of our Supervisory Board or Executive Committee drawn from a single nationality. While a diverse composition in
terms of nationality / cultural background is also taken into account in the composition of the Managing Board, no
quantitative target is set here, given the relatively small number of Managing Board members.
Our diversity policies are implemented by applying them to nominations for (re)appointments of Supervisory Board and
Managing Board members as well as to appointments of Executive Committee members.
At the 2022 Annual General Meeting Eileen Kennedy, an American national, was reappointed as member of the Supervisory
Board. This was on the basis of her broad and in-depth nutrition knowledge and her qualities as Supervisory Board
member as demonstrated during her past period as member of DSM’s Supervisory Board. With the reappointment of Eileen
Kennedy, the Supervisory Board maintains a strong profile in the areas of DSM’s Health, Nutrition & Bioscience business,
R&D and sustainability.
Also, at the 2022 Annual General Meeting Geraldine Matchett, a British, French and Swiss national, was reappointed as
member of the Managing Board on the basis of her qualities as all-round and international CFO, as well as from her
extensive experience with external stakeholders during her second tenure as a Managing Board member.
Both our Supervisory Board and our Managing Board were well balanced in 2022 in terms of gender, each comprising 50%
women, which is in line with Dutch legislation and with the company’s own diversity policy. The gender diversity levels
within our Supervisory Board and our Executive Committee exceed our target for at least 30% of these positions to be held
by women and at least 30% by men. The percentage of women in DSM’s Executive Committee was 40% until 1 December
2022 and 33.3% thereafter. Furthermore, the composition of both our Supervisory Board and our Executive Committee is in
line with our target of having not more than 50% of the members drawn from a single nationality.
General Meeting of Shareholders
The main powers of the General Meeting of Shareholders relate to:
- The appointment, suspension and dismissal of members of the Managing Board and the Supervisory Board
- Approval of the remuneration policy of the Managing Board
- Approval of the remuneration of the Supervisory Board
- The adoption of the annual financial statements and declaration of dividends on ordinary shares
- Release from liability of the members of the Managing Board and the Supervisory Board
- Issuance of shares or rights to shares, restriction or exclusion of pre-emptive rights of shareholders and
repurchase or cancellation of shares
- Amendments to the Articles of Association
- Decisions of the Managing Board that would entail a significant change to the identity or character of DSM or its
business
The Annual General Meeting (AGM) is held within six months of the end of the financial year in order to discuss and, if
applicable, adopt the Integrated Annual Report, the annual accounts, any appointments of members of the Managing
Board and the Supervisory Board, and any of the other topics mentioned above.
Corporate governance and risk management – Corporate governance
Royal DSM Integrated Annual Report 2022 124
The AGM and, if necessary, other General Meetings of Shareholders are called by the Managing Board or the Supervisory
Board. The agenda and explanatory notes are published on the company website.
According to the Articles of Association, shareholders who, individually or jointly, represent at least 1% of the issued
capital have the right to request the Managing Board or the Supervisory Board to put items on the agenda. Such requests
must be received in writing by the Chair of the Managing Board or the Chair of the Supervisory Board at least 60 days
before the date of the General Meeting of Shareholders.
The AGM was held on 10 May 2022. In view of the COVID-19 measures, the AGM was held both at the corporate
headquarters in Heerlen (Netherlands), and virtually. Shareholders attending the meeting, both virtually and in person,
were given the opportunity to ask questions upfront and during the meeting. All questions were addressed during the
AGM. The agenda was essentially similar to that of previous years. Additional topics were the reappointment to the
Managing Board of Geraldine Matchett and the reappointment to the Supervisory Board of Eileen Kennedy. All topics were
adopted by the General Meeting of Shareholders.
Control effectiveness and continuity assumption
The Statements of the Managing Board conform with the Dutch Corporate Governance Code best practice 1.4.3 on 'Board
Statements'.
At DSM, we visualize our control environment as a ‘house’ that includes the internal control process areas with control
measures related to strategic, operational, financial, compliance and reputational risks. The elements of COSO (the
Committee of Sponsoring Organizations of the Treadway Commission) provide a framework for structuring company
activities that are carried out to ensure that the control environment is adequately structured. Finally, to make sure that
full use is made of learning opportunities, monitoring activities include the sharing of findings and experiences as well as
the application of control measures across the supporting pillars.
Our structure for managing risks is based on a three-lines model (see also Risk management). Line management within
the units acts as the first line. Group Risk Management acts as the second line together with other departments such as
DSM SHE & Security, assessing the effectiveness of risk management and internal control at both unit and corporate level.
Corporate governance and risk management – Corporate governance
Royal DSM Integrated Annual Report 2022 125
Corporate Operational Audit (COA) acts as the third line. The scope and frequency of COA audits is determined by ranking
the auditable units according to the scale of their risk exposure, using a set of defined characteristics.
COA assesses the operation of risk management framework of the units by performing risk-based audits. These audits
review the key processes and activities for the specific units. By means of these audits, COA closes the risk management
cycle and provides additional assurance to the Managing Board as to the effectiveness of the design and operation of the
risk management and internal control systems.
COA reports its audit results to the Managing Board and Executive Committee twice a year. COA also shares an overview
with the Audit Committee of the Supervisory Board and communicates the executive summary of each audit report to
Geraldine Matchett in her capacity as CFO and Co-CEO and to Dimitri de Vreeze in his capacity as Co-CEO.
In 2022, COA carried out 50 audits. Thanks to the improved COVID-19 situation, COA was able to conduct almost half of the
audits on site in 2022, which increased the assurance level. In general, audit findings are considered opportunities for
improvement as part of a healthy learning culture. In virtually all of the audited areas (e.g., Operations, IT, Finance,
Cybersecurity, Safety, Health & Environment (SHE), Quality and Commercial), the expected DSM standard was achieved. In
the rare event of insufficient follow-up on a finding, the Director of COA escalated that finding to the Co-CEOs.
Dutch Corporate Governance Code
DSM supports the Dutch Corporate Governance Code amended in 2016 and adopted by the company with effect from the
financial year 2017. We ensure our continued compliance with the Dutch Corporate Governance Code. The Dutch Corporate
Governance Code can be found on www.mccg.nl.
In line with the notion underlying the Dutch Corporate Governance Code we follow a multi-stakeholder approach. Our
stakeholders are those groups and individuals who, directly or indirectly, influence — or are influenced by — the
attainment of the company’s objectives. The Managing Board and Supervisory Board have the responsibility for weighing
up the interests of all stakeholders.
Long-term value creation is embedded in both our company’s purpose-led, performance-driven strategy and our company
culture: Our purpose is to create brighter lives for all. Sustainability is central to how we fulfill that mission, and to achieve
this, we consider People, Planet and Profit in all we do. We apply our company strategy to focus our resources and
capabilities to address the urgent societal and environmental challenges linked to the way the world produces and
consumes food. More information on how long-term value creation is fundamental to our strategy and culture can be
found in Strategy and People, as well as in How we create value for our stakeholders in Our approach to the Sustainable
Development Goals.
Any proposed substantial change to our corporate governance structure and compliance with the Dutch Corporate
Governance Code should be submitted to the General Meeting of Shareholders for discussion under a separate agenda
item.
All documents related to the implementation of the Dutch Corporate Governance Code at DSM can be found in the
Corporate Governance section of the company website.
Royal DSM Integrated Annual Report 2022 126
Governance framework
Organizational & operating model
Our Business Groups are the main building-blocks of the company’s organization. They have integral long-term and short-
term responsibility for business and have at their disposal all functions that are crucial to their business success. As the
company’s primary organizational and entrepreneurial building blocks, our Business Groups focus on the following
primary business driven functions: Science, Operations, Sourcing, Supply Chain and Global Products & Strategic Alliances.
With effect from 1 January 2022, we have transformed ourselves into a Health, Nutrition & Bioscience company with three
Business Groups – Animal Nutrition & Health, Health, Nutrition & Care and Food & Beverage – each with clear
opportunities to benefit the health of people and the health of the planet, underpinning our growth plans. Our Health,
Nutrition & Bioscience strategy is underpinned by our ‘global products, local solutions’ business model and
complemented by our growing competences in the rapidly emerging area of precision and personalization. Innovation has
been integrated much more closely with our end-market orientation in Health, Nutrition & Bioscience. In order to ensure
sufficient independence regarding financial management, the CFO has no Business Groups reporting to her, as has always
been the case.
Our Business Groups receive enabling services from various global support and corporate functions, and are supported by
the regional organizations. This set-up enables us to create a global, high-performing organization focused on meeting its
targets and achieving its ambitions. The support functions and functional excellence departments are paid for their
services by the users — the Business Groups and, to a lesser extent, other DSM units. Corporate departments are paid from
a corporate budget.
Support and corporate functions provide those services that can be delivered more efficiently (in terms of total cost of
ownership) by leveraging them across the company, thus capturing benefits of scale and delivering higher quality at lower
cost, rather than having them arranged in each Business Group separately. There are support and corporate functions in
the areas of Finance, People & Organization, Global Business Services, Digital, Strategy, M&A, Communications & Branding,
Corporate Audit & Compliance, Legal, Risk, Investor Relations and Sustainability. Each support function reports to a
Managing Board member or a member of the Executive Committee.
Within support functions, centers of expertise provide specialist support, while shared service centers provide standard
transactional support. Business partnering is the concept that acts as the interface between the Business Groups and the
support functions. Business partners consequently have a second reporting line in the business. In order to ensure that
the functional policies sufficiently reflect regional requirements, the support functions work closely with the regional
organizations and integrate their advice.
Functional excellence departments are mandated by the Managing Board to help the businesses achieve excellence in
their respective fields. They cover the areas of Operational Excellence and Safety, Health and Environment. Functional
excellence departments support our businesses in improving their performance. They also provide guidance in setting
aspiration levels and targets.
Corporate governance and risk management – Governance framework
Royal DSM Integrated Annual Report 2022 127
Governance framework
The following figure depicts our company’s overall governance framework and the most important governance elements
and regulations at each level.
The Managing Board and Executive Committee adhere to the Regulations of the Managing Board. In addition, DSM has a
Management Framework in place which implies, among other things, that the units adhere to the DSM Code of Business
Conduct and applicable corporate policies and requirements.
The company’s strategic direction and objectives are set by the Managing Board. In September 2021, DSM presented the
acceleration of its strategic journey, including the announcement of its new Food System Commitments, for more detail,
see Strategy and Food System Commitments.
The units conduct their business within the boundaries of the Management Framework. This implies, among other things,
that they:
- Comply with the DSM Code of Business Conduct, Corporate Requirements and Directives
- Establish the strategy, objectives and operational targets of their business in line with the corporate strategy,
investigate various scenarios and related risk profiles, and report on the achievement of these objectives and
targets
- Implement a risk management framework, which includes taking accountability for the identified risks and related
mitigation through annually signing the Letter of Representation
- Implement company-wide standards for support functions (systems, processes, vendors, etc.)
- Implement annual functional improvement plans
Independent audits for all operational units are conducted by the Corporate Operational Audit (COA) department. The
Director of COA reports to the CFO and has access to the Managing Board, the external auditor and the Audit Committee of
the Supervisory Board. Furthermore, the Director of COA acts as the compliance officer regarding inside information and is
also the secretary of the Disclosure Committee. The Director of COA additionally chairs the DSM Alert Committee, which is
responsible for our whistleblower policy, systems and processes.
Chaired by the CFO, the Disclosure Committee ensures the timely and accurate disclosure of share-price-sensitive
information related to the company and is responsible for the implementation of company rules on the holding and
execution of transactions in the company’s financial instruments, among other things.
Corporate governance and risk management – Governance framework
Royal DSM Integrated Annual Report 2022 128
A third committee at corporate level is the Fraud Committee, which was installed to ensure structural follow-up of fraud
cases with the aim of reducing fraud exposure. Relevant corporate functions participate in the Fraud Committee, which is
chaired by the Group Controller.
Sustainability Governance Framework
Managing Board
Sustainability falls under the responsibility of the Managing Board. Specific actions in our climate action agenda are
owned by members of the Managing Board and Executive Committee. In 2022, our Co-CEOs oversaw Sustainability as a key
responsibility and company value as well as a driver of business growth. They Co-Chair our Inclusion & Diversity Council,
and jointly oversee our strategic partnership with the World Economic Forum. Both our Co-CEOs are engaged in our
climate advocacy efforts.
In 2022, our Co-CEO Dimitri de Vreeze was responsible for Safety, Health and Environment (SHE) and supervised our
Sustainable Procurement Program and the sourcing of electricity from renewable sources in his responsibility for the
Sourcing function. He managed our engagement with organizations with a primary focus relating to climate. Within the
climate agenda, he was responsible for the upgrading of our methodology for measuring the impact of our product
portfolio, for our climate advocacy efforts, and for reviewing our emissions reduction targets.
Our Co-CEO Geraldine Matchett oversaw our engagement with organizations with a primary focus relating to nutrition and
food system transformation. She was responsible for integrating sustainability into financial decision-making. She also
oversaw our efforts and commitment toward the Taskforce on Climate-related Financial Disclosures (TCFD)
recommendations. Within the climate agenda, she was responsible for integrating climate risks into our risk management
process, TCFD, carbon pricing and developing our engagement with climate-focused investors.
Supervisory Board
Our Supervisory Board has its own Sustainability Committee to oversee progress against targets and to report on the
embedding of sustainability across the organization. For more details, see Supervisory Board Report.
External Sustainability Advisory Board
Comprising a diverse international group of thought leaders, DSM’s Sustainability Advisory Board acts as a sparring partner
for the Managing Board and senior executives, to help sharpen their focus on strategic issues, deepen their understanding
of external stakeholder needs, conduct advocacy and tackle specific issues as they arise.
The Sustainability Advisory Board met twice in 2022 with the Managing Board and a number of senior executives. The first
meeting was a hybrid meeting in Amsterdam and the second was a virtual meeting. Subjects included business updates,
food systems and the true value of food, nature, healthy livelihoods, and our innovation roadmaps to support our net-zero
transformation. During the Amsterdam meeting, this Board hosted colleagues on a panel discussion during Earth Day. This
board maintains a good balance of knowledge and a diverse composition in terms of gender and nationality.
Sustainability Advisory Board
Member
Background
Robin Chase (f)
Co-founder and former CEO of Zipcar, co-founder of Veniam and the New Urban Mobility
Alliance, Advisory Board Member to WRI’s Ross Center for Sustainable Cities and Chair of
Tucows. Serves as an informal advisor to many cities, national governments, and transport
agencies on urban transportation planning and innovation. Nationality: American.
Corporate governance and risk management – Governance framework
Royal DSM Integrated Annual Report 2022 129
Ertharin Cousin (f)
CEO and Founder of Food Systems for the Future; Distinguished Fellow at The Chicago
Council on Global Affairs; Visiting Scholar at Stanford University; Robert von Weizsäcker
Fellow at the Bosch Academy; Senior Advisor at ClimateWorks Foundation; Board Member of
Bayer S.A., Mondelez International Corporation, and Camelot North America; Trustee on the
Rwanda-based AKADEMIYA2063 Board of Directors. She served as the twelfth Executive
Director of the United Nations World Food Programme from 2012 to 2017 and as the US
Ambassador for Food and Agriculture from 2009 to 2012. Nationality: American.
Paul Gilding (m)
Social entrepreneur, author and corporate strategy advisor. Fellow at the University of
Cambridge Institute for Sustainability Leadership (UK). Author of The Great Disruption
(Bloomsbury, London, 2011). Executive Director of Greenpeace International during the 1990s.
Published papers at www.paulgilding.com. Nationality: Australian.
David King (m)
Emeritus Professor of Chemistry, University of Cambridge; Founder and Chair of the Centre
for Climate Repair at Cambridge; Chair of the Climate Crisis Advisory Group, an Affiliate
Partner of SYSTEMIQ Limited; Senior Strategy Advisor to the President of Rwanda; Founder
Member of the Clean Growth Leadership Network; The British Foreign Secretary’s Special
Representative on Climate Change 2013–2017. Nationality: British.
Ndidi Nwuneli (f)
Social entrepreneur and Founder of LEAP Africa and African Food Changemakers, and co-
founder of AACE Food Processing & Distribution Ltd. (AACE Foods). She is also co-founder
and Executive Chair of Sahel Consulting Agriculture & Nutrition, which works across Africa,
transforming the nutrition and agriculture landscapes via innovative ecosystem solutions.
She is the author of the book Food Entrepreneurs in Africa: Scaling Resilient Agriculture
Businesses (Routledge, 2021). Nationality: Nigerian.
Ye Qi (m)
Head of the Innovation, Policy and Entrepreneurship Thrust at Hong Kong University of
Science and Technology (Guangzhou), and Cheung Kong Professor of Environmental Policy at
Tsinghua University in Beijing (China). Before joining HKUST(GZ), he taught at HKUST,
Tsinghua University, Beijing Normal University, and the University of California at Berkeley
(USA). Nationality: American.
Rob Routs (m)
Former Member of the DSM Supervisory Board and Chairman until 2021. Degree in Chemical
Engineering from the Technical University of Eindhoven and Ph.D. in Technical Sciences.
Devoted the professional side of his life to the energy sector during his 37-year career with
Royal Dutch Shell plc, building up a global energy sector leadership as well as operating and
board experience. Served in regional manufacturing and global general manager positions,
restructuring operations to enhance business operations. Led the company’s sustainability
efforts. Nationality: Dutch.
Feike Sijbesma (m)
Honorary Chairman of Royal DSM since March 2020, and CEO from 2007 to 2020. In 2020, he
acted as the Special Corona Envoy for the Netherlands. He is Chairman of the Supervisory
Board of Royal Philips, Non-Executive Board member of Unilever, and Member of the
Supervisory Board of the Dutch Central Bank (DNB). He co-chairs the Global Centre on
Adaptation together with Ban Ki-moon and acts as an advocate and leader for business
tackling climate change. As Co-Chair of the Alliance of World Economic Forum (WEF) CEO
Climate Leaders and via his membership of the Board of Trustees of the WEF, he also
contributes to the expansion of Africa Improved Foods. Nationality: Dutch.
Corporate governance and risk management – Governance framework
Royal DSM Integrated Annual Report 2022 130
Global network
Sustainability Leadership Team
At corporate level, sustainability is steered by our Sustainability Leadership Team, a group of senior executives
representing the Business Groups and contributing corporate functions, which is chaired by the Vice President
Sustainability. He leads the Corporate Sustainability department and reports directly to the Co-CEOs. The Corporate
Sustainability staff functions as a business-oriented center of excellence and partner on sustainability, internally and
externally.
The Sustainability Leadership Team meets quarterly to monitor the progress of sustainability across the company, with
particular emphasis on steering our business and innovation portfolio in relation to key drivers. Regional operational
sustainability networks are in place in China, India, Latin America and North America.
Operations and SHE & Security
DSM SHE & Security has responsibility for all corporate issues related to Safety, Health and Environment (SHE) as well as
Security. The Vice President DSM Safety, Health & Security reports directly to the co-CEO. SHE managers and experts in the
business and in each region provide support to all our operations worldwide. Our SHE Leadership Team, which includes all
Business Group SHE managers as well as all regional SHE leads, is instrumental in sharing experiences and developing
best practices and communications on SHE issues.
Environmental strategy and progress are steered by the Environmental Review Team, consisting of the Executive Vice
President Operations; the Chief Operating Officers of the Business Units; the Vice President Safety, Health & Security; the
Vice President Operational Sustainability; and the Corporate Lead Environment/ GHG Reduction Program Director.
People and Organization
Our Inclusion & Diversity (I&D) Council steers the overall I&D strategy and drives activation of our I&D program. Co-chaired
by the Co-CEOs, it comprises the Regional Presidents and Employee Resource Group leads. In addition, the five diversity
pillars are sponsored by Executive Board members.
The day-to-day responsibility for Human Rights at DSM sits with our Executive Vice President People & Organization, who
chairs our Human Rights Steering Committee. This committee is responsible for the strategy and framework for managing
human rights issues and is comprised of senior leaders from People & Organization, Sustainability, Legal, Procurement
and Operations. These departments are further represented in the human rights working group who are responsible for
the day-to-day implementation of our respect for human rights.
Taskforce on Climate-related Financial Disclosures
In her capacity as CFO, Ms. Matchett has appointed a finance executive to lead the efforts needed to address the
recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Senior leaders from various disciplines
such as Finance, Risk Management, Sustainability, Insurances, Operations and Sourcing worked on various initiatives in
2022 to expand physical and transition risk assessments to our business units and to our value chain, as well as
continuing to embed climate-related risks into the overall risk management processes. For more information, see Note 3
Taskforce on Climate-related Financial Disclosures (TCFD) of the Sustainability statements.
External Scientific Advisory Board
In 2022, the Scientific Advisory Board met with our scientists and innovation leaders to challenge and review our scientific
work across the company and give advice on trends and upcoming technologies. We extended this team of internationally
recognized experts by the inclusion of two new members, Remko Boom and Jeroen Raes, strengthening the scientific
knowledge on microbiome and food process engineering.
Corporate governance and risk management – Governance framework
Royal DSM Integrated Annual Report 2022 131
Scientific Advisory Board
Member
Background
Remko Boom (m)
Full Professor of Food Process Engineering at the Agrotechnology and Food Sciences Group
of Wageningen University (Netherlands) and Affiliated Professor at the University of
Kopenhagen (Denmark). His research focuses on food structure, digestion and health, along
with modeling and implementation of membrane separation for effective use of milk
components. He has authored over 450 publications in the field of Agricultural Technology
and Nutrition. Nationality: Dutch
Thomas Hankemeier (m)
Full Professor of Analytical BioSciences at the Leiden Academic Center for Drug Research,
Leiden University (Netherlands), since 2004. As a principal investigator, he leads the
Metabolomics and Analytics Center. His research focuses on the development of innovative
analytical tools for metabolomics-driven systems biology in personalized health strategies.
Nationality: German
Kirk Klasing (m)
Distinguished Professor of Nutritional Immunobiology at the University of California, Davis
(USA). His research focuses on interactions between immunology, disease resistance, and
nutritional status. Nationality: American
Jeroen Raes (m)
Full Professor at KU Leuven and Vice-Director of the Flemish Institute for Biotechnology (VIB)
Center for Microbiology. He has a substantial track record in microbiome research, with
expertise in bioinformatics, systems biology, clinical research and microbiology. Nationality:
Belgian
Chris Voigt (m)
Daniel I.C. Wang Professor of Advanced Biotechnology in the Department of Biological
Engineering at the Massachusetts Institute of Technology (MIT) (MA, USA). He works in the
developing field of synthetic biology and is the Co-Director of the Synthetic Biology Center at
MIT. Nationality: American
Royal DSM Integrated Annual Report 2022 132
DSM Code of Business Conduct
Introduction
The DSM Code of Business Conduct (‘the Code’) serves as an umbrella for several other DSM regulations and forms the
basis for our company’s ethical business behavior. Our purpose, our culture and our business principles are an integral
part of the Code. The business principles translate our purpose into important do's and don’ts to guide our business
operations and decisions in daily practice. All DSM employees are expected to follow the Code, which is available in seven
languages. The full text of the Code also appears on the company website. The Managing Board holds DSM’s unit
management accountable for compliance with the Code.
DSM Code of Business Conduct and values training program
Training and awareness
The DSM values training program contains several e-learning courses to explain the Code and a number of its business
principles in more detail. These courses are aimed at raising awareness of ethical business behavior and are assigned to
all employees or, in the case of certain subjects, to specific target audiences. All courses are available in at least six
languages, unless indicated otherwise. When we acquire a business, integration and compliance plans are rolled out to
make sure new employees are trained accordingly.
A review team, chaired by the Vice President Risk Management & Internal Control, monitors the internal and external
developments around corporate ethics to promote and safeguard the company’s values and reputation. The review team
also monitors implementation of the DSM values training program (see table Implementation of the DSM values). At year-
end, most employees had completed or refreshed their training. Our learning management system also has an external
portal to enable relevant contractors and other third parties to follow courses of the DSM values training program.
The DSM values training program covers the three dimensions of People, Planet and Profit. An overview of the courses is
listed below, as well as a number of important implementation measures.
People
The Life Saving Rules e-learning specifies the 12 most important rules that must be followed by all our employees to
prevent incidents.
Corporate governance and risk management – DSM Code of Business Conduct
Royal DSM Integrated Annual Report 2022 133
The Respectful Behavior e-learning emphasizes the importance of inclusion and diversity, and promotes respectful
behavior as well as active bystander behavior. It is meant to foster effective employee relations, communications, and
non-discriminatory practices, and to prevent inappropriate behavior, including sexual harassment.
The DSM Binding Corporate Rules for Data Privacy prescribe mandatory Data Privacy training for employees who regularly
work with personal data from employees and business partners. This is provided by the General Data Protection
Regulation (GDPR) overview e-learning, which is rolled out to a large target audience including all employees working in
the functions People & Organization, Marketing & Sales and Purchasing. In addition to this, concise e-learnings are in
place to train all our employees on the consequences of the GDPR and the importance of prompt data breach notification.
Planet
The Basic Course Responsible Care addresses the elements of the Responsible Care Program: Safety, Health, and
Environment; Product stewardship; Security; and Sustainability.
Profit
The e-learning course Global Competition Law Principles and Practices addresses the main principles of anti-trust
legislation. In addition, the DSM Compliance Manual Competition Law is shared with selected employees in commercial
and business roles and can be consulted online on the company’s intranet. Relevant employees annually confirm their
compliance with the rules via a Competition Law Compliance Statement. In this statement, they confirm that they are not
aware of any violation of competition laws by DSM. For a smaller group of employees, mandatory Competition Law
classroom trainings on specific topics are organized. Alleged breaches, if any, are reported to, and discussed with, Group
Legal Affairs. In 2022, no breaches were reported.
The course for Global Trade Controls (available in English) explains the most important aspects of international trade
legislation. Compliance with trade controls is embedded in our systems and processes. Company master data is screened
to check customers and suppliers against embargoes and lists of sanctioned parties.
The Anti-Bribery & Corruption (ABC) e-learning provides training on the most important features of bribery and corrupt
behavior. In addition, the DSM Compliance Manual Anti-Bribery and Corruption is shared with selected employees in
commercial and business roles and can be consulted online on the company’s intranet.
The DSM Security e-learning covers our seven Key Security Behaviors. To complete this e-learning, employees are required
to read and sign off on the DSM Code of Conduct for Information Security. The Cyber Fraud Awareness e-learning is an
additional training to increase awareness among all employees regarding prevalent types of cybercrime. Furthermore,
global as well as targeted phishing tests are regularly carried out to ensure that our people stay alert.
We also have rules to prevent misuse of inside information on the holding of or trading in DSM financial instruments, such
as shares and other securities, and where applicable the holding of or trading in financial instruments of other companies.
These rules apply to all relevant employees, including the Executive Committee, the Managing Board, and the Supervisory
Board.
Value chain
The business principles most relevant to our supply chain are brought together in the Supplier Code of Conduct and are
also structured along the three dimensions of People, Planet and Profit. The Supplier Code of Conduct, available on the
company website, is signed off by suppliers in framework contracts, confirming their commitment to sustainability, among
other things.
For our distributor and agent framework contracts, the Anti-Bribery & Corruption Policy is translated into terms and
conditions to ensure ethical business conduct when these parties act on behalf of DSM or deal with DSM products further
down the value chain.
Corporate governance and risk management – DSM Code of Business Conduct
Royal DSM Integrated Annual Report 2022 134
Consequence management
We apply zero-tolerance consequence management to violations of the Code. Under our whistleblower procedure (DSM
Alert), most (potential) violations are reported to and dealt with by local line management. Where this is not considered
appropriate, complaints can directly be made to the DSM Alert Officer. In both cases, consequence management practices
(such as official warning, temporary suspension, dismissal) are in place for substantiated violations to support compliance
with the Code. The DSM Alert Officer reports to the Managing Board and also reports independently to the Audit
Committee of the Supervisory Board twice a year. Any individual not employed by DSM who might wish to voice a concern
regarding violations of the Code may also contact the DSM Alert Officer via the company website.
In 2022, 22 Alert cases (reports of potential violations of the Code) were received by the DSM Alert Officer, four of which
were reported by an external party. This is at a level comparable with previous years. There were three potential bribery
and corruption cases, none of which were substantiated.
The table below gives an overview of all reported substantiated violations of the Code (including Alert cases), with a
breakdown by the People, Planet and Profit dimensions and region. Proven violations result in dismissal or other forms of
consequence management. In line with this policy, 53 employees were dismissed in 2022 on account of breaches of the
Code, national legislation, or local company regulations. In addition, 150 employees received another form of consequence
management. Compared to 2021, the number of dismissal cases slightly increased and the number of cases leading to
other forms of consequence management significantly increased. The broadening of the bottom of the so-called ‘incident
pyramid’ (significantly more minor incidents than major incidents) may be taken to indicate that the establishment of
Compliance Councils in China, India and the APAC region improved our reporting process.
People
Most of the cases in the People dimension relate to violations of the Life Saving Rules. Inappropriate or disrespectful
behavior that does not contribute to a psychologically safe and healthy working environment (discrimination, sexual and
other kinds of harassment) is also reported in this dimension. Health and safety are priorities for the company and
incident-reporting channels are well known.
Planet
There were eight violations of the Code reported in the Planet dimension in 2022. Five cases, including the four dismissals,
concerned violations of our quality procedures, and the other three cases concerned violations of standard operating
procedures leading to the formation of production waste and financial losses.
Profit
Most of the cases in the Profit dimension relate to fraud and business integrity, such as unauthorized absence from work.
Corporate governance and risk management – DSM Code of Business Conduct
Royal DSM Integrated Annual Report 2022 135
Implementation of the DSM values training program
2022
2021
% of targeted employees trained
General
Code of Business Conduct
98%
97%
People
Life Saving Rules
96%
99%
Respectful Behavior
97%
98%
GDPR overview
95%
99%
Planet
Basic Course Responsible Care
99%
99%
Profit
Global Trade Controls
99%
98%
Anti-Bribery & Corruption
99%
98%
Security
98%
96%
Cyber Fraud Awareness
85%¹
98%
.
DSM Annual Competition Law Statement
% of people having signed the statement
100%
100%
Violations of the Code
2022
2021
Number of dismissals / other cases of consequence management
53 / 150
45 / 91
Triple P breakdown
People
36 / 114
30 / 73
Planet
4 / 4
0 / 6
Profit
13 / 32
15 / 12
Regional breakdown
Europe & Africa
13 / 24
12 / 37
Americas
27 / 60
26 / 42
Asia–Pacific
13 / 66
7 / 12
TOTAL
203
136
Alert cases (whistleblower procedure)
2022
2021
Number substantiated / not substantiated / under investigation
10 / 12 / 0
7 / 15 / 1²
Triple P breakdown
People
8 / 8 / 0
6 / 11 / 1²
Planet
0 / 0 / 0
0 / 0 / 0
Profit
2 / 4 / 0
1 / 4 / 0
Regional breakdown
Europe & Africa
4 / 3 / 0
1 / 4 / 0
Americas
4 / 6 / 0
4 / 9 / 12²
Asia–Pacific
2 / 3 / 0
2 / 2 / 0
TOTAL
22
23
1 Updated training, launched in the second half of 2022, was temporarily unavailable due to technical problems, preventing employees from completing this
course in a timely manner.
2 The Alert case 'under investigation' in 2021 was resolved in 2022 and proved to be substantiated.
Royal DSM Integrated Annual Report 2022 136
Risk management
DSM risk management framework
DSM has a well-embedded risk management framework and accompanying organization. The framework is based on COSO
Enterprise Risk Management, and this section is structured accordingly (see DSM Risk Management Cycle below). For each
of the five COSO components (dark blue boxes), the implementation within DSM (light blue boxes) is explained, starting
with Governance & Culture (in a clockwise direction).
Governance & Culture
Risk management responsibilities
The Managing Board is accountable for the management of all risks associated with our company’s strategy and business
objectives. To this end, an appropriate risk management system is in place.
It is the responsibility of the Business Groups, support functions, functional excellence departments and regions within
DSM (the units) to set up, operate, maintain and monitor an appropriate risk management system within their area of
responsibility. We apply elements of the Three Lines Model to manage risks effectively:
- First line: The responsibility for identifying, assessing and managing risks, including control execution, lies with
the individual units
- Second line: Group Risk Management (GRM) designs, implements and maintains the overall risk management
framework for the company. GRM also supports the first line in risk identification, assessment and management
by designing and developing standards, systems and tools. Within GRM there is an independent department
testing the effectiveness of the Internal Control Framework. Besides GRM, there are also other departments acting
as a second line, for instance, DSM Safety, Health and Security
- Third line: Corporate Operational Audit (COA) conducts independent operational audits of all units on behalf of
the Managing Board
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 137
GRM and COA report directly to the CFO, and COA has direct access to the COO as well as to the Audit Committee of the
Supervisory Board.
Code of Business Conduct
The DSM Code of Business Conduct comprises our purpose, our culture, and our business principles, which form the basis
for risk management. Our culture is directly related to our purpose of creating brighter lives for all. All our employees
receive regular training on the Code of Business Conduct and on detailed aspects of relevant business principles.
Strategy & Objective-Setting
The Managing Board supported by the Executive Committee establishes the company strategy and business objectives.
Risk appetite
The risk appetite defines the level of risk the company is prepared to take in the various risk categories, comprising
strategic, operational, financial, compliance, and reputational risks. The risk appetite supports priority-setting in risk
responses. The Executive Committee decides on the risk appetite, which is reviewed annually.
DSM’s risk appetite
Corporate Requirements
The Corporate Requirements are our internal rules and regulations, which are defined and maintained by the support
functions and GRM. In line with the Code of Business Conduct and the risk appetite, the Corporate Requirements provide:
- Risk-based guidance for managing common business and process risks (‘common controls for common risks’)
- Standards and practices to increase the efficiency of our main business processes and functions
The Corporate Requirements are mandatory for all units, and management is responsible for implementing these as and
when applicable.
Performance
Risk management is designed to create and preserve value. Important elements are identifying, assessing and responding
to risks that may impact the achievement of the business objectives of our company strategy and the execution of control
activities. This part of the risk management framework focuses on practices that support the organization in making
decisions.
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 138
Risk identification, assessments and response
Risk assessments are performed at various levels in the organization. We take a standard, but flexible approach to risk
assessments:
- Risk assessment planning
- Preparation
- Risk identification and clustering
- Risk rating
- Evaluation and risk response
Both short-term risks (up to and including three years) and emerging risks (more than three years) in the risk categories
strategic, operational, financial, compliance, and reputational are the focus of our risk assessments. A risk assessment
manual and training are available to give guidance and continuously improve the effectiveness of our risk assessment
process.
Corporate Risk Assessment
We periodically conduct a Corporate Risk Assessment (CRA), which is the responsibility of the Managing Board. As part of
this assessment, the Executive Committee reviews and agrees on the short-term top risks as well as emerging risks. The
Executive Committee also agrees on how to mitigate and monitor these.
Unit Risk Assessments
The DSM units conduct various types of risk assessments:
- Business Risk Assessments focus on risks that could jeopardize the attainment of our strategic goals and
business objectives
- Process Risk Assessments are intended to make our processes more robust and fraud-proof
- Project Risk Assessments focus on specific projects and are updated throughout project execution to secure
successful delivery of project objectives and value creation for the company
In addition to the above, specific risk assessments may be performed for areas such as Safety, Health, Environment,
Climate, Quality and Security, including Cybersecurity.
Most risk assessments are carried out by cross-functional teams. These teams include experienced facilitators as well as
experts who can challenge assumptions to help improve the quality of these risk assessments.
Control activities
Control activities are integrated in our business processes, and are executed by the first line. They are preventive or
detective and may encompass a range of manual and (semi-)automated controls such as policies, procedures,
authorizations, verifications and business performance reviews. We apply a standard approach for user access
management, including privileged users, as well as Segregation of Duties (SoD) management. These controls also help us
to avoid fraud and reputational damage, and support the Statements of the Managing Board.
The Internal Control Framework (ICF) aims to ensure reliable financial reporting, mitigate fraud risks and safeguard our
assets. It defines the standard set of key controls that must be performed by the first line. The internal control department
within GRM owns the ICF.
Review & Revision
Internal Control review
The testing of the effectiveness of the key controls as included in our Internal Control Framework (ICF) is performed by the
Internal Control department within GRM. This is one of the pillars of our House of Control supporting the Statements of the
Managing Board.
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 139
COA audits
COA, as the third line, conducts independent operational audits based on the mandatory guidance of ‘The Institute of
Internal Auditors’ to provide additional assurance to the Managing Board that significant risks are being managed and
controlled effectively, efficiently and sustainably. Some of these audits are unannounced. The scope and frequency of COA
audits is set according to the ranking of the auditable units in terms of the magnitude of risk, based on a number of
defined characteristics. This program is agreed by the Executive Committee and the Audit Committee of the Supervisory
Board.
Enhancement of the risk management system
During 2022, the following main improvements were made to our risk management framework:
- Group Risk Management was extended with the expertise areas Information Security Risk Management and
Sustainability Risk Management
- Several sections of our Corporate Requirements were updated:
▪ An overarching privacy policy was added to the existing requirements regarding privacy and personal data
processing
▪ New security requirements for ‘clear desk’ were added for remote working, working in open offices, and
working on multi-user sites
▪ Risk management requirements were issued to strengthen the Internal Control Framework, among other
considerations
▪ Legal requirements on trade controls were adjusted
▪ Procurement requirements were adjusted to reflect the repositioning of the DSM Procurement organization
▪ The Research, Technology & Development and Innovation Requirements were replaced by Science &
Innovation Requirements to reflect the repositioning of the Corporate Science Office organization
- The roles, responsibilities and processes to manage Segregation of Duties (SoD) conflicts were strengthened,
supported by new tooling
- The automation level of internal controls was increased, improving the efficiency and effectiveness of the
execution and testing of controls
Information, Communication & Reporting
Communication channels
We strive for an open communication culture and have various channels for communicating risk information both
internally and externally. These channels enable our organization to provide relevant information for decision-making.
Risk management is an intrinsic part of doing business, so normal business discussions regularly address this topic. In
addition, to ensure that specific risks receive sufficient attention, we have installed the following consultation and
communication structures:
- Global Fraud Committee
- Global Issue Committee
- Cybersecurity Governance Board
- Ethics Board for People Data
- Human Rights Steering Committee
- Privacy Council
- Alert Committee
- Disclosure Committee
- Project Quality Reviews
- Risk Management Committees in the various units
- Dedicated discussions with the Executive Committee on the Corporate Risk Assessment and the outcome of the
Letter of Representation process
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 140
Letter of Representation
The Letter of Representation (LoR) is a biannual process whereby DSM’s units provide a comprehensive overview of
incidents and risks to the Managing Board. The units report their identified short-term and emerging risks according to five
categories: strategic, operational, financial, compliance, and reputational. The LoR also documents the mitigation actions
defined in respect of these risks. Formal sign-off by each unit director is required. The output of the LoR process is
discussed in the Executive Committee as well as the Audit Committee of the Supervisory Board. The material incidents are
reported in the section What still went wrong in 202.
Top and climate-related risks
The output of the Corporate Risk Assessment process — comprising top risks and climate-related — is discussed in the
Financials and auditing of the Supervisory Board and reported on below.
Our risk profile
The risk management activities as performed by the first line as well as the reviews/audits conducted by the second and
third line in 2022 did not indicate any material failings in the design and effectiveness of our risk management and
internal control system. This is the basis for the Statements of the Managing Board and for the risk disclosures below.
Top risks and related mitigating actions
Below, the five most important risks are listed that might prevent us from achieving the targets defined in our strategy,
along with the mitigating actions we are taking to further reduce our exposure. These risks are labeled as top risks as the
exposure on DSM’s EBITDA is an indicative €30 million or more, or because they have a major non-financial impact such as
on reputation.
Market environment
As the world around us is very volatile, there is a risk that we may not meet our strategic targets in the event that we are
not able to respond fast enough or in full. The inflationary environment and the high volatility of energy prices, especially
in Europe, are putting pressure on our margins. Supply chain disruptions have the potential to impact our operations if not
handled well.
To address this risk, we aim to counter cost increases with pricing actions and strict spend management. Our global
footprint helps us optimize our supply and demand balance, which increases our resilience. Where necessary and
practicable, we make use of alternative pre-qualified suppliers in order to maintain continuity of supply. We offer
solutions for our customers that help them to navigate difficult market circumstances.
Nevertheless, with increasing inflation and uncertain market developments there is a risk that sales volumes and margins
could be negatively impacted.
Further mitigations
We continue to innovate and offer products and services that meet the continually evolving needs of our customers while
addressing significant societal and environmental challenges.
Talents
There is a risk that we might not be able to attract, retain and develop the talents required to transform our company and
deliver on our strategy. Various initiatives that are implemented as part of our P&O strategy are addressing this risk. We
deploy global and local health and well-being programs to support our people. We have introduced hybrid working. By
aiming for a 50:50 balance between office and remote work, we hope to provide our office-based employees with the
flexibility to focus on individual work where needed, while also facilitating the right opportunities for personal
development, strong collaborations, and closer relationships. In 2022, we continued to work on making sure that all our
people feel included and cared for through the execution of our Diversity, Equity & Inclusion (DE&I) strategy.
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 141
We create a working environment that encourages all colleagues to take ownership of their performance and
development. As part of this, we launched MyCareer Marketplace as well as the Learn Together, Grow Together initiative.
We expanded our offering of flexible benefits to address the different needs of people. And, as an engaged workforce is
essential, we increased our efforts to connect with our employees in different ways throughout the pandemic. We monitor
employee engagement and well-being by means of various surveys.
Further mitigations
The implementation of the P&O strategy will be continued. Based on the insights from our Employee Engagement Survey,
extra focus will be given to support the well-being of all our employees and their ability to regularly re-energize.
Purpose-driven growth
As we move further into new business areas – such as gut health and ‘precision & personalization’ — there is increased
uncertainty around time-to-market and peak sales of our innovation projects, impacting our organic growth.
In 2022, we implemented our new organizational model in which we have a central, shared science organization in
combination with dedicated innovation teams that are embedded in our Business Groups. This allows us to be closer to
our customers and develop solutions that address market needs with greater speed.
Our innovation roadmap is focused around four overarching growth themes that address major global societal,
environmental and technological trends: Pathways, Proteins, Prevention and Precision. Each theme is connected to a
technology platform that develops disruptive technologies which allow us to expand our customer offerings. We use
advanced digital technologies in order to accelerate innovation and provide evidence of its efficacy.
During 2022 we progressed well with several of our strategic innovations, such as our methane inhibitor solution Bovaer®,
the decision-making tools Sustell
TM
and Verax
TM
, our
‘
Health of the Gut’ platform, and Vertis™ CanolaPRO®, our high-quality
canola protein isolate.
Despite the progress that has been made so far and having processes in place to manage and monitor further progress of
innovation projects, the contribution to organic sales growth remains a risk.
Further mitigations
We will continue to increase our investments in the digital transformation of our science and innovation capabilities such
as artificial intelligence (AI), big data, deep learning and modelling. We will also extend lab automation.
Cyber threats
In an increasingly digital world, DSM is subject to cybersecurity attacks which, if successful, could lead to a loss of
intellectual property, discontinuity of operations, or otherwise have a negative impact on the company.
To address this risk, we continued throughout 2022 to implement our multi-year cybersecurity programs that cover the
domains of information technology, operations technology, and R&D laboratory systems. Further progress was made to
integrate the three domains under an overarching framework.
Since the ‘human firewall’ remains critically important, we continued to raise employee awareness via e-learnings,
knowledge assessments and regular phishing tests, either on a global scale or for specific target groups.
Despite our progress in this area, the risk remains due to a growing number of digital initiatives driven by our strategy and
increasing external cyber threats.
Further mitigations
We will continue the various multi-year programs to increase our resilience. Further improvements are being implemented
based on the learnings from a cybersecurity incident response exercise. Following the announcement of our merger of
equals with Firmenich, we updated and expanded the actions taken to increase cyber awareness.
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 142
Product quality
A food safety incident might arise due to (alleged) acts or omissions of DSM, our suppliers or other value chain partners,
with potentially severe consequences for the health of consumers and negative financial and reputational impact for DSM.
To reduce this risk, product quality has been accorded the same scrutiny as safety. We perform special risk assessments to
identify quality risks. Based on the outcomes, we define and implement quality standards. Technical solutions are
deployed when needed and procedures are adapted to make processes more robust. We are working to sustainably
embed the right quality mindset and behaviors in our organization and to grow as learning organization.
With the shift to new markets and new product offerings, the importance of product quality increases further. Despite
quality being a core value, the risk of quality defects cannot be fully excluded.
Further mitigations
We will continue to develop and adapt our capabilities in the three focus areas: risk assessments, standards, and learning
organization, mindset & behavior. We use incidents and near misses to improve by performing root cause analyses and
taking corrective actions. As learning organization, we share and discuss quality incidents and near misses with a broader
audience.
Climate-related risks
In 2020, we started our climate risk assessments by means of a desk study for our most material sites on physical risks
that could lead to material financial impact in case of a prolonged shutdown. We mapped five emerging hazards (flooding,
cyclones, wildfire, extreme heat, and water scarcity) against three IPCC climate temperature scenarios (RCP 2.6, RCP 4.5, and
RCP 8.5), using three different time horizons (2020, 2030, and 2040/2050). These scenarios were supplemented with
additional data.
In 2021, the results from that study were validated with the most relevant sites in order to understand our risk exposure
and resilience, taking into account local circumstances and existing mitigations. The validations demonstrated that we
already have mitigations in place for several of the risks identified through the desk study. Water scarcity was the most
material physical climate risk identified, which needs to be actively monitored and managed. Our sites with an increased
water risk profile were already in scope of our water stewardship program. For more information on our water stewardship
program, see Water stewardship.
In 2022, we made progress on our assessments as follows:
- We started on-site deep dives to understand the climate risks in more detail. These have been completed for four
of our material sites. For this, the RCP 4.5 scenario was used in combination with a 2040-2060 time horizon. In
addition to the five hazards mentioned above, several other hazards are also considered such as storm, hail and
subsidence
- We started to expand the risk assessments to our value chains. We completed a pilot to obtain first insights into
potential climate risks for our key suppliers by means of a desk study
- We also completed a study to increase our understanding of physical climate risks for one of our end-markets,
being the Brazilian dairy market.
In 2022, we performed transition risk assessments for our three Business Groups. Both risks and opportunities are
captured through the assessments. The scope is not limited to our own operations but includes the full value chain impact
on our business. Using external data sources, such as International Energy Agency - World Energy Outlook, World Bank,
and sector-specific sources such as the FAIRR initiative, we built forward-looking scenarios aligned with the IPCC
temperature models and time horizons used for the physical risk assessments.
Corporate Governance and risk management – Risk management
Royal DSM Integrated Annual Report 2022 143
The following risks were identified as having the highest impact:
Policy and legal
- As carbon pricing schemes expand, this could have a negative impact on our operating costs
- Regulations to constrain emissions-intensive activities could require us to reduce or stop manufacturing activities
in certain locations
- Changes in animal farming practices following regulations to reduce emissions could impact demand for our
products in the event that we are unable to adapt our product and service offerings in a timely manner
Markets
- As demand for certified, renewable energy and sustainable raw materials will increase, this might have a negative
impact on their availability and price levels
- In the event that we are not able to bring innovations to the market that address the need for solutions with a
verifiable, lower carbon footprint, this could impact the demand for our products
- Changing customer preferences related to climate change, e.g, dietary shifts could impact demand for some of
our solutions
With our innovation portfolio and through the implementation of our GHG roadmap, we aim to mitigate those risks and by
doing so capture the opportunities offered by the transition to a net-zero world.
The material risks identified through the climate risk assessments are integrated and are managed as part of our regular
risk management processes.
We will continue to expand and update our physical risk assessments for our own operations as well as the rest of our
value chains. With the help of external parties, we explore different approaches to assess vulnerabilities caused by climate
change and to increase our resilience. Furthermore, we will update the transition risk assessments on an ongoing basis
and continue to update our scenarios to reflect the latest external insights.
Other important risks
There are also more generic business risks, such as business continuity, sourcing, intellectual property, tax, changing
legislation and regulations, increasing non-financial reporting requirements, and business process risks. Our risk
management framework is set up to adequately monitor and respond to these risks.
For risks related to the announced merger between DSM and Firmenich, reference is made to the offering circular dated
November 22, 2022.
All relevant risks are taken into account in the preparation of our financial statements.
Royal DSM Integrated Annual Report 2022 144
What still went wrong in 2022
The year 2022 presented us with many challenges as well as opportunities. The ongoing effects of the COVID-19 pandemic,
coupled with the impact of the Russia-Ukraine conflict, placed additional and unexpected new demands on our company
and our people worldwide. At the same time, 2022 was a pivotal year in DSM’s transformation with the sale of our
Protective Materials business and the announcement of the sale of our Engineering Materials business, during which we
focused entirely on becoming a Health, Nutrition & Bioscience company.
Despite the challenging circumstances, we applied our high standards with our usual rigor. Possible breaches of the DSM
Code of Business Conduct were investigated and, if actionable infringement was found to have occurred, consequence
management was applied (see DSM Code of Business Conduct for further information). Here we share the most significant
incidents of 2022 across all three dimensions of People, Planet and Profit and not relating solely to breaches of the DSM
Code of Business Conduct. This overview includes incidents with a financial impact as well as incidents regarding safety,
health, environment, quality, security and fraud, in all of which areas we have a low risk appetite.
We have a process in place to collect information about serious and/or material incidents - as presented in this overview,
using various sources including our internal Letter of Representation, and our reporting system for SHE and Security
incidents as well as the quality incident reporting system.
Preventing incidents from reoccurring requires us to understand each incident to the best of our ability. When an incident
occurs, our first priority is to take care of any injuries, repair any damage and for quality incidents to ensure that the
product does not enter the market and reach consumers. We investigate every recordable incident using a fixed root cause
analysis method and we trigger global improvement cycles, see Safety, Quality, and Health & Well-being. We adjust
requirements and processes and apply consequence management as needed.
People
In the following overview, we list the incidents that occurred during 2022 and describe how we responded to them in terms
of improving our performance. We do not report on the treatment of any specific injuries listed here. Our first priority is of
course always to take care of any injuries to personnel.
Most serious safety incident
Incident
Our learning response
At our Yimante joint venture site (Hubei province, China),
an employee fell into a hot wastewater basin and suffered
severe burns.
We ran programs to improve safety awareness – including
awareness of the Life Saving Rules, among both
employees and contractors – as part of our continuing
integration program at this site. See also People.
Incidents involving slips and trips
Incident
Our learning response
Tripping, slipping, and falling sometimes leads to serious
injuries, such as muscle strains, joint sprains, and bone
fractures. This happened on our sites in Grenzach
(Germany), Delft (Netherlands) and Geleen (Netherlands)
to three of our contractor employees.
We stepped up our efforts to promote an engaging and
disciplined safety culture by means of focused
improvement programs, such as the Behavior-Based
Safety program (Safestart®). See also People.
What still went wrong in 2022
Royal DSM Integrated Annual Report 2022 145
Incidents during troubleshooting and maintenance
Incident
Our learning response
The resolution of process disturbances involving manual
work on a machine led to serious hand injuries, including
the amputation of fingers, or parts of fingers, in the case
of three of our employees. These employees were working
respectively at our site in Blok Dobryszyce (Poland),
Tongxiang (Zhejiang province, China), and Banting
(Malaysia). In all three cases, the equipment had not been
properly secured beforehand as required by our Life
Saving Rules.
We introduced improvements to ensure safe handling of
the relevant machine in future. The learnings from these
incidents were shared with all DSM sites to prevent any
recurrence.
This was accompanied by a renewed focus on the
implementation of LOTOTO (Lock-Out, Try-Out, Tag-Out)
Life Saving Rule at the three sites involved.
At our site in Grenzach (Germany), a sudden pressure peak
in a hot water pipe caused a water hose to become
detached from the faucet, despite being fixed by means of
two hose clamps. Hot water from the pipe hit an operator
who was standing nearby, causing burns to his foot.
We made improvements to the design of the hot water
pipe in question. We also applied the learnings from this
incident to our handling of both hot water and steam and
shared these learnings with all other DSM sites.
On our site in Seclin (France), a wrench being used by an
operator slipped and hit him in the face, inflicting a cut to
his upper lip that required stitches.
We stepped up our efforts to promote an engaging and
disciplined safety culture by means of focused
improvement programs, such as the Behavior-Based
Safety program (Safestart®). Safestart® trains our
employees and contractors to stay out of ‘the line of fire’
when performing operations with tools. See also People.
Process safety incidents
We had three serious process safety incidents without serious personal injuries or environmental impact, but with
material damage.
Incident
Our learning response
On our site in Grenzach (Germany), a deflagration caused
by an electrostatic discharge occurred in the site’s off-gas
system, causing material damage.
We examined the piping material in question and
ascertained that it had triggered the electrostatic
discharge. The piping was immediately replaced.
The learnings from this incident were shared with all DSM
sites to prevent any recurrence of such an incident.
At our Yimante joint venture site (Hubei province, China),
corrosion caused a distillation column to implode and
leak.
We introduced improvements to ensure the reliability of
equipment. This included intensifying our existing
corrosion inspection program, restating the minimum
acceptable thicknesses of vessels and reducing vacuum
levels, where possible.
What still went wrong in 2022
Royal DSM Integrated Annual Report 2022 146
Incidents involving the handling of materials
Incident
Our learning response
Loading, unloading and manual handling of heavy
materials has the potential to cause musculoskeletal
injuries. Injuries of this type were sustained by four of our
employees, across our sites in Kingstree (South Carolina,
USA), Village-Neuf (France) (two cases), and
Stadtoldendorf (Germany).
On our site in Dalry (United Kingdom), an employee got his
hand jammed and suffered serious abrasion to a finger
while handling a roll of packaging material.
Over the past few years, most of the recorded cases of this
kind have involved ergonomic risk factors. To address this
issue, we are implementing a dedicated program that
tackles both the behavioral and the technological aspects
of ergonomics. A pilot in 2022 proved successful and is to
be rolled out globally. See also People.
Human rights incidents
Incident
Our learning response
A breach of our expectations regarding international
human rights standards was identified in the case of a
supplier in Taiwan. The supplier was using third-party
recruiters that charged fees to workers.
Following a failed probationary period to attempt to
rectify the practice, we discontinued our relationship with
the supplier. To ensure this will not happen again,
relevant processes and controls were reviewed and
updated to strengthen our position on human rights.
Quality incidents
Incident
Our learning response
We experienced several minor quality incidents, mainly in
the area of microbiological contamination of products.
These were all identified in good time, before material was
shipped to our customers.
Considering our historical data on these kinds of incidents
and the constantly improving analytical techniques for
identifying microbiological contaminations, we initiated a
quality improvement program. This yielded a lower
number of occurrences in 2022 compared to prior years.
Security incidents
Incident
Our learning response
An employee from our site in Lagos (Nigeria) was robbed
at gunpoint on the way to the office.
We investigated the incident and identified improvement
actions, including increasing employee awareness
regarding security risks, and especially when travelling for
business purposes. For Nigeria, a visitor travel security
plan is already in place, and a security plan for operations
is being established.
What still went wrong in 2022
Royal DSM Integrated Annual Report 2022 147
Planet
Incident
Our learning response
At our site in Jiangshan (Jiangsu province, China), sparks
from welding work ignited the plastic packing material of a
cooling water tower, causing a fire.
We increased awareness of our Hot Work Life Saving Rule
designed to prevent risks of fire when work such as
welding is being carried out.
Profit
Incident
Our learning response
Due to major force majeure events at three of our raw
material suppliers, we had serious production losses in
several business areas. In addition to that, there were
several other supply chain interruptions impacting our
business worldwide.
To limit the impact of supply disruptions on our own
operations, we increased safety stock levels of several raw
materials and wherever possible qualified alternative
suppliers.
On our site in Dalry (United Kingdom), we had loss of
production due to a technical defect of our high-pressure
steam supply.
Preventive maintenance plans and regular controls were
intensified, to prevent re-occurrence.
Royal DSM Integrated Annual Report 2022 148
Supervisory Board and Managing Board Royal DSM
Supervisory Board
Thomas Leysen (1960, m), Chair
First appointed: 2020. End of current term: 2024.
Nationality: Belgian. Nomination Committee (Chair),
Remuneration Committee (Member). Last position held:
CEO of Umicore; Supervisory directorships/other
positions: Non-Executive Chair of the Supervisory Board
of Umicore; Chair of the Board of Directors of Mediahuis;
Chair of the Belgian Corporate Governance Commission
(until end 2022).
John Ramsay (1957, m), Deputy Chair
First appointed: 2017. End of current term: 2025.
Nationality: British. Audit Committee (Chair),
Remuneration Committee (member). Last position held:
Chief Financial Officer (CFO) and interim CEO of
Syngenta AG. Supervisory directorships/other positions:
Non-Executive Director of RHI Magnesita N.V.; Non-
Executive Director of Croda International PLC; Non-
Executive Director of Babcock International PLC.
Eileen Kennedy (1947, f)
First appointed: 2012. End of current term: 2024.
Nationality: American. Sustainability Committee (Chair),
Nomination Committee (Member). Position: Professor of
Nutrition, Friedman School of Nutrition Science and
Policy at Tufts University in Boston (MA, USA);
Supervisory directorships/other positions: Member of
the Board of Directors of Sight and Life Foundation.
Carla Mahieu (1959, f)
First appointed: 2021. End of current term: 2025.
Nationality: Dutch. Remuneration Committee (Chair),
Nomination Committee (Member). Last position held:
Global Head of Human Resources and Member of the
Management Board of Aegon N.V.; Supervisory
directorships/other positions: Non-Executive Member of
the Board of VodafoneZiggo Group B.V. Netherlands;
Non-Executive Member of the Board of Arcadis; Non-
Executive Member of Stichting Continuïteit PostNL.
Erica Mann (1958, f)
First appointed: 2019. End of current term: 2023.
Nationality: Australian. Sustainability Committee
(Member), Audit Committee (Member). Last position
held: Member of the Board of Management of the Bayer
Group and Global President of Bayer’s Consumer Health
Division. Supervisory directorships/other positions: Non-
Executive Member of the Board of Perrigo; Non-
Executive Member of the Board of Kellogg Company;
Non-Executive Member of the Board of Blackmores.
Frits Dirk van Paasschen (1961, m)
First appointed: 2017. End of current term: 2025.
Nationality: Dutch and American. Remuneration
Committee (Member), Sustainability Committee
(Member). Last position held: CEO Starwood Hotels and
Resorts. Supervisory directorships/other positions: Non-
Executive Board Member of Williams Sonoma (USA);
Board Member of Sonder; Board Member of Crown
Proptech Acquisitions; Board member of CitizenM Hotels
(NL); Board Member of JCrew Group; advisor to private
equity firm TPG, advisor to Russell Reynolds; CEO and
Founder of The Disruptor's Feast Advisory.
Pradeep Pant (1953, m)
First appointed: 2016. End of current term: 2024.
Nationality: Singaporean. Audit Committee (Member),
Nomination Committee (Member). Last position held:
EVP and President APAC and EMEA of Mondelez
International. Supervisory directorships/other positions:
Honorary Council Member of Food Industry Asia; Non-
Executive Director of Max India Ltd., MAX Life Insurance
Co Ltd. (India), Antara Senior Living Ltd. (India) and NIVA
BUPA Health Insurance Co. Ltd. (India); Chair of the
Board of Nurasa Holding Pte Ltd and Nurasa Pte Ltd;
President of Pant Consulting Pte Ltd.
Corien Wortmann-Kool (1959, f)
First appointed: 2021. End of current term: 2025.
Nationality: Dutch. Audit Committee (Member),
Sustainability Committee (Member). Position: Non-
Executive Chair of the Board of ABP Pension Fund (until
31 December 2022). Supervisory directorships/other
positions: Vice-Chair of the Supervisory Board of Aegon
N.V.; Advisory Board Member of the Impact Economy
Foundation; Member of the Capital Markets Advisory
Board of the Dutch Financial Markets Authority.
Royal DSM Integrated Annual Report 2022 149
Managing Board
Geraldine Matchett (1972, f), Co-CEO
Position: Co-CEO & CFO since February 2020; member of the Managing Board since August 2014 and
CFO since December 2014. End of current term: 2026. Nationality: British, Swiss, French. Supervisory
directorships/other positions held: Non-Executive Director of ABB; Board Member of FCLT Global;
Executive Committee Member of the World Business Council for Sustainable Development (WBCSD);
Member of the Foundation Board of IMD Business School; Board Member of Catalyst Europe; Member
of A4S (Accounting 4 Sustainability) CFO Leadership Network.
e-mail: geraldine.matchett@dsm.com
Dimitri de Vreeze (1967, m), Co-CEO
Position: Co-CEO & COO since February 2020; member of the Managing Board since September 2013.
End of current term: 2025. Nationality: Dutch. Supervisory directorships/other positions held:
Chairman of the Supervisory Board of DSM Netherlands; member of the Supervisory Board of
Sanquin (until 31 December 2022); Chairman of the Young Captain Foundation; Chair of the ALV
United World College, Maastricht.
e-mail: dimitri.vreeze-de@dsm.com
Royal DSM Integrated Annual Report 2022 150
Statements of the Managing Board
The Managing Board is responsible for the design and operation of the company’s internal risk management and control
systems. In discharging this responsibility, the Managing Board has made a systematic assessment of the effectiveness of
the design and operation of the internal control and risk management systems.
On the basis of this report and in accordance with best practice 1.4.3 of the Dutch Corporate Governance Code of
December 2016, and Article 5:25c of the Financial Supervision Act, the aforementioned assessment and the current state of
affairs, to the best of its knowledge and belief, the Managing Board confirms that:
- DSM’s internal risk management and control systems provide reasonable assurance that financial reporting does
not contain any material inaccuracies
- There have been no material failings in the effectiveness of the internal risk management and control systems of
the company
- There are no material risks or uncertainties that could reasonably be expected to have a material adverse effect
on the continuity of DSM’s operations in the coming 12 months
- There is a reasonable expectation that DSM will be able to continue its operations and meet its liabilities for at
least 12 months, therefore it is appropriate to adopt the going concern basis in preparing the financial reporting
It should be noted that the above does not imply that these systems and procedures provide absolute assurance as to the
realization of operational and strategic business objectives, or that they can prevent all misstatements, inaccuracies,
errors, fraud and non-compliances with legislation, rules and regulations. Nor can they provide certainty that we will
achieve our objectives.
In view of all of the above, the Managing Board confirms that, to the best of its knowledge and belief, the financial
statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company, and that
the management report includes a fair review of the position at the balance sheet date and the development and
performance of the business during the financial year 2022, together with a description of the principal risks and
uncertainties that the company faces.
Heerlen, 1 March 2023
The Managing Board
Geraldine Matchett, Co-CEO
Dimitri de Vreeze, Co-CEO
Royal DSM Integrated Annual Report 2022 151
Report by the Supervisory Board
Introduction by the Chair
Dear reader,
2022 was a challenging year for the world as a whole. Conflict, including in Europe for the first time in decades, and
growing concern about the state of the planet itself led to increasingly vocal and disruptive protests in many countries,
polarizing opinions and intensifying the mood of pessimism in a world that was only just emerging from the shadows of a
two-year-long pandemic. The resulting sharp rises in the price of energy, raw materials and other essential commodities
has fueled inflation and fostered further insecurity across the planet.
In these turbulent operating conditions, DSM remained strong, focused and committed to delivering on its strategic
objectives. Its diversified portfolio and comprehensive global reach afforded a measure of protection against the
uncertainties into which the company’s operating environment was thrown. As a whole, we can be proud of DSM’s
achievements in safeguarding essential supply lines and continuing to offer customers the exceptional standards of
quality and reliability that they rightly expect. All three businesses saw overall continued resilient demand, but were
confronted with an increasingly inflationary environment during the year, exacerbated by ongoing supply chain volatility.
Multiple pricing initiatives were unable to fully offset the rate of increases in energy and raw materials costs. Sales
volumes were solid, especially considering the tough comparison with the strong growth of 2021.
Even without the highly demanding macroeconomic conditions, 2022 would of course have been a momentous year for
DSM. On 31 May we announced our intention to enter into a merger of equals with Firmenich, the world’s largest privately
owned fragrance and taste company.
We began repositioning the company to be focused on Health, Nutrition & Bioscience, serving our customers via three
market-orientated businesses, from the start of 2022. At the same time, we made arrangements for divesting our Materials
businesses, finding new homes where the Engineering Materials and Protective Materials operations are able to continue
their successful development trajectories and deliver innovative, value-adding and market-shaping solutions to their
customers. These divestments mark the end of an era for DSM and the start of an exciting new future.
A crucial contributor to that future is DSM’s pipeline of innovation. The structural changes upon entering 2022 saw science
and innovation more closely embedded within the Health, Nutrition & Bioscience businesses. DSM has earned a well-
deserved reputation for ground-breaking scientific breakthroughs but by bringing together those who invent, make, and
sell, we expect greater alignment all the way from ideation to commercialization, creating the best prospects for that R&D
to make a difference in the market. It was both fascinating and exciting for us on the Supervisory Board to review the long-
term innovation prospects and the potential advances that should benefit DSM, as well as all its stakeholders, in time.
Firmenich shares complementary capabilities and the intended merger of equals will produce a leading creation and
innovation partner in nutrition, beauty and well-being. The business combination agreement was the result of intense and
detailed discussions whose aim was to create a new entity able to fully leverage the strengths of both parties. The
Supervisory Board played a significant role in these negotiations, working very closely with our Co-CEOs, and is fully
supportive of the transaction.
Against the background of these developments, DSM remained as committed as ever to urgent climate action, and to
achieving net-zero by 2050 at the latest. The company continues to set increasingly stringent improvement targets in line
with the latest climate science and with the aim of limiting global warming to no more than 1.5°C.
In view of DSM’s journey to become a company focused on Health, Nutrition & Bioscience, we decided to accord quality
the same degree of supervisory scrutiny as safety, with effect from 1 January 2022. The two topics therefore enjoy parity in
the considerations of both the Supervisory Board and the Executive Committee, each receiving attention at alternate
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 152
meetings. The safety of all employees and contractors is of course ever-present in our minds. The increase in recordable
injuries in 2022 was a disappointing development and we will be carefully monitoring all aspects of safety in the workplace
in 2023 with the uncompromising aim of improving safety performance in 2023.
The year 2022 was a remarkable one in the life of DSM, creating the springboard for a new chapter in a long history of
successful transformations. For the Supervisory Board, 2022 might be described as a ‘hybrid’ year, involving as it did very
welcome face-to-face meetings as well as the continuation of some meetings online. My colleagues and I enjoyed our
interactions with employees throughout the year, especially in the context of our site visit to Switzerland and we are
appreciative of the hard work and commitment everyone continued to demonstrate in often extremely challenging
circumstances. I would also like to thank the Co-CEOs, the Executive Committee, and my colleagues on the Supervisory
Board for their vision and leadership throughout 2022.
Looking forward, I am deeply honored to have been chosen to chair the Board of Directors of the future DSM-Firmenich. I
am inspired by the prospect of what we will all create together: a new entity committed to innovative transformations that
will benefit not only the world we live in but also generations yet to come.
Sincerely,
Thomas Leysen, Chair of the Supervisory Board
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 153
Supervisory Board Report
This Report provides further information on the way the Supervisory Board performed its duties in 2022. These include
supervising the policy pursued by the Managing Board, the Managing Board’s performance of its managerial duties, and
the general course of affairs within our company and its businesses, as well as assisting the Managing Board with advice,
either upon request or proactively. Finally, these duties also include assessing the Managing Board’s performance and
ensuring that their remuneration is in line with that performance and that it provides the appropriate incentives. Since the
inception of an Executive Committee, the Supervisory Board has also been responsible for ensuring that the checks and
balances that are part of the two-tier governance system are still taken into account, paying specific attention to the
dynamics between the Managing Board and the Executive Committee.
The responsibility of supervising the policy pursued by the Managing Board includes evaluating the way the Managing
Board implements DSM’s strategy for long-term value creation and promotes a culture aimed at creating value. In the
performance of its duties, the Managing Board and Supervisory Board act in accordance with the interests of the company
and weigh up the interests of all stakeholders, in line with DSM’s multi stakeholder-approach. This is all described in the
sections Strategy, People and Corporate governance and risk management.
Composition of the Supervisory Board
The composition of DSM’s Supervisory Board is diverse in terms of gender, nationality, background, knowledge and
experience. The Board comprises four men and four women. Two members are Dutch, one American, one Dutch-American,
one British, one Singaporean, one Australian and one Belgian. The Board’s current members are Thomas Leysen (Chair),
John Ramsay (Deputy Chair), Eileen Kennedy, Carla Mahieu, Erica Mann, Frits van Paasschen, Pradeep Pant and Corien
Wortmann-Kool. For detailed information on their backgrounds, see the company website and Supervisory Board and
Managing Board Royal DSM.
Following best practice 2.1.10 of the Dutch Corporate Governance Code, the Supervisory Board establishes that its members
are able to act critically and independently of one another, the Managing Board and any particular interests involved. To
safeguard this, the Supervisory Board is composed in such a way that all its members are independent in the meaning of
best practice 2.1.8 of the Dutch Corporate Governance Code.
The targeted profile of the Supervisory Board is described on the company website under ‘Supervisory Board’ and is
reflected in the company’s regulations. The size, composition and qualities of the Supervisory Board as a whole should be
in keeping with the company’s size, portfolio, nature, culture, geographical spread and its status as listed company. The
Supervisory Board should be diverse in its composition and possess knowledge and experience in the fields as listed
under ‘DSM Supervisory Board: key competences’ below. Members of the Supervisory Board should represent certain
qualities, among others, integrity and the ability to operate independently and critically vis-à-vis the other members and
the Managing Board members. The Supervisory Board has four committees to cover key areas in greater detail: Audit,
Nominations (to the Supervisory Board and Managing Board), Remuneration (of the Supervisory Board and Managing
Board) and Sustainability. Information on these committees is given elsewhere in this section. The charters of the
committees are published on the company website under ‘Supervisory Board’.
Relationship and stakeholder management
In performing its duties, the Supervisory Board acts in accordance with the interests of the company and the business
connected with it, taking into consideration the interests of the company’s stakeholders. The Chair of the Supervisory
Board is in regular close contact with the Co-CEOs, as is the Chair of the Audit Committee with the CFO.
Furthermore, the Supervisory Board regularly interacts with members of the Executive Committee, who regularly attend
Supervisory Board meetings and participate in the yearly site visit of the Supervisory Board.
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 154
The Supervisory Board interacts with our employees on various occasions and in various contexts. The Supervisory Board
regularly receives information on relevant topics from senior leaders and experts in the company during committee
meetings, full Supervisory Board meetings, annual site visits, and also as part of their ongoing professional education.
During its annual site visit, the Supervisory Board actively takes the opportunity to interact with employees at different
levels, from shop floor to senior leadership, thus collecting valuable information and insights from various sources across
the company. In May 2022, we announced our intention to enter into a merger of equals with Firmenich and become the
leading creation and innovation partner in nutrition, beauty and well-being. The Supervisory Board was involved as of the
start of the merger discussions and had several additional meetings to engage with the proposition and contribute to
decisions on key topics such as legal structure, valuation and governance. The Supervisory Board was regularly kept up to
date on the progress being made to close the transaction as well as on the preparations for integration. The Supervisory
Board was also involved early in the strategic discussions leading to the announcements of the divestments of DSM’s
Materials businesses. Other strategic topics in which the Supervisory Board was involved were the strategic alliance in the
US for Bovaer® between DSM and Elanco and the acquisition of Prodap. The Supervisory Board also performed a post-
acquisition review of the CSK business and was regularly updated as to the progress made on large innovation projects
dedicated to the development of products such as Bovaer®, Veramaris®
1
, EVERSWEET® and CanolaPRO®.
Direct, one-to-one contact between Supervisory Board members and Managing Board and Executive Committee members
generally follows naturally from topics discussed in the meetings of the Supervisory Board. These discussions draw on the
expertise of individual Supervisory Board members, whose advice is sought on a wide range of specialist topics as
required. Supervisory Board members also have direct contact with other employees in the course of the aforementioned
site visits and specifically arranged meetings. Examples are the visits of Thomas Leysen to DSM’s two sites in Poland and in
Freeport (Texas, USA). Upon specific request, the full Supervisory Board reviewed the company’s corporate risk assessment
and the Audit and Sustainability Committee jointly reviewed the ESG reporting landscape. In addition, the Audit Committee
had in-depth discussions on the financial reporting requirements of the announced merger. Pradeep Pant, who is based in
Singapore, continued to be in regular contact with our senior management in Asia.
In 2022, a rhythm of alternating virtual and face-to-face meetings was set up, as well as several additional phone calls to
discuss and contribute to the decisions leading to the announced merger of equals between DSM and Firmenich as well as
the announced divestments of the Protective Materials business (completed on 1 September 2022) and the Engineering
Materials business. The full Supervisory Board’s annual site visit, together with the Executive Committee, was to DSM in
Kaiseraugst (Switzerland), and was combined with a visit to DSM’s site in Sisseln (Switzerland).
The Supervisory Board takes an active interest in maintaining a good understanding of our stakeholders and their
positions on various topics related to the company’s areas of business. This includes the perceptions of our shareholders.
The Supervisory Board is informed of the position of other DSM stakeholders by the Managing Board. In addition, the
Supervisory Board collects such information through its own network.
1 Veramaris® is a trademark owned by Veramaris V.O.F, a joint venture between DSM and Evonik.
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 155
DSM Supervisory Board: key data and attendance records
Thomas
Leysen (C)
John
Ramsay (DC)
Eileen
Kennedy
Carla
Mahieu
Erica
Mann
Frits van
Paasschen
Pradeep
Pant
Corien
Wortmann-
Kool
Diversity
Year of birth
1960
1957
1947
1959
1958
1961
1953
1959
Gender
Male
Male
Female
Female
Female
Male
Male
Female
Geography
Europe
Europe
North
America
Europe
Oceania
Europe /
North America
Asia
Europe
Tenure
Initial appointment
2020
2017
2012
2021
2019
2017
2016
2021
Latest reappointment
n.a.
2021
2022
n.a.
n.a.
2021
2020
n.a.
End of current term
2024
2025
2024
2025
2023
2025
2024
2025
Reappointment possible?
Y
Y
N
Y
Y
Y
Y
Y
Attendance
Committee memberships
NomCo (C)
RemCo
AC (C)
RemCo
SustCo (C)
NomCo
RemCo (C)
NomCo
AC
SustCo
RemCo
SustCo
AC
NomCo
AC
SustCo
Attendance of
SB meetings
1
100%
100%
94%
2
100%
89%
3
100%
83%
4
100%
Attendance of Committee
meetings
NomCo
100%
RemCo
83%
5
AC
100%
RemCo
100%
NomCo
100%
SustCo
100%
RemCo
100%
AC
83%
3
SustCo
100%
RemCo
100%
SustCo
100%
AC
100%
NomCo
100%
AC
100%
SustCo
100%
1 ‘Attendance’ refers to the three physical Supervisory Board (SB) meetings and 15 virtual meetings held in 2022. In addition to these
meetings, there were also two virtual SB meetings in 2022 for which the decision-making had been mandated by the SB to the Chair of the Board
and the Chair of the Audit Committee, who both participated in these calls. Pradeep Pant and Erica Mann voted by proxy at a virtual meeting in May.
2 Eileen Kennedy missed one virtual SB in February due to internet problems caused by a storm.
3 Erica Mann missed a Supervisory Board call in February and the Supervisory Board call and Audit call in July due to other previously scheduled
commitments. She gave advance input via other members.
4 Pradeep Pant missed one virtual SB meeting due to a previous scheduled commitment. Furthermore, he missed two virtual meetings for health reasons.
5 Thomas Leysen missed the virtual Remuneration Committee in April due to travelling. He gave advance input to the Chair of the Remuneration Committee.
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 156
DSM Supervisory Board: key competences
Thomas
Leysen (C)
John
Ramsay (DC)
Eileen
Kennedy
Carla
Mahieu
Erica
Mann
Frits van
Paasschen
Pradeep
Pant
Corien
Wortmann-
Kool
Competences
General Management
x
x
x
x
x
x
Finance/Accounting/Auditing
x
x
x
Strategy
x
x
x
x
x
x
x
x
Risk
x
x
x
Marketing & Sales
x
x
x
x
Operations & Manufacturing
x
x
R&D/Innovation/Technology
x
x
Safety
x
x
Sustainability & Environment
x
x
x
x
x
Emerging Economies
x
x
x
x
People & Organization
x
x
x
x
IT/Digital
x
x
Governance/Compliance/Legal
x
x
x
x
x
x
Public Affairs
x
x
x
x
DSM’s businesses
X
x
x
x
x
x
x
x
x
Supervision and advice
The Supervisory Board performs its duties of supervising and advising the Managing Board with respect both to recurring
standard agenda items for Supervisory Board meetings and to specific topics that become relevant at any given point in
time.
In view of DSM’s journey to become a focused Health, Nutrition & Bioscience company, as of 1 January 2022 it was decided
that Quality should be accorded the same level of attention as Safety in the agendas of Supervisory Board meetings, with
each being discussed as the first agenda point in alternate meetings. Another prominent agenda item is an update on
business performance, financials, treasury and investor relations topics. As part of this agenda item, the Supervisory Board
tracks the company’s financial performance, approves the annual Finance and Capital Expenditure Plan, is updated on
capital market expectations and deliberates on any additional treasury topics as needed. In 2022, the Supervisory Board
also discussed and approved the usual share buy-back programs to cover commitments under share-based compensation
plans and the stock dividend. In addition, a bridge financing facility was approved to cover for the financial aspects related
to the announced merger.
In line with our overall Strategy, the Supervisory Board was actively involved in the company’s transition to a focused
Health, Nutrition & Bioscience company as well as the discussions leading to the announcement of the intent to merge
with Firmenich. The Supervisory Board was also involved in the discussions leading to the acquisition of Prodap, the
divestment of DSM’s Protective Materials business, and the announcement of the divestment of DSM’s Engineering
Materials business. A post-acquisition review of CSK was performed in 2022 in addition to a post-investment review of
Advanced Solar, DSM’s divested solar panel business. The Supervisory Board also discussed DSM’s new climate targets to
accelerate the route to net-zero as well as DSM’s progress on its new Food System Commitments.
At the Supervisory Board’s request, the company’s risk assessment procedures were discussed in the full Supervisory
Board meeting. The Supervisory Board also discussed the progress made on the development of Bovaer® and the strategic
alliance with Elanco in this area. In addition to Bovaer®, the Supervisory Board also reviewed the full Innovation portfolio.
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 157
Site visits
Each year, the Supervisory Board takes a number of days to visit DSM sites in a particular region. This fosters interaction
with employees across different areas of the company and provides Supervisory Board members with opportunities for
continuing education. This year’s visit was dedicated to DSM’s business in Switzerland. A central theme of the visit was the
Supervisory Board’s interactions with our employees at all levels of the organization. The visit deepened the Supervisory
Board’s knowledge of DSM’s vitamin A business, the biomass power plant in Sisseln and the Health, Nutrition & Care lab in
Kaiseraugst, specifically in the area of sensory science, the skin microbiome and hair care.
The program began with a visit to DSM’s site in Sisseln, where the Site Director welcomed the Supervisory Board and
several members of the Executive Committee. The DSM Sisseln site is an important production location, development
center and ideas hub within DSM. The Supervisory Board was presented with an overview of the site’s vitamin E
production, forward-looking technologies, such as DSM’s bio-based vitamin A, and certain of the site’s development
projects. The visit continued with a tour of the bio-based vitamin A facility and the biomass power plant and ended with
an interactive lunch with young talents from the site. In the afternoon, the Supervisory Board travelled to Kaiseraugst,
where they were welcomed by the President of DSM Switzerland. In Kaiseraugst, the Supervisory Board experienced the
new Innovation Campus, including a virtual reality session, followed by a townhall meeting with employees, which resulted
in an open and lively discussion between Supervisory Board members and employees. The evening was spent with local
senior executives to get to know each other better.
The Supervisory Board spent the next day at the office in Kaiseraugst, where they had another interactive lunch session
with talents, followed by a Health, Nutrition & Care deep-dive and a lab tour. During the lab tour, several employees
presented current Health, Nutrition & Care development projects in the areas of sensory science, the skin microbiome and
hair care/shampoo. At the end of the day, the Swiss Food & Nutrition Valley organized a ‘food market’ where the
Supervisory Board was able to meet up with start-ups and associated companies. During the dinner in the evening, the
Supervisory Board shared its impressions with the Executive Committee members and evaluated the conversations they
had had with several senior executives.
The Supervisory Board (front row, from left to right): Frits van Paasschen, Corien Wortmann-Kool, John Ramsay (Vice-Chair), Pradeep Pant and Carla Mahieu;
(back row, from left to right): Eileen Kennedy, Erica Mann and Thomas Leysen (Chair).
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Royal DSM Integrated Annual Report 2022 158
Supervisory Board meetings and performance evaluation
In 2022, the Supervisory Board held its five regular meetings and one regular call in the presence of the Managing Board,
as well as 12 additional calls also in the presence of the Managing Board and several Executive Committee members. There
were also 2 Supervisory Board calls in 2022 for which the decision-making had been mandated by the Supervisory Board to
the Chair of the Board and the Chair of the Audit Committee, who both attended these calls. On three dates, a member was
excused due to conflicting commitments. On two other dates, a member was excused for health reasons and on one date
a member could not attend due to internet problems. The additional calls were needed to discuss and approve the
announcements of DSM’s intentions to merge with Firmenich and divest its Protective Materials and Engineering Materials
businesses. Information on attendance of Board and Committee meetings can be found in the table in this Supervisory
Board Report.
The Supervisory Board also convenes in the absence of the Managing Board, which usually happens either before or after
a meeting.
An evaluation of the Supervisory Board is performed once every three years by an external advisor; this was the case in
2022. In the other two years, the evaluation of the Supervisory Board is performed by means of a self-assessment
consisting of a written survey, followed by in-depth, one-on-one interviews between the Chair and individual Supervisory
Board members. The outcome of the evaluation was presented to, and discussed with, the Supervisory Board in December,
in the absence of the Managing Board.
The Supervisory Board used an external firm that conducts multiple board evaluations and was therefore able to
benchmark DSM’s Supervisory Board evaluation against that of other boards. As in previous years, the overall feedback
from the evaluation in 2022 was positive. Overall, and across the board, there is great satisfaction and positivity on the
side of the Supervisory Board members. They adjudge the Supervisory Board to be of an appropriate size and range of
diversity in terms of competences, nationalities/geographical footprint, experience and gender. The Supervisory Board
fulfills its tasks and responsibilities in a professional and constructive manner. Members come well prepared for meetings
and show respect for each other’s contributions and points of view. The dialogue is described as open and the atmosphere
is transparent and collegial. Opinions and views are regularly challenged, generating constructive debate. There is a trust
in collective decision-making, an example of which is the Supervisory Board’s approval of the Managing Board’s decision
to enter into a merger of equals with Firmenich.
Some points for improvement were noted, some of a rather practical nature and others related to content. With respect to
the overall dynamics, the Supervisory Board members highly value the personal interactions and would like to further
invest in more face-to-face time. An area for improvement in practical terms is the succinctness and timeliness of briefing
materials. From a content perspective, the Supervisory Board would like to spend more time on education with a focus on
DSM’s operating context. While the Managing Board’s performance is also (indirectly) assessed as part of the evaluation,
this happens throughout the year as part of the discussions on succession planning in the Nomination Committee. This
applies particularly when the performance appraisals of Managing Board members are discussed, as well as their
performance versus their individual targets in the Remuneration Committee. The Nomination and Remuneration
Committees report back on these discussions to the Supervisory Board.
Committees
The Supervisory Board has four committees to cover key areas in greater detail: Nomination, Remuneration, Sustainability
and Audit. These are described in more detail below.
Board nominations
The Nomination Committee comprises Thomas Leysen (Chair), Eileen Kennedy, Pradeep Pant and Carla Mahieu. Geraldine
Matchett, Dimitri de Vreeze and Cristina Monteiro, Executive Vice President People & Organization, were also involved in
this Committee’s discussions. The Committee met four times in 2022. The recommendations of all Nomination Committee
meetings were shared with the entire Supervisory Board. This feedback included advice and recommendations regarding
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 159
topics to be approved by the full Supervisory Board. The Supervisory Board also has access to all the meeting materials
posted for the Nomination Committee meetings.
In 2022, discussions in this committee focused on evaluation of the Managing Board and Executive Committee as well as
succession planning for the Managing Board, the Executive Committee, and the Supervisory Board. With respect to the
Executive Committee, the discussions focused on the succession pipeline for each of the Executive Committee positions
with specific attention for the Executive Committee succession in view of the announced merger between DSM and
Firmenich.
As in other years, the Supervisory Board established that the composition of the Managing Board is, and will remain,
diverse in nationality, gender, background, expertise and experience, and that it provides a good foundation to support all
Business Groups in achieving their targets and thus delivering on the company strategy. For detailed background
information on the Managing Board members, see the company website under ‘Managing Board’ and the Managing Board
section of this Report.
Taking into account the Supervisory Board profile as laid down in the Supervisory Board regulations, the Nomination
Committee continued discussions on the overall composition of the Supervisory Board and discussed succession planning
for the Supervisory Board. In view of the announcement of the intended merger, the Nomination Committee also
contributed to the discussion around the proposed members of the Board of Directors of DSM-Firmenich.
Board remuneration
The Remuneration Committee had six meetings in 2022. Carla Mahieu (Chair), Thomas Leysen, John Ramsay and Frits van
Paasschen are members of this committee. Recommendations of the Remuneration Committee meetings were shared with
the full Supervisory Board and were used to determine the final remuneration of the members of the Managing Board. The
Supervisory Board also has access to all the meeting materials provided for the Remuneration Committee meetings. For
more information on the remuneration policy, see the company website. For the implementation of that policy in 2022, see
the Remuneration report 2022.
Discussions focused on the performance and the related remuneration of the members of the Managing Board, in respect
of both company and individual performance in 2022. The performance and remuneration of the Executive Committee
members were also shared with the Remuneration Committee. Geraldine Matchett, Dimitri de Vreeze and Cristina Monteiro
were also partly involved in these discussions. The majority of discussion time in 2022 was spent on remuneration topics
related to the Short-Term Incentive (STI) and Long-Term Incentive (LTI) scorecard. Attention was given both to the setting
of targets for 2022 and to first estimates of performance against those targets, gender pay gap, and equal pay.
Preparations took place for the possible amendments to the company’s remuneration policy. Due to the merger
announcement, the activities in this area were paused and will be taken up again once the merger has been completed.
Sustainability
The Sustainability Committee prepares the Supervisory Board’s discussions on sustainability topics. The Sustainability
Committee met four times in 2022. This Committee comprises Eileen Kennedy (Chair), Erica Mann, Frits van Paasschen and
Corien Wortmann-Kool. The Chair of the Supervisory Board has a standing invitation and participated in all meetings. The
recommendations of these meetings were shared and discussed with the entire Supervisory Board during its meetings
with the Managing Board. The Supervisory Board has access to all the meeting materials provided for the Sustainability
Committee meetings. The feedback from the Committee to the full Board included advice and recommendations regarding
topics to be approved by the Supervisory Board, in particular the sustainability reporting in this Report. Taking into
consideration the draft Assurance report of the independent auditor on the Sustainability Information by KPMG, the full
Supervisory Board approved the reporting against these topics on 1 March 2023. The assurance report was finalized by
KPMG after the approval of the Supervisory Board. The Sustainability Information complies with the Standards of the
Global Reporting Initiative and our internal reporting criteria, which are included in this Report, and is also aligned with
the international Integrated Reporting Council <IR> Framework where possible.
During the year, recurring topics were the company’s performance against its People and Planet aspirations, with a focus
on safety, emissions reduction, Brighter Living Solutions Plus, and Diversity, Equity & Inclusion. Through these discussions,
the Sustainability Committee followed up on the progress made with the implementation of the sustainability and safety
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Royal DSM Integrated Annual Report 2022 160
aspirations set as part of the company’s strategy, as well as progress made on DSM’s Food System Commitments. As ever,
safety was extensively addressed, being always the first item on the agenda of the Sustainability Committee. The
Sustainability Committee also zoomed in on the impact of the EU taxonomy for sustainable activities on the company and
received an update on DSM’s physical and transition climate risks. A deep dive was performed on DSM’s Personalized
Nutrition business, and the members of the Sustainability Committee received an update on DSM’s position papers. The
update of DSM’s greenhouse gas emissions targets to align with the 1.5°C trajectory was also extensively discussed. In
terms of Diversity, Equity & Inclusion, the Sustainability Committee reviewed and discussed the company’s performance as
well as our long-term strategic ambitions.
Financials and auditing
The activities of the Supervisory Board in the area of financials and auditing are prepared by the Audit Committee. The
Audit Committee met six times in 2022. John Ramsay (Chair), Pradeep Pant, Erica Mann and Corien Wortmann-Kool are
members of the Audit Committee. All Supervisory Board members have a standing invitation to attend Audit Committee
meetings. In 2022, most of them used this for the two conference calls in which the financial developments and interim
results for the first and third quarter were discussed. The Chair of the Supervisory Board participated in all meetings and
calls. The highlights of all Audit Committee meetings were shared with the full Supervisory Board. This feedback included
advice and recommendations regarding topics to be approved by the full Supervisory Board. In 2022, these included the
approval of the 2022 COA Audit plan and the proposed reappointment of the external auditor (approved by the 2022
Annual General Meeting of Shareholders). All Supervisory Board members have access to all the meeting materials posted
for the Audit Committee meetings.
Our external auditor KPMG, Geraldine Matchett in her capacity as CFO, and the Senior Vice President Group Controller
participated in all the meetings of the Audit Committee, along with the managers responsible for internal audit, risk
management and compliance. An exception was formed by the two meetings in which the financial developments and
interim results for the first and third quarter were discussed. Three times a year, the Audit Committee meets with the
external auditor without the Managing Board being present, and one time per year the Audit Committee meets with the
internal auditor without the Managing Board being present.
The Committee had in-depth discussions of the company’s financials: the Finance plan, the Capital Expenditure plan,
dividend proposals, the financial statements, and accounting policy changes. The discussions of internal risk management
and control systems covered the Internal Control Framework, compliance with recommendations and observations made
by internal and external auditors, and the role and functioning of COA. This included the endorsement of COA’s proposed
audit plan for 2023, which was subsequently approved by the full Supervisory Board. The Corporate Risk Assessment, the
company’s main risks and their mitigation were this year discussed during the full Supervisory Board meeting. The Audit
Committee also discussed and evaluated cases submitted under the company whistleblower policy (DSM Alert), fraud
cases, ongoing litigation, tax, insurances and privacy compliance. Another recurring topic is our cybersecurity resilience,
about which the Audit Committee is informed through a dashboard, as well as information on running cybersecurity
programs and cybersecurity governance. In addition, the Audit Committee discussed the update of the Internal Control
Framework.
Discussions were held with KPMG about the audit plan, management letter, audit report and financial statements for 2022,
including managerial judgments and key accounting estimates. In its management letter, KPMG shared the outcome of its
evaluation of the company’s procedures and system of internal controls to the extent necessary within the scope of the
audit of the financial statements. The observations of KPMG were presented along the pillars that support our in-control
statement with a continued focus on the Internal Control Framework pillar (for the Statements of the Managing Board; for
a visualization of our control environment, see Corporate governance). KPMG confirmed that in 2022 DSM made good
progress on improving its Internal Control Framework. With respect to the upcoming increase in reporting requirements,
KPMG’s management letter contained constructive recommendations on reporting of non-financial information, as well as
our preparations for the future organization also considering the announced intended merger of equals of DSM and
Firmenich.
Finally, in 2022, the Audit Committee formally evaluated the external auditor, and discussed the reappointment of KPMG.
The proposal to reappoint KPMG is based on the Audit Committee’s own assessment of KPMG, on discussions with KPMG in
the absence of management, and on the outcome of an evaluation among DSM executives.
Report by the Supervisory Board – Supervisory Board Report
Royal DSM Integrated Annual Report 2022 161
Financial statements 2022
The Report by the Managing Board and the financial statements for 2022 were submitted by the Managing Board to the
Supervisory Board, in accordance with the provisions of Article 30 of the Articles of Association, and were subsequently
approved by the Supervisory Board on 1 March 2023. The financial statements were audited by KPMG, who issued an
unqualified opinion (see the Independent auditor’s report). The Supervisory Board established that the external auditor
was independent of DSM.
The Supervisory Board will submit the 2022 financial statements to the 2023 Annual General Meeting of Shareholders, and
will propose that the shareholders adopt them and release the Managing Board from all liability in respect of its
managerial activities and release the Supervisory Board from all liability in respect of its supervision of the Managing
Board. The profit appropriation as proposed by the Managing Board and approved by the Supervisory Board is presented
in Profit.
Royal DSM Integrated Annual Report 2022 162
Remuneration report 2022
Introduction by the Chair of the Remuneration Committee
Growing concerns about climate change, international conflicts and rising energy prices, among other factors, set the tone
in 2022. As a result, we faced a very challenging global operating environment, while insecurities and (especially in Europe)
rising inflation put pressure on the daily lives of our employees. 2022 was also the year in which our game-changing
merger of equals with Firmenich was announced. In preparation for this transformational move, the repositioning of the
company to focus on Health, Nutrition & Bioscience that had been initiated in 2021 continued in 2022, in parallel with
arrangements to find new homes for our Materials businesses.
Even as the world emerged from the COVID-19 pandemic, growing concerns about the planet and high inflation began to
make themselves felt in the daily lives of our employees, who faced new insecurities and experienced the impact of these
developments on their purchasing power. In view of this, we made special one-off payments to our employees in various
countries to supplement local governmental programs aimed at reducing the impact of these developments. In addition,
we paid special attention to living wages. Certified reviews against the WageIndicator’s benchmark were performed,
resulting in an adjustment of salaries to respective regional/local standards.
In a challenging business environment, characterized by an overstrained labor market, rising energy costs and the impact
of supply chain disruptions, among other factors, DSM delivered a solid performance over the course of 2022. While sales
volumes were approximately equal to 2021, pricing actions to counter higher energy and raw materials costs, resulted in
higher revenues. However, the price-cost gap remained significant for parts of the business. Neither the Adjusted EBITDA
target nor the Cash Flow target included in the Short-Term Incentive (STI) scheme have been achieved. Our Safety
performance during 2022 was disappointing by our own high standards and likewise did not contribute to the achievement
of our STI result. However, we remained on track regarding the Brighter Living Solutions Plus goal. Given the significant
external and internal changes the organization underwent, we were particularly proud to see Employee Engagement
remain strong with an engagement index of 77% indicating that our employees are supportive of our ongoing
transformation to become a leading Health, Nutrition & Bioscience company. The vesting of the Performance Share Units
(PSUs) granted in 2019 was driven by the result on the Total Shareholder Return (TSR) target and the outperformance
against our sustainability goals.
In 2022, we continued our strategic journey to become a company focused on Health, Nutrition & Bioscience, better placed
to deploy our resources and capabilities to address the urgent societal and environmental challenges linked to the way
the world produces and consumes food. Major steps were taken in this respect. New homes were found for the Materials
businesses, enabling them to maximize their full potential to drive the important industrial shift to a bio-based and
circular economy. Our operating structure was simplified and streamlined to deliver on our new operating model. At the
end of May, we announced our intention to enter into a merger of equals with Firmenich, the world’s largest privately-
owned fragrance and taste company, to form a leading creation and innovation partner in nutrition, beauty, and well-
being.
In view of the upcoming merger, we decided to interrupt the project concerning the review of the Remuneration policy, as
the merger will have an impact on the governance and decision-making processes regarding remuneration. A detailed
benchmarking study conducted in early 2022 confirmed that DSM lags behind the market as far as the remuneration of the
Managing Board is concerned. Referencing a peer group consisting of companies headquartered in Europe and
comparable to DSM (pre-merger) in terms of size and complexity, we learned that the remuneration of DSM’s Co-CEOs is
positioned around the lower quartile of the market. An appropriate step-up would be needed to bring the remuneration
close to the market median, as described in our policy.
The 2022 remuneration reported herein is fully aligned with the pursuit of DSM’s strategic objectives. In addition, we
continued in 2022 to remain focused on customer-centricity, large innovation projects, integrating acquired businesses,
cost control, and operational excellence.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 163
This Remuneration report provides a summary of the remuneration policy for the Managing Board of Koninklijke DSM N.V.
and the Supervisory Board of Koninklijke DSM N.V. respectively, as well as an overview of the remuneration of the
members of the Managing Board and the Supervisory Board in the financial year 2022. The full remuneration policy as
approved by the AGM in 2019 is published on the company website. This report is prepared in accordance with the relevant
parts of Section 135 Book 2 of the Dutch Civil Code.
Carla Mahieu
Chair, Remuneration Committee
Remuneration of the Managing Board of Koninklijke DSM N.V. 2022
Summary of the remuneration policy of the Managing Board of Koninklijke DSM N.V.
The remuneration policy of the Managing Board is designed to attract and retain qualified leaders who can shape our
purpose-led, performance-driven strategy, engage our people and other stakeholders, and ultimately achieve results –
putting customers first and delivering on our company’s promises. The policy provides clear focus: improving company
performance and enhancing purpose-led, long-term value creation across multiple dimensions (People: individual and
societal; Planet: environmental and ecological; and Profit: economic and financial) while recognizing the interests of all our
stakeholders (our customers, employees, shareholders, as well as society at large).
Remuneration is linked to company and individual performance. Based on the company’s short- and long-term strategic
objectives as well as our business drivers, results are measured on the basis of specified targets, balancing short- and
long-term outcomes, serving the interests of all our stakeholders. To be competitive and to ensure alignment internally,
Total Direct Remuneration offered by DSM approaches – from below – the median of a predefined peer group. Reward
levels are benchmarked against the Dutch/European labor market peer group, while the design of various reward
components is reviewed against the broader perspective of best market practices.
Labor market peer group
European industry peers:
Dutch AEX-listed peers:
- Clariant AG
- Koninklijke Ahold Delhaize N.V.
- Covestro AG
- Akzo Nobel N.V.
- Evonik Industries AG
- ASML Holding N.V.
- Givaudan SA
- Heineken N.V.
- Johnson Matthey Plc
- Koninklijke KPN N.V.
- LANXESS AG
- Koninklijke Philips N.V.
- Lonza Group AG
- Randstad N.V.
- Solvay SA
- Wolters Kluwer N.V.
The full version of the remuneration policy of the Managing Board Koninklijke DSM N.V., as approved by the 2019 AGM, is
available on the company website. The following table specifies the elements of the remuneration policy, describing their
purpose, design, and link to our company strategy, as well as their potential value.
Purpose
Design and link to strategy
Value
Goal
The goal of DSM's remuneration policy for the Managing Board is to offer an on-target total remuneration package approaching
– from below – the median of the labor market peer group.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 164
Purpose
Design and link to strategy
Value
Total Direct Compensation
Is the basis for benchmark
efforts, i.e., the reference to the
labor market peer group.
Includes base salary and variable income. Variable
income concerns the performance-related Short-Term
Incentive (STI) and the STI deferral & matching plan, as
well as the Long-Term Incentive plan (LTI). In addition,
Managing Board members are entitled to certain
benefits.
Value of each respective item is
included hereafter.
Base salary
Basic pay for doing the job.
Aims to provide a fair and competitive basis for the total
pay level to attract and retain qualified leaders. Annual
review based on the market movement for executives
based in the Netherlands and peer companies. Regular
in-depth benchmark.
Base salaries at DSM approach –
from below – the median of the
labor market peer group.
Short-Term Incentive (STI)
Incentive aligning short-term
business objectives and
business drivers with strategic
company objectives. Driving pay
for performance.
The Supervisory Board sets goals and targets for the
respective performance year and determines the extent
to which these have been achieved. By ensuring that
strategic objectives are properly reflected in stretching
yet achievable targets, the realization of strategic
business objectives is addressed. Half of the at-target
STI is linked to financial objectives; the other half is tied
to sustainability aspirations and individual goals.
On-target performance: 50% of
annual base salary. Maximum
opportunity capped at 100%.
Threshold: no STI pay-out in case
the target for Adjusted EBITDA is
not achieved to the level of at
least 75%.
STI deferral & matching
Ensures that longer-term
considerations are sufficiently
considered in pursuing short-
term objectives.
Conversion of STI into shares, with a 1:1 company match
delivered in Performance Share Units (PSUs). The PSUs
vest upon the realization of predefined goals (same as
LTI program), observing a three-year vesting period. By
linking the vesting of the PSUs to the targets of the LTI
program, it is ensured that decisions regarding short-
term results are aligned with long-term value creation.
Mandatory conversion: 25% of STI
achieved; voluntary conversion: 0–
25%, with incremental steps of 5%.
Maximum number of matching
PSUs to vest is equal to number
of PSUs granted.
Long-Term Incentive (LTI)
Focus on long-term value
creation. Designed to ensure
that decisions made are in the
long-term interests of all
stakeholders and to ensure
that interests of the Managing
Board and the company
stakeholders are aligned.
PSUs are awarded every year, to be converted into
shares upon realization of predefined targets, observing
a three-year vesting period. A five-year holding period
(starting at grant date) applies. Performance goals are
based on company strategy, driving long-term value
creation. Half of the target LTI is linked to financial
goals; the other half is linked to sustainability
aspirations. Performance is measured over three
financial years, starting with the year of grant.
Based on face value, the at-target
grant equals 100% of base salary;
the number of PSUs granted
equals the maximum to vest (i.e.,
150% of base salary). Therefore,
the maximum vesting opportunity
is 100% of the number of PSUs
granted.
Shareholding requirement
Aligning reward to the interests
of stakeholders and
emphasizing confidence in
performance and strategy.
Managing Board members are expected to build up a
shareholding in the company; the minimum
shareholding requirement must be accrued in four
years. Considered are shares privately purchased and
vested shares granted under DSM share-based
compensation plans.
The minimum share-holding
requirement is 300% of annual
base salary for both Co-CEOs and
200% for other Managing Board
members.
Pension and other benefits
Post-retirement remuneration
contributing to the
competitiveness of the overall
package. Together with other
benefits, creates alignment with
market practice.
Mandatory enrollment in basic pension plan as
applicable to all DSM employees in the Netherlands
(Collective Defined Contribution). In addition, a
company-paid contribution to allow participation in the
so-called Net Pension Plan under conditions as
applicable to Netherlands-based employees (Individual
Defined Contribution).
Other benefits include sick pay (aligned with
Netherlands-based employees) and a company car.
Pension scheme aligned with
plans in place for employees in
the Netherlands.
Other benefits aligned with
market practice.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 165
Purpose
Design and link to strategy
Value
Goal- and target-setting
Goal- and target-setting are key
to drive pay for performance
aligned with Company strategy
and to ensure that decisions
made, and results delivered,
are aligned with the interests of
DSM's stakeholders.
The Supervisory Board sets goals, their respective
weight, and targets (i.e., metric to be achieved) for the
respective performance year under the STI and LTI
scheme, considering:
- Company strategy
- Focus on long-term value creation
- Historical performance, business outlook, and
circumstances and priorities
- Stakeholder expectations
- At target level, there is a 50:50 split between
financial goals and sustainability/individual
goals
Targets must be stretching yet
achievable.
The company website contains an overview of the main terms and conditions of employment of both Co-CEOs.
Total remuneration of the Managing Board 2022
Introduction
Other than the positioning of the targeted Total Direct Compensation, which is at the lower quartile of the peer group, the
remuneration for 2022 is aligned with the remuneration policy, and complies with EU requirements, the Dutch Corporate
Governance Code and legislation.
Base salary
As at July 2022, the annual review of base salary resulted in an adjustment of 2.5%, As such, the adjustment is aligned
towards the market movement for executives based in the Netherlands and peer companies.
Fixed annual base salary
in €
1 July 2022
15 February 2021
Geraldine Matchett
1,028,750
1,003,625
Dimitri de Vreeze
1,028,750
1,003,625
Goals and targets incentive programs
In September 2021, DSM announced its strategic decision to fully focus its resources and capabilities to address the urgent
societal and environmental challenges linked to the way the world produces and consumes food. With a growing global
population, the world is facing multiple systemic and interconnected food system challenges that impact the health and
wellbeing of people, animals, and the planet. Advancements in digital technology and bioscience offer realistic scalable
solutions to tackle these challenges, creating new markets and innovation opportunities. With its strong combination of
scientific competences and growing portfolio of nutrition and health solutions, DSM is ideally positioned to capture these
opportunities.
In view of this, during 2022 DSM simplified its operating structure and reorganized its Health, Nutrition & Bioscience
activities into three Business Groups, each with clear opportunities to benefit the health of people and the health of the
planet, underpinning the company’s growth plans. At the time, DSM announced it was reviewing the strategic options for
its Materials businesses. This resulted in the divestment of DSM Protective Materials in 2022, while the closing of the
divestment of DSM Engineering Materials is approaching.
As a Health, Nutrition & Bioscience company, DSM has a purpose-led, performance-driven strategy with sustainability and
innovation as key growth drivers of its long-term focused plan, underpinned by ambitious targets across People, Planet
and Profit. In view of this, the company announced an acceleration in its greenhouse gas emissions reduction target (a
reduction of its own emission by 59% in 2030).
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 166
Related to this, a broader set of key performance indicators (KPIs) was defined, some of which feature in our incentive
programs. This relates to targets that reflect our financial performance as well KPIs reflecting our commitment to deliver
on sustainability goals, since contributing to brighter lives goes hand in hand with profitable growth. The design of our
Short- and Long-Term Incentive plans emphasizes the importance of building long-term growth opportunities. Targets
regarding energy efficiency and greenhouse gas (GHG) emission reduction and building our portfolio of Brighter Living
Solutions Plus underpin our commitment to contribute to a better world, while at the same time generating profitable
growth in line with our key strategic goals (Adjusted EBITDA and Adjusted net operating free cash flow) and safeguarding
employee safety and engagement (definitions are provided in the respective paragraph).
A comprehensive scenario analysis was conducted when the current Remuneration policy was prepared. The analysis
confirmed that neither the structure of the incentive schemes nor the nature of the goals would result in inappropriate
pay-out levels. DSM’s Remuneration policy is designed in the interest of long-term value creation, as is confirmed by a
range of factors, including:
- The pay mix: the target value of the LTI has twice the target value of the STI
- The mandatory re-investment of any STI achieved in LTI and the vesting of the match provided on such
investments is subject to targets with a long-term horizon
- The targets set for the STI or underlying the LTI grants are consistent with DSM’s longer-term strategic financial
and sustainability objectives
By this means, the structure of the policy is designed to ensure that the pursuit of short-term objectives does not prevail
over the delivery of long-term results.
Short-Term Incentive (STI)
This report includes the STI achievement for 2022, payable in April 2023, and based on the base salary paid in 2022. Targets
were set ahead of the STI cycle, in accordance with the Remuneration policy and with reference to the prior year, the
budgets and the business plans for the performance year, ensuring that achievement of the threshold, target or maximum
pay-out out are appropriately challenging.
Definitions of goals set for 2022 STI (total at-target weight is 50% of annual base salary):
- Adjusted EBITDA (weighting 12.5%): sum of the operating profit plus depreciation and amortization, adjusted for
material items of profit/loss following acquisitions/divestments, restructurings and other circumstances deemed
necessary
- Adjusted net operating free cash flow (10%): cash flow from operating activities, corrected for the cash flow of the
Alternative Performance Measures (APM) adjustments, minus the cash flow of capital expenditures and drawing
rights
- Net sales growth (2.5%): net organic sales growth
- Brighter Living Solutions Plus (BLS+) (5%): DSM applies a Sustainable Portfolio Steering methodology to identify,
and further develop sustainable, innovative solutions that deliver sustainability benefits within the value chain.
Brighter Living Solutions Plus are those products, services and technologies that, considered over their life cycle,
offer a sustainability benefit recognized by key stakeholders, underpinned with substantiating evidence, whilst
having no urgent negative signals. The set-up enables us to align the impact of our products more closely with
the UN Sustainable Development Goals (SDGs)
- Safety (5%): based on the Frequency Index for recordable injuries
- Employee Engagement (5%): based on the High-Performance Norm in the industry
- Individual goals (10%): in 2022, the Managing Board / Executive Committee shared a team target
The financial measures reflect our strategic growth ambitions while the targets related to Brighter Living Solutions Plus,
Employee Engagement and Safety relate to our Sustainability Commitments.
Within DSM’s STI scheme, pay-out brackets are defined, considering the nature of the goal. A minimum threshold is set for
each goal; an achievement below this threshold results in no pay-out with respect to that target. Over-performance results
in a pay-out exceeding 100% where the maximum achievement is capped at 200% of the ‘at-target’ weighting of the
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 167
respective goal. Goals, targets and pay-out schedules were defined at the beginning of the year, with defined brackets
between ‘threshold’ and ‘maximum’. The following table provides an overview of the realization of the 2022 STI targets.
2022 STI achievement
Weight
in % of
base salary
Target definition
Achievement
Performance
achieved
Pay-out
in % of
base
salary
Pay-out
Threshold¹
Target
Maximum²
Adjusted EBITDA
12.5%
≤ €1,845m
€1,920m
> €1,995m
€1,725m
0%
0%
€0
Adjusted net operating free cash flow
10.0%
≤ €974m
€1,019m
> €1,064m
€425m
0%
0%
€0
Net sales growth
2.5%
≤ 2.5%
5%
> 7.5%
8%
200%
5%
€50,809
Brighter Living Solutions Plus
5.0%
≤ 58%
65%
> 73%
67%
100%
5%
€50,809
Safety
5.0%
≥0.24
0.21
≤ 0.20
0.28
0%
0%
€0
Employee Engagement
5.0%
≤ 73%
76%
> 80%
77%
100%
5%
€50,809
Individual value adding goals³
(Between 0 and 200% of target)
10.0%
200%
20%
€203,239
Total STI achieved over performance year 2022
35%
€355,666
1 If threshold not achieved, no pay-out on respective goal.
2 If achievement at maximum or above, pay-out capped at 200% of weighted target.
3 In 2022, the Managing Board members had a shared strategic objective related to the strategic transformation.
Considering the challenging business environment, DSM delivered strong results in 2022. As in 2021, our net sales growth
target was overachieved (8% in 2022, compared with 13% in 2021). Although pricing actions to counter higher energy and
raw materials costs delivered increased revenues, the price-cost gap remained significant for parts of the business. The
realization (for 2022 representing total group with DSM Protective Materials included until August 31, 2022) of both the
Adjusted EBITDA target and the Cash Flow target therefore remained below their respective thresholds. In 2021 a maximum
achievement of these goals had been recorded. Our Safety performance during 2022 was disappointing by our own high
standards. Although our safety performance did not contribute to the STI in 2022, we remained on track in terms of our
other sustainability targets. Our Brighter Living Solutions Plus score improved, attaining 67% in 2022 versus 64% in 2021.
Given the significant external and internal changes the organization underwent, we are proud to report that Employee
Engagement improved to a level of 77% compared to 75% in 2021. This resulted in an on-target achievement. It also
indicates that our employees are supportive of our ongoing transformation to become a leading Health, Nutrition &
Bioscience company. The combined realization resulted in a 2022 STI pay-out, as shown below.
Short-Term Incentive
in €
2022
2021
Geraldine Matchett
355,666
819,888
Dimitri de Vreeze
355,666
819,888
Short-Term Incentive deferral & matching
As included in the Offering Circular, the STI deferral & matching scheme will be canceled in view of the intended merger
with Firmenich and settled in cash. Regarding performance year 2022, no PSUs will be granted to eligible persons under
the respective deferral & matching plans. Instead, a payment in cash will be made. This will equate to the amount of the
maximum deferral percentage (i.e., 50% of the STI achieved) that would have applied under the respective DSM Share
Matching Plan over performance year 2022 and also what MB members have consistently deferred in the last years. The
achievement of the STI over 2022 is therefore multiplied by a factor of 1.5. This resulted in a mark-up of the STI of €177,833.
This figure is not included in the above table (the amount of the STI deferred over performance year 2021 was €409,944,
converted to 2,506 PSUs).
Grant of PSUs under the STI deferral & matching scheme
Number of PSUs
2022 grant
2021 grant
Geraldine Matchett
2,506
1,850
Dimitri de Vreeze
2,506
1,850
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 168
Long-Term Incentive (LTI)
2022 and 2023 grant
On 31 March 2022, 8,500 Performance Shares Units (PSUs) were granted to each of the Co-CEOs (2021: 10,000). The grant is
based on the annual base salary applicable on the grant date and the average share price in January of the year of grant.
The fact that the number of PSUs granted in 2022 is lower compared to the previous year is a result of the share price
appreciation between both grant dates.
For performance year 2023, final approvals are yet to be made regarding the remuneration of the Executive Committee
with regards to the question of whether a grant will be made and – if a grant is confirmed – the number of equity-related
instruments to be granted.
Goal setting
Targets were set ahead of the LTI cycle, in accordance with the remuneration policy, ensuring that achievement is realistic
but challenging. The following goals were set for the LTI grants:
- Total Shareholder Return — TSR (weighting 25%): sum of capital gain and dividends paid, representing the total
return to shareholders; the relative ranking (within the peer group) reflects the overall performance relative to
our peers
- Return on Capital Employed — ROCE (25%): operating profit as percentage of weighted average capital employed
- Energy Efficiency Improvement — EEI (25%, as of the 2022 grant 15%): the reduction of the amount of energy used
per unit product (known as energy efficiency) on a three-year rolling average basis
- Greenhouse Gas Emissions — GHGE (25%, as of the 2022 grant 35%): absolute structural reduction of greenhouse
gas emissions in kilotons
Vesting 2019 grant
The performance period of the PSUs granted in 2019 was completed by year-end 2021: the actual vesting was on 31 March
2022. This concerns the PSUs granted under the Long-Term Incentive plan as well as the PSUs granted under the STI
deferral & matching plan. The following vesting schemes applied.
TSR¹
ROCE
EEI
GHGE Efficiency improvement
Rank
% of PSUs
granted
that vest²
ROCE ultimo
performance
period
% of PSUs
granted
that vest²
EEI%
(over a 3-year
period)
% of PSUs
granted
that vest²
GHGE Efficiency
absolute reduction
(3-year period)
% of PSUs
granted
that vest²
1
100
>16.7
100
≥4.00
100
<1.285
100
2
97
>16.20 - ≤16.70
83
3.25 - <4.00
83
1.285 - <1.290
83
3
93
>15.20 - ≤16.20
67
2.75 - <3.25
67
1.290 - <1.295
67
4
87
>14.70 - ≤15.20
50
2.50 - <2.75
50
1.295 - <1.300
50
5
80
>14.20 - ≤14.70
33
2.25 - <2.50
33
1.300 - <1.305
33
6
73
≤14.20
-
2.00 - <2.25
17
1.305 - <1.310
17
7
67
<2.00
-
≥1.310
-
8
50
9
33
10–15
0
1 Peer group 2019 grant includes Arkema, BASF, Celanese, Chr. Hanssen, Clariant, Croda International, Evonik, Givaudan, IFF, Kerry, Lonza Group, Novozymes,
Solvay, and Symrise. In line with the plan rules, IFF replaced DuPont in the Total Shareholder Return (TSR) peer group.
2 Any PSU grant concerns the maximum number that may vest, 100% vesting included in this table means that the target has been achieved to the maximum
level.
On the back of a strong share price appreciation, our Total Shareholder Return performance remained strong. As in 2021,
we ranked second, resulting in an achievement of 145% of target. This figure equates to the vesting of 97% of the number
of Performance Share Units initially granted and linked to this goal. At 14.3%, the ROCE target resulted in a vesting of 50%
of target (or 33% of PSUs granted, related to this goal); the 2021 realization against this target remained below the
threshold. In terms of Energy Efficiency, DSM realized an improvement of 14% over the performance period. In terms of
greenhouse gas emissions, DSM realized an absolute reduction over the performance period of 1,058kt on average. As a
result, the vesting related to both sustainability goals was at maximum level. The below table provides an overview of the
vesting (i.e., conversion to shares) on 31 March 2022 of the number of Performance Share Units granted in 2019: 82.5%
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 169
(123.75% of target) of the Performance Share Units granted under the Long-Term Incentive plan vested (compared to 74.2%
in 2021), whereas all Performance Share Units granted in 2019 under the STI deferral & matching scheme vested in 2022.
PSUs granted in 2019 vested in 2022
Numbers of PSUs vested¹
LTI
STI deferral & matching scheme
Geraldine Matchett
10,313
2,552
Dimitri de Vreeze
10,313
2,474
1 At vesting, a sell-to-cover applied: out of the vested shares, a number of shares are sold at vesting date to cover taxes due.
Pension and other benefits
Participation in the basic pension plan provided by the Dutch pension fund (Stichting Pensioenfonds DSM Nederland –
PDN) to all DSM employees in the Netherlands is mandatory for the Managing Board. Regarding pensionable salary not
covered by the basic pension plan, a company-paid pension contribution as determined by the Supervisory Board applies.
This contribution can be used by Managing Board members to participate in the so-called Net Pension Plan under
conditions applicable to all participating DSM employees. The company provides accident insurance cover, a company car,
and a fixed representation allowance in line with market practice.
Total remuneration
Actual total remuneration for 2022 is aligned with the remuneration policy. The following table provides an overview of the
total remuneration expense for the company in relation to the Managing Board in accordance with IFRS rules (these costs
are not necessarily equal to compensation paid or the cash-out for DSM).
Total remuneration expenses incurred in 2022 were higher than in 2021. The differences between the two years are mainly
attributable to variable compensation. The Short-Term Incentive concerns the incentive accrued for in 2022. As explained
herein, this figure has been multiplied by a factor of 1.5 to offset the cancelation of the STI deferral & matching plan in
view of the intended merger with Firmenich. The total amount is 35% lower than in 2021. The expense for share-based
compensation is approximately €0.7 million higher in 2022 than in 2021. This is for two reasons: first, the fact that the 2022
amount includes different grants, and second, the additional cost considered in 2022 in view of the Long-Term Incentive
grants made in 2021 and 2022. As included in the Offering Circular, PSUs granted in 2021 and 2022 under the Long-Term
Incentive plan shall vest on the vesting date as initially determined at the grant date. Such vesting shall be based on the
average of the vesting result achieved over the vesting that occurred in 2020, 2021 and 2022. Considering IFRS accounting
standards, this results in an additional expense of €0.5 million for each of the Co-CEOs.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 170
Total remuneration expense for the Managing Board in accordance with IFRS definitions
x € thousand
Fixed
Variable compensation
Fixed
Fixed
Total
Proportion fixed
/ variable
remuneration
Base salary /
fees
Short-term
incentive
Share-based
compensation¹
Pension
expenditure
Other items²
2022
2021
2022³
2021
2022⁴
2021⁴
2022
2021
2022⁵
2021
2022
2021
2022
2021
Geraldine Matchett
1,016
994
533
820
1,626
903
178
153
17
17
3,370
2,887
36:64
40:60
Dimitri de Vreeze
1,016
994
533
820
1,624
903
201
180
(27)
46
3,347
2,943
36:64
41:59
Total
2,032
1,988
1,066
1,640
3,250
1,806
379
333
(10)
63
6,717
5,830
36:64
41:59
1 Share-based compensation represents the expense of Performance Share Units (PSUs) awarded. These costs are considered over the vesting period and
therefore cover several years. Against the opening price at vesting date (i.e., 31 March 2022), the 2022 vesting (the Co-CEOs together) represented the value
of €4.2 million (2021 €3.2 million), subject to a sell to cover.
2 Fringe benefits, such as company car and allowances.
3 Including €177,833 (for each of the Co-CEOs) in lieu of the cancelation of the STI deferral & matching scheme for performance year 2022 as included herein.
4 Share-based compensation for 2022 concerns the grants in 2019 (partial), 2010, 2021 and 2022 (partial), share-based compensation for 2021 concerns the
grants in 2018 (partial), 2019, 2020 and 2021 (partial).
5 Other items for Mr. De Vreeze include the impact of a tax equalization because he temporarily observed the role of Chair of the Executive Leadership Team
of DSM Nutritional Products. This impact exceeds cost of other benefits provided.
Equity-based compensation
Main characteristics
The main conditions of the share-based compensation are:
- Vehicle
Performance Share Units (PSUs), converted to shares at vesting
- Grant date
Last trading day in March
- Vesting period
Three years, starting at Grant date
- Vesting conditions
Realization predefined performance goals and in service at vesting date
- Performance period
Three performance years, starting 1 January in the year of grant
- Holding period
Five years, starting at Grant date
- Lock-up period
Blocking period chosen by incumbent; may result in a tax discount
Outstanding Performance Share Units
The table below provides an overview of outstanding PSUs (granted under the LTI and STI deferral & matching scheme
respectively).
Outstanding PSUs
Year of
issue
Outstanding at 31
Dec. 2021
In 2022
Outstanding at 31
Dec. 2022
Share price
at date of
grant (€)
Granted
Vested
Forfeited / expired
Geraldine Matchett
2019
15,052
-
(12,865)
(2,187)
-
97.74
2020
14,058
-
-
-
14,058
105.00
2021
11,850
-
-
-
11,850
147.40
2022
-
11,006
-
-
11,006
163.65
Total
40,960
11,006
(12,865)
(2,187)
36,914
Retained shares originated from PSUs
58,924
.
Dimitri de Vreeze
2019
14,974
-
(12,787)
(2,187)
-
97.74
2020
14,132
-
-
-
14,132
105.00
2021
11,850
-
-
-
11,850
147.40
2022
-
11,006
-
-
11,006
163.65
Total
40,956
11,006
(12,787)
(2,187)
36,988
Retained shares originated from PSUs
49,482
For employee information, as required by section 383d Book 2 of the Dutch Civil Code, reference is made to Note 27 Share-
based compensation. On 31 December 2022, 1,647,106 (2021: 1,665,073) of the total number of treasury shares outstanding
were held for servicing equity-based remuneration plans.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 171
Shareholding obligation
In addition to the performance shares held because of vested grants under the DSM Stock Incentive Plan, the Co-CEOs
invested in DSM shares. These shares were bought through private transactions with private funds (including shares
purchased through STI deferral). The below table provides an overview of the number of shares held at year-end. The Co-
CEOs significantly exceed the shareholding obligation (300% of base salary).
Managing Board holdings of DSM shares
31 December 2022
31 December 2021
Ordinary shares
purchased with
private money
Holdings from
vested PSUs
Total
Ordinary shares
purchased with
private money
Holdings from
vested PSUs
Total
Geraldine Matchett
19,242
58,924
78,166
16,736
51,594
68,330
Dimitri de Vreeze
28,345
49,482
77,827
25,839
42,722
68,561
Total holdings
47,587
108,406
155,993
42,575
94,316
136,891
Company performance versus remuneration over time
Five-year review of company performance and Managing Board remuneration
The following table provides an overview of the development of the remuneration of the members of the Managing Board
over the past five years, the development of company performance, and the average remuneration of other employees
(excluding the Managing Board members). Total remuneration for Managing Board members consists of the remuneration
expenses calculated in accordance with IFRS as included in the annual reports of the relevant years. The table provides an
overview of company performance based on Adjusted EBITDA, share price (year-average) and the reduction of greenhouse
gas emissions.
Typically, the share of total remuneration that is at risk varies for different employee segments and geographies, due to
the impact of incentive schemes. While the percentage of variable pay as a percentage of total remuneration is highest for
the Co-CEOs (at target 150%), it may be limited or nil for other employee segments or in certain countries (also because of
collective agreements). Based on performance, the results of the respective incentive schemes (and therefore the impact
on total remuneration) varies over time. The average remuneration of all other employees (excluding the Managing Board)
is influenced not only by factors such as differences in the pay mix, or changes in exchange rates, but also by factors
related to the composition of the employee population such as the impact of acquisitions and divestments, restructuring,
and in- and outflow of personnel.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 172
5-year overview of the year-on year-change of remuneration and company performance
2022
2021
2020
2019
2018
Average
Managing Board remuneration
Geraldine Matchett
Base salary
1,016
994
889
630
614
829
2.2%
11.8%
41.1%
2.6%
2.7%
12.1%
Total remuneration expenses
3,370
2,887
2,595
2,182
2,269
2,661
16.7%
11.3%
18.9%
-3.8%
22.3%
13.1%
Dimitri de Vreeze
Base salary
1,016
994
889
630
614
829
2.2%
11.8%
41.1%
2.6%
2.7%
12.1%
Total remuneration expenses
3,347
2,943
2,639
2,175
2,188
2,658
13.7%
11.5%
21.3%
-0.6%
25.1%
14.2%
Company performance
Adjusted EBITDA¹
1,725²
1,814
1,534
1,551
1,532
1,631
-4.9%
18.3%
-1.1%
11,8%³
6.0%
6.0%
Year-average share price (€)
143.36
164.86
123.70
103.44
84.00
123.87
-13.0%
33.3%
19.6%
23.1%
25.8%
17.7%
Greenhouse gas emission improvement
5.1%
14.8%
8.5%
12.7%
9.3%
10.1%
Average employee remuneration
Average remuneration employees global
92,098
86,860
84,169
84,320
84,500
86,389
6.0%
3.2%
-0.2%
-0.2%
-1.6%
1.5%
1 Adjusted EBITDA as of 2019 reflects Adjusted EBITDA from Continuing Operations as per current scope. The Adjusted EBITDA for 2018 reflects the Total
Group.
2 Represents total group with DSM Protective Materials included until August 31, 2022.
3 EBITDA change versus a pro forma restated 2018 Adjusted EBITDA updated for Continuing Operations. EBITDA change versus 2018 reported Adjusted EBITDA
1.2%.
Although DSM delivered a strong performance in 2022, the price-cost gap remained significant for parts of the business.
This resulted in an Adjusted EBITDA lower than in 2021. In line with other companies in the industry whose stock is traded
similarly to the DSM stock, the share price dropped during 2022. In line with these observations, the STI fell to a lower level
compared to 2021. It should be noted that the increase of remuneration expenses for the Co-CEOs in 2022 compared to
2021 is mainly caused by the fact that -in accordance with IFRS rules- the cost to be considered in 2022 for the outstanding
yet unvested PSUs had to be corrected. This correction was necessary because the PSUs granted under the Long-Term
Incentive plan in 2021 and 2022, respectively, shall vest against the average of the vesting result achieved over the vesting
that occurred in 2020, 2021 and 2022. This is in accordance with IFRS rules and In line with the Offering Circular. Had this
not been the case, the 2022 remuneration expenses for each of the Co-CEOs would have dropped by €0.5 million. This
demonstrates that total Co-CEO remuneration fluctuates in accordance with the fluctuations in the Short-Term Incentive
and the cost of the share-based compensation. Since the variable portion of total remuneration is smaller for employees
globally, the year-to-year change of the average of this figure (which includes all employee costs as included in Note 5 of
the Consolidated Financial Statements) always fluctuated less in the past. In 2022, however, we recorded a 6% upward
movement of the average employee cost. This increase includes one-off payments made to our employees to offset the
effects of rising inflation. It should be noted that the average remuneration of all employees remains impacted by merger
& acquisition activities and restructuring of our operations. Exchange rate adjustments also have an impact. Furthermore,
the year-on-year change of the average employee cost globally is influenced by the fact that the composition of the
underlying employee population changes from year to year. This is attributable to a range of factors including retirements,
new hires and restructurings.
Pay ratio
The pay ratio is calculated at 31 December 2022 and is based on the average remuneration expense reported for each Co-
CEO and the total average employee cost (on an FTE basis). Intercompany comparisons must be made with caution, as
differences in the composition of the workforce, the geographical spread or in pay structures may occur. The pay ratio will
differ from year to year, since the variable pay (as a percentage of annual base salary) will differ from year to year based
on company results. Since their pay is to a larger extent at risk, such fluctuations have a higher impact at Managing Board
or executive level, compared to the average variable pay of the employee group (limited or no variable pay component).
The ratio will furthermore be influenced by differences in pay structures between regions, acquisitions/divestments and
foreign exchange rates.
Royal DSM Integrated Annual Report 2022 173
Report by the Supervisory Board – Remuneration report 2022
At DSM, we believe that remuneration throughout the organization should be based on the same principles and values but
should also consider local regulations and practices. This means that we aim for a consistent global approach (median of
the market reference) and take local circumstances into consideration. This may, for example, result in a different pay mix
between countries or for employee segments without jeopardizing our principles and values. That is how we built and
internally align our remuneration policies, including the Remuneration policy for the Managing Board. Ratios do not
necessarily provide a reflection of such considerations, as they ignore, among other things, the typical differences between
fixed and variable pay in geographies and/or employee segments and are influenced by changing currency conversion
rates as well as being vulnerable to M&A activities.
The 2022 ratio of total remuneration expenses for each of the Co-CEOs, including annual base salary, STI, LTI expenses and
other benefits such as pension (as reported in this Remuneration report) versus the average remuneration of total
employees globally is 36:1 (2021: 34:1). As indicated the respective paragraph, this is merely driven by the IFRS requirement
impacting the expenses (accruals) to be considered for outstanding equity-based compensation. Had this not occurred,
the Pay ratio would have dropped to 31 on the back of the Short-Term Incentives lagging behind the incentive recorded
over 2021.
Underlying data for the pay ratio calculation can be retrieved from the table DSM’s remuneration expense for the
Managing Board (including table notes) in the section Total remuneration of this Remuneration report, and from the table
Employee benefit costs in Note 5 Net sales and costs (continuing operations) to the consolidated financial statements.
Retrospect and outlook
As mentioned in the 2021 Remuneration report, DSM intended to revise its Remuneration policy in 2022. In view of the
intended merger with Firmenich and consequently the change of the regulatory environment, this project was interrupted.
Following a successful completion of the intended merger with Firmenich, the DSM-Firmenich shareholders will at each
annual General Meeting have the opportunity to vote, with non-binding effect, on DSM-Firmenich's remuneration report
(for the prior financial year) and, with binding effect, on the maximum remuneration envelope for the members of the
Board of Directors of DSM-Firmenich (until the next annual General Meeting) and the Executive Committee of DSM-
Firmenich (for the next financial year).
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 174
Remuneration of the Supervisory Board of Koninklijke DSM N.V. 2022
Summary of the Remuneration policy of the Supervisory Board of Koninklijke DSM N.V.
The Remuneration policy is designed to engage qualified leaders with the right balance of personal skills, competences
and experience required to oversee the execution of the company’s strategy, its performance, and its creation of long-term
value, recognizing the interests of all stakeholders. In line with the Dutch Corporate Governance Code, the remuneration is
not linked to company and individual performance. As a reference, the remuneration of the Supervisory Board is
benchmarked to market practice, predominantly against AEX companies, given the company’s country of domicile. The
total fixed remuneration should approach the median of the reference market. The full version of the remuneration policy
for the Supervisory Board of Koninklijke DSM N.V. as approved by the 2019 AGM is available on the company website.
The table below summarizes the key elements of the remuneration policy, describing purpose, design and (potential)
value.
Purpose
Design
Value
Fixed fee
Basic pay for doing the job
Reward Supervisory Board members and incentivize
them to utilize their skills and competences to the
maximum extent possible in executing their tasks. The
reward reflects the nature of responsibilities, the time
spent, and aims to provide a fair and competitive pay
level to engage qualified leaders.
Review: in principle, every three years, based on in-
depth benchmarking.
Approaching the median of the
market reference (predominantly AEX
companies).
Position and annual fee:
- Chair €105,000
- Deputy Chair €75,000
- Member €70,000
- Chair Audit Committee €18,500
- Member Audit Committee €12,000
- Chair other Committees €14,000
- Member other Committees €8,500
Intercontinental travel fee
Fixed amount representing time commitment related to
intercontinental travel.
€5,000 for each time it is required to
travel outside the continent of
residence.
Expenses
Expenses incurred in fulfilling duties are reimbursed. To
be paid upon submission of a statement of expenses,
partially covered by a fixed allowance.
Depending on level of expenses.
Fixed per annum: €2,475 gross per
annum.
Shareholding requirement
In line with Dutch Corporate Governance Code, no
mandatory shareholding requirement. Supervisory
Board members are encouraged to invest in privately
owned DSM shares.
Not applicable.
Benefits and loans
Supervisory Board members are not entitled to
participate in any benefits program offered to
employees. Loans will not be provided.
Not applicable.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 175
Total remuneration 2022
Committee overview
The Supervisory Board members are assigned to the various committees.
Committee overview
Audit
Nomination
Remuneration
Sustainability
Thomas Leysen (Chair)
Chair
Member
John Ramsay (Deputy Chair)
Chair
Member
Eileen Kennedy
Member
Chair
Carla Mahieu
Member
Chair
Erica Mann
Member
Member
Frits van Paasschen
Member
Member
Pradeep Pant
Member
Member
Corien Wortmann-Kool
Member
Member
Total Remuneration
The below table provides an overview of the total remuneration provided in 2022.
Remuneration of Supervisory Board Members
in €
Fixed
Total remuneration
Portion
fixed/variable
compensation
Annual fee
Committee fee
Other costs¹
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Thomas Leysen, Chair
105,000
90,417
22,500
21,667
2,475
1,250
129,975
113,334
100:0
100:0
John Ramsay, Dep. Chair
75,000
72,917
27,000
27,000
2,475
1,250
104,475
101,167
100:0
100:0
Rob Routs, Chair²
-
43,750
-
9,375
-
521
-
53,646
n.a.
100:0
Pauline van der Meer Mohr, Dep. Chair²
-
31,250
-
9,375
-
521
-
41,146
n.a.
100:0
Eileen Kennedy, Member
70,000
70,000
22,500
22,500
17,475
6,250
109,975
98,750
100:0
100:0
Carla Mahieu, Member³
70,000
40,833
18,958
8,167
2,475
729
91,433
49,729
100:0
100:0
Erica Mann, Member
70,000
70,000
20,500
20,500
17,475
1,250
107,975
91,750
100:0
100:0
Frits van Paasschen, Member
70,000
70,000
17,000
18,458
17,475
11,250
104,475
99,708
100:0
100:0
Pradeep Pant, Member
70,000
70,000
20,500
20,500
12,475
11,250
102,975
101,750
100:0
100:0
Corien Wortmann-Kool, Member³
70,000
40,833
20,500
11,958
2,475
729
92,975
53,520
100:0
100:0
Total
600,000
600,000
169,458
169,500
74,800
35,000
844,258
804,500
100:0
100:0
1 Involves International travel fee, expenses allowance and expenses exceeding expenses allowance.
2 Member of the Supervisory Board until 6 May 2021.
3 Member of the Supervisory Board since 6 May 2021.
In line with the remuneration policy, variable compensation does not apply, and Supervisory Board members do not
participate in any pension scheme. No extraordinary items apply. The total remuneration of the Supervisory Board is
slightly above the 2021 level, explained by the fact that more meetings in 2022 have been in person or hybrid, whereas the
2021 meetings were predominantly virtual.
Benefits and loans
Members of the Supervisory Board are not eligible for any benefit programs offered by the company (or any beneficiary) to
its employees, nor are any loans provided.
Equity-based compensation
As confirmed in the remuneration policy, Supervisory Board members do not receive any equity-based compensation. They
are, however, encouraged to hold privately owned shares in DSM. At year-end 2022, Thomas Leysen held 10,035 shares
(2021: 5,035) and John Ramsay held 1,788 shares (2021: 1,068). No other Supervisory Board members held company shares at
year-end 2022.
Report by the Supervisory Board – Remuneration report 2022
Royal DSM Integrated Annual Report 2022 176
Remuneration over time
The below table provides an overview of the total remuneration of the Supervisory Board members over a five-year period.
A comparison of the development of total remuneration compared to company performance is not provided, as the
Supervisory Board's total remuneration is not linked to company performance (Dutch Corporate Governance Code and
remuneration policy of the Supervisory Board Koninklijke DSM N.V.).
5-year overview of the Supervisory Board remuneration
2022
2021
2020
2019
2018
5-years
average¹
Thomas Leysen, Chair
129,975
113,334
53,520
-
-
John Ramsay, Dep. Chair
104,475
101,167
98,250
97,000
82,450
96,668
Eileen Kennedy, Member
109,975
98,750
98,750
110,292
90,250
101,603
Carla Mahieu, Member
91,433
49,729
-
-
-
Erica Mann, Member
107,975
91,750
96,750
67,251
-
Frits van Paasschen, Member
104,475
99,708
96,750
114,125
102,250
103,462
Pradeep Pant, Member
102,975
101,750
96,750
109,125
98,250
101,770
Corien Wortmann-Kool, Member
92,975
53,520
-
-
-
1 Average only calculated if the respective Supervisory Board member was engaged during five whole years.
Closing remarks and shareholder vote
The 2019 AGM approved the remuneration policy for the Supervisory Board of Koninklijke DSM N.V. (98.45% in favor) as well
as the remuneration policy for the Managing Board of Koninklijke DSM N.V. (97.48% in favor). The total remuneration
delivered in 2022 is aligned with the respective remuneration policies: other than total remuneration lagging behind the
median of the labor market peer group, no deviations or derogations applied. As in 2021, no revision or claw-back of any
incentives occurred in 2022.
Questions raised in the 2022 AGM regarding remuneration items were addressed in the respective meeting (reference is
made to the Q&A document and minutes of that meeting, posted on the company website). As a result, there were no
specifics raised that needed to be addressed in this Remuneration report.
Heerlen, 1 March 2023
The Supervisory Board
Thomas Leysen, Chair
John Ramsay, Deputy Chair
Eileen Kennedy
Carla Mahieu
Erica Mann
Frits van Paasschen
Pradeep Pant
Corien Wortmann-Kool
Royal DSM Integrated Annual Report 2022 177
Information on the DSM share
Shares and listing
1
Ordinary shares in Koninklijke DSM N.V. are listed on the Euronext stock exchange in Amsterdam (Netherlands) (Stock code
00982, ISIN code NL0000009827). Options on ordinary DSM shares are traded on the European Option Exchange in
Amsterdam (Euronext.LIFFE).
In the US, a sponsored unlisted American Depositary Receipts (ADR) program was offered by Deutsche Bank Trust Co.
Americas (DR ISIN US7802491081), with four ADRs representing the value of one ordinary DSM share. This deposit
agreement has been terminated with an effective termination date of 14 November 2022.
Besides the ordinary shares, 44.04 million Cumulative Preference Shares A (cumprefs A) are in issue, which are not listed
on the stock exchange; these have been placed with institutional investors. The cumprefs A have the same voting rights as
ordinary shares, as their nominal value of €1.50 per share is equal to the nominal value of the ordinary shares.
The dividend percentage of the cumprefs A is based upon the dividend yield of the ordinary shares (dividend as a
percentage of the average share price). This percentage may be increased or decreased by a mark-up or discount of no
more than one hundred (100) basis points, to be determined by the Managing Board in consultation with the Supervisory
Board. The basis of computation of the dividend on the Cumulative Preference Shares is €5.2942.
Transfer of the cumprefs A requires the approval of the Managing Board, unless the shareholder is obliged by law to
transfer his or her shares to a previous shareholder.
The average number of ordinary shares outstanding in 2022 was 172,826,732. All shares in issue are fully paid. On 31
December 2022, the company had 173,075,397 ordinary shares outstanding.
Issue of shares
The issue of shares takes place by a decision of the Managing Board. This decision is subject to the approval of the
Supervisory Board. The scope of this power of the Managing Board shall be determined by a resolution of the General
Meeting of Shareholders and shall relate to at most all unissued shares of the authorized capital, as applicable now or at
any time in the future. In the Annual General Meeting of Shareholders of 10 May 2022, this power was extended up to and
including 10 November 2023, on the understanding that this authorization of the Managing Board is limited to a number of
ordinary shares with a nominal value amounting to 10% of the issued capital at the time of issue, and to an additional 10%
of the issued capital at the time of issue in connection with a rights issue. The issue price will be determined by the
Managing Board and shall to the extent possible be calculated on the basis of the trading prices of ordinary shares on the
Euronext Amsterdam Stock Exchange.
Distribution of shares
Under the Dutch Financial Markets Supervision Act, shareholdings of 3% or more in any Dutch company must be disclosed
to the Netherlands Authority for the Financial Markets (AFM). According to the register kept by the AFM, the following
shareholders had disclosed that they have a direct or indirect (potential) interest between 3% and 10% in DSM's total
share capital as at 31 December 2022:
- ASR Nederland N.V.
- BlackRock, Inc.
- Capital Research and Management Company
- NN Group N.V.
- Rabo Participaties B.V.
1 Status as at 31 December 2022.
Information on the DSM share
Royal DSM Integrated Annual Report 2022 178
Repurchase of own shares
The company may acquire paid-up own shares by virtue of a decision of the Managing Board, provided that the par value
of the acquired shares in its capital amounts to no more than one tenth of the issued capital. Such a decision is subject to
the approval of the Supervisory Board. In the Annual General Meeting of Shareholders of 10 May 2022, the Managing Board
was authorized to acquire own shares for a period of 18 months from said date (i.e., up to and including 10 November
2023), up to a maximum of 10% of the issued capital, provided that the company will hold no more shares in stock than at
maximum 10% of the issued capital.
The total number of issued shares is 218,826,029, consisting of 174,786,029 ordinary shares and 44,040,000 Cumprefs A.
In 2022, DSM repurchased 1,330,000 of its own shares for a total consideration of €210 million for the purpose of covering
the company’s commitments under existing share-based compensation plans and final stock dividend 2021.
Development of the number of ordinary DSM shares
2022
2021
Issued
Repurchased
Outstanding
Outstanding
Balance at 1 January
174,786,029
1,817,299
172,968,730
172,219,339
Changes:
Reissue of shares in connection with
share-based payment plans
-
(617,967)
617,967
803,049
Repurchase of shares
-
1,330,000
(1,330,000)
(1,050,000)
Bearer share certificates that have become void
-
-
-
(7,466)
Dividend in the form of ordinary shares
-
(818,700)
818,700
1,003,808
Balance at 31 December
174,786,029
1,710,632
173,075,397
172,968,730
DSM share prices on Euronext Amsterdam
(€ per ordinary share):
- Highest closing price
199
199
- Lowest closing price
112
137
- At 31 December
114
198
Market capitalization at 31 December (€ million)¹
19,978
34,608
1 Source: Bloomberg.
Geographical spread of DSM shares outstanding
in % (excl. cumprefs A)
2022
2021
North America
32
35
United Kingdom
18
17
France
15
13
Netherlands
10
11
Nordic
6
7
Switzerland
5
6
Germany
5
5
Asia-Pacific
4
4
Other countries
5
2
Information on the DSM share
Royal DSM Integrated Annual Report 2022 179
DSM Share price development versus AEX and Dow Jones Euro StoXX Chemical Index
rebased versus DSM share price
in €
Trading volume ordinary DSM shares 2022
x million shares as reported by Euronext Amsterdam
Information on the DSM share
Royal DSM Integrated Annual Report 2022 180
Article 10 of Directive 2004/25
With regard to the information referred to in the Resolution of article 10 of the EC Directive pertaining to a takeover bid
which is required to be provided according to Dutch law, the following can be reported:
- Information on major shareholdings can be found above (Distribution of shares)
- There are no special statutory rights attached to the shares of the company
- There are no restrictions on the voting rights of the company’s shares. When convening a General Meeting of
Shareholders, the Managing Board is entitled to determine a registration date in accordance with the relevant
provisions of the Dutch Civil Code
- The applicable provisions regarding the appointment and dismissal of members of the Managing Board and the
Supervisory Board and amendments to the Articles of Association can be found in the section Corporate
governance and risk management
- The powers of the Managing Board regarding the issue and repurchase of shares in the company can be found in
the sections Issue of shares and Repurchase of own shares above
- Other information can be found in the 'Notes to the consolidated financial statements' (16 Equity, 19 Borrowings,
27 Share-based compensation)
Dividend on ordinary shares
An interim dividend for the year 2022 of €0.93 per ordinary share was recognized as a liability in the second quarter of 2022.
The total distribution amounted to €161 million. This interim dividend was paid as from 26 August 2022 in cash after deduction
of 15% Dutch dividend withholding tax.
Upon a successful completion of the merger transaction between DSM and Firmenich, DSM-Firmenich intends to offer a
gross dividend to all DSM-Firmenich shareholders of in total €423 million which is almost €1.60 per share as described in
the Offering Circular. Subject to the General Meeting of DSM-Firmenich resolving to pay this dividend, eligible DSM
shareholders who tender their DSM ordinary shares for DSM-Firmenich ordinary shares will receive a total dividend of about
€2.53 over 2022 (versus €2.50 over 2021).
Dividend on Cumulative Preference Shares A
The Cumprefs A are, in accordance with article 32, section 3, of the Articles of Association, entitled to a dividend for the
financial year 2022, which dividend has been determined by the Managing Board in consultation with the Supervisory
Board to be €0.1334 per Cumulative Preference Share A, which is equal to the dividend paid over 2021 for these shares. An
interim dividend of €0.04 per Cumulative Preference Share A having been paid in August 2022, the final dividend thus
amounts to €0.0934 per Cumulative Preference Share A.
Bearer shares
On 27 April 2006, all bearer shares (‘aandelen aan toonder’) in DSM’s issued share capital were converted into registered
shares (‘aandelen op naam’) pursuant to an amendment of the Articles of Association made at the time. In order to
exercise the rights vested in the shares, holders of former bearer shares were required to hand in their bearer share
certificates (‘aandeelbewijzen’) to DSM.
Pursuant to an amendment of Section 2:82 of the Dutch Civil Code (DCC) in 2019, DSM shareholders who still have not
handed in their bearer share certificates will lose any entitlement to exchange their bearer share certificates for a
replacement share as per 2 January 2026.
Information on the DSM share
Royal DSM Integrated Annual Report 2022 181
In accordance with Section 2:391(2) DCC, DSM hereby gives notice of the following:
(i) A shareholder may not exercise the rights vested in a share until after he/she has handed in his/her bearer share
certificates to DSM.
(ii) A bearer share certificate which was not handed in to DSM on or before 31 December 2020 has become void and the
share represented by the bearer share certificate has been acquired by DSM for no consideration, irrespective of whether
DSM's Articles of Association allow the acquisition of its own shares. Section 2:98a (3) DCC does not apply to this
acquisition. DSM shall be registered as the shareholder thereof in DSM’s shareholders register. DSM shall hold the shares
until the end of the period mentioned in (iii) below.
(iii) A shareholder who hands in a bearer share certificate to DSM no later than five years after the acquisition mentioned
in (ii) above, therefore no later than 1 January 2026, is entitled to receive from DSM a replacement registered share
provided that this share is registered in DSM’s shareholders register in the name of a central securities depository, and
DSM will instruct the shareholder’s bank to credit the share in a securities account in the name of holder of the bearer
share certificate.
The procedure described above follows from Section 2:82(3) up to and including (9) DCC, whose provisions apply.
Royal DSM Integrated Annual Report 2022 182
Sustainability statements
Stakeholder engagement
In the following pages, we present some examples of how we engage with external stakeholders, including the partners in
our value chain. For an overview of all our stakeholders, see Stakeholders. For information on how we engage with our
employees, see People. For historical information on our sustainability performance, please see the five-year summary –
sustainability tables and the company website.
Suppliers
Our partnerships and suppliers across the value chain play an essential role in helping us all thrive in ways that benefit
People, Planet and Profit. The goal is to develop our business together in an environmentally, economically and socially
responsible manner. This is why we expect all our suppliers to act sustainably.
The DSM Sustainable Procurement Program
Our Sustainable Procurement Program comprises the following elements:
- Supplier development and evaluation program, in which we focus on assessing, auditing and further improving
our suppliers’ sustainability performance by actively developing and following up on corrective actions
- Our Scope 2 program for reducing greenhouse gas (GHG) emissions from purchased electricity
- Our Scope 3 program for reducing GHG emissions throughout our value chain, where we are working together with
our suppliers on our collective carbon footprint and emissions
- A sustainable decarbonization of heat via the procurement of renewable fuels
Supplier Sustainability Evaluation
2022
2021
Spend coverage SCoC
96%
95%
EcoVadis assessments
429
411
Together for Sustainability audits
9
8
Spend on local suppliers¹
64%
62%
1 For continuing operations only. Local supplier is defined where the supplier country is equal to the purchasing location’s country.
The Supplier Code of Conduct (SCoC) is the foundation of DSM’s Sustainable Procurement Program and outlines the
business principles which are most relevant for our supply chain, clustered along the People, Planet, and Profit
dimensions. In 2022, more than 96% of our spend was covered by the SCoC, exceeding our 95% target. The SCoC is available
on the DSM Supplier website in eight languages.
In addition to our SCoC, DSM invites suppliers to perform an EcoVadis assessment. An EcoVadis assessment measures the
quality of the relevant supplier’s sustainability systems through its policies and actions, and results are categorized in four
themes: Environment; Labor & Human Rights; Ethics; and Sustainable Procurement. DSM supports suppliers who do not
meet our minimum score in defining and executing a corrective action plan. Assessments are valid for three years in the
case when the minimum score is met, and for one year when there are gaps between the supplier’s performance and
DSM’s norms and values.
Assessing sustainability in our supply chain
Improving sustainability in a complex value chain is challenging. That is why we work together with 39 other companies
operating in the Together for Sustainability (TfS) initiative. TfS is an industry-driven collaboration dedicated to building
sustainable supply chains through supplier engagement and development as well as continuous improvement efforts. We
are active in several workstreams to enhance sustainability, and in 2022, TfS welcomed seven new members. More
information about this program can be found on our company website.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 183
Through TfS, we also continued to use virtual audits to further increase transparency regarding supplier sustainability
performance. Virtual audits are not suitable for every supplier – for example, for initial audits, due to the absence of
physical experiences (such as human interaction and smells). However, we believe that virtual audits are a cost-effective
and environmentally friendly method to follow up on initial audits and corrective actions.
When a TfS member invites a supplier for an EcoVadis assessment, the results are shared among all other members,
enhancing transparency across the industry. In 2022, value chains were disrupted through the energy crisis, the war in
Ukraine, and COVID-19. Despite these factors, TfS members assessed 429 DSM suppliers, of which 385 were reassessments.
Sixty-two percent of our supplier base received an improved score, confirming that sustainability development remains a
key focus point for all stakeholders.
We are also exploring additional tools to EcoVadis for the purpose of evaluating supplier sustainability performance.
Through IntegrityNext, we were able to assess 134 suppliers on environmental, social, and governance performance in 2022.
Capabilities to enhance and drive sustainability
We work with our strategic suppliers to further elevate sustainability. In addition to assessments, audits, and corrective
action plans, we also support our employees and suppliers directly through raising awareness and providing training.
Given the increasing importance of driving sustainable business, we have mandatory trainings on sustainable
procurement, sustainability assessments and audits, and scope 3. Over the course of 2022, we started to revise our internal
training material on scope 3. These trainings, together with training on how to coordinate assessments and audits, are
mandatory for all DSM employees within the sourcing area. Going forward, DSM also recommends these trainings to a
wider target audience, enabling cross-functional teams to support in tackling our scope 3 ambitions. The new online
training will be rolled out over the course of 2023.
Additionally, TfS launched the TfS Academy in early 2022. This new online learning platform enables our employees as well
as our suppliers to follow 240 online courses in seven languages, covering a broad curriculum ranging from basic
education on sustainable procurement to advanced training material on human rights due diligence and developing a
scope 3 program. Since the summer of 2022, over 1,000 courses have been completed by TfS members.
When engaging with suppliers on Scope 3 reduction projects and corresponding roadmaps, DSM offers expertise from our
own GHG experts to support our suppliers in their own journey to reduce emissions. The suppliers’ scope 1 and 2
emissions directly determine our scope 3 emissions, making this a mutually beneficial learning experience.
Since 2021, the concept of sustainable tender has been included in all strategic sourcing projects within global logistics
and packaging. With sustainable tender in the supplier selection process, we will be able to identify sustainable solutions
from our suppliers, differentiate suppliers in terms of sustainable behavior, and influence the supply market.
Stakeholder engagement
In addition to working with our suppliers, we also work with external partners to enhance collaboration in the supply
chain. These partners include Roundtable for Sustainable Palm Oil (RSPO), Friends of the Sea, and the Marine Stewardship
Council.
Taking steps toward deforestation-free supply chains.
We are taking steps to tackle deforestation: in 2021, we committed to create a healthier future for people, planet and
livelihoods, through various global Food System Commitments. One of these commitments is to achieve 100%
deforestation-free primary supply chains, by 2030 at the latest. This commitment relates to palm derivatives, sugarcane,
and direct soy and corn products. For suppliers to prove deforestation-free primary supply chains, we require
certifications from not-for-profit organizations such as RSPO, BonSucro, ProTerra, or ISCC. As a member of the RSPO, a not-
for-profit, multi-stakeholder organization aimed at making sustainable palm oil the market norm, we aim to have RSPO
certification for all of our major production sites that use palm oil derivatives. Through our legal entity DSM Nutritional
Products AG, we are a member of RSPO. For more information on our use of palm oil, see the company website.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 184
Responsibly sourced marine resources
Protecting our marine environment is important to us as a company. We are committed to the responsible and sustainable
use of natural marine resources. We have ‘Friends of the Sea’ certification for all our fish oil purchases. This helps ensure
that the fisheries involved in providing fish oil to produce our omega-3 product range are sustainable. Furthermore, we
have had 100% Marine Stewardship Council (MSC) certification for all our tuna oil suppliers since 2020. We are proud to
partner with the MSC, the global gold standard for certification and eco-labeling of seafood, to offer MEG-3® tuna DHA oils
and powders that are MSC Chain of Custody (CoC)-certified. This certification guarantees ‘ocean-to-purchase’ traceability
throughout the entire supply chain, providing assurance that our tuna DHA products can be easily traced to certified
fisheries.
The BICEPS Network
The BICEPS Network is a network with shippers and industry bodies to advocate sustainability in the international
transport market. It has the aim to reduce CO
2
emissions of carriers. In 2022, the Network welcomed new members, and
held multiple innovation sessions, with external speakers presenting new innovations in sustainable shipping and
workshops to explore cooperating on logistics. The Network created an internationally verified rating system that provides
an industry-recognized sustainability ranking of shipping lines and enables us to reward sustainable behavior. We work as
much as possible with top-ranked carriers.
Supplier projects
As part of our drive to foster better business through our supplier projects, our Procurement organization engages in
proactive dialogue with suppliers to move the business agenda forward. In this context, we pursue initiatives to create
joint value, awareness and engagement regarding innovation, greenhouse gas emissions reduction and renewable
electricity projects. Over the course of 2022, we continued our engagement with key suppliers through our CO2REDUCE
program on reducing the carbon footprint of our most GHG-emitting value streams, jointly developing roadmaps with more
than 80 suppliers across our Nutrition business. More information on this program can be found in Scope 3 emissions.
A joint initiative of one of our suppliers and our procurement team in our Health, Nutrition & Care plant in Buk (Poland)
replaced all conventional cardboard boxes with FSC-certified packaging. The shift to raw materials originating from
responsible forestry, in combination with reduced thickness of the boxes, not only led to a cost saving for our customers,
but also made a positive contribution toward maintaining biodiversity.
We are continuously looking for ways to address and assess the impact of our operations in close collaboration with our
strategic business partners. Human rights in supply chains is an area that is receiving increased focus from our
stakeholders and in legislation around the world. In 2022, we initiated a human rights impact assessment together with
Seafoodia, one of our key suppliers in marine resources, to better understand potential and actual human rights risks in
our fish oil value chain. As this assessment is performed along the full upstream value chain, transparency and a
collaborative approach to engage local stakeholders are required to make this a success. The results will be available in
2023 and will be used to develop future guidance on implementing the UN Guiding Principles. In the event of any actual
impacts, a multi-stakeholder approach with Seafoodia will be aligned.
Together with our key suppliers in scientific equipment, we developed a high-end laboratory equipment lease program.
Typically, expensive, high-tech lab equipment is purchased and owned for a period of up to 10 years. However, with
increasingly rapid advances in technological innovations and improvements, the usefulness and added value of this
equipment decreases after only a few years. Leasing now enables us to return the equipment to the supplier and replace it
with a newer, updated version, instead of keeping and maintaining the obsolete equipment. This provides our scientists
with continued access to the latest and best technology and allows the unused equipment to have a second lease of life.
In Brazil and France, we started utilizing electrical heavyweight trucks for on-site transportation and local distribution. The
sourcing process addressed sustainability dimensions alongside the commercial and operational conditions, combined
with a longer-term perspective on scalability across Latin America. Besides electric options, we also explored alternative
fuels, with HVO (bio-fuel) solutions being implemented in Europe to reduce emissions for customer deliveries.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 185
Investors
We value the essential contribution our capital providers make to our success and prosperity, allowing us to pursue a
long-term-oriented, purpose-led, performance-driven strategy. This should also lead to an increase of the company’s
value for the benefit of all its stakeholders including its shareholders and debt holders. We see the focus of our capital
providers increasingly moving from financial returns on financial capital providers increasingly moving from financial
returns to requiring simultaneous value-creation across social, environmental, and economic dimensions.
Transparent communication with financial markets
We ensure that accurate financial and relevant non-financial information is communicated to the financial markets in a
transparent and simultaneous way. All information is made easily accessible to the public via the company website.
Besides the Annual General Meeting of Shareholders, we also reach out to the financial markets through events such as
our Investor Days, participation in roadshows and conferences, in person and virtually. We actively seek engagement with
both financial and ESG advisors who cover DSM on behalf of their financial market clients, such as brokers, credit rating
agencies, proxy advisors, shareholder representative organizations, and ESG rating agencies.
Feedback from the engagement with financial markets is periodically discussed and assessed by the Managing Board and
the Supervisory Board. We highly value the insights gained through these dialogues.
In 2022, we engaged with our investors and their representatives on topics such as the SDGs, climate change, biodiversity,
governance, sustainability in supply chain management, human rights, responsible taxation, and diversity, equity &
inclusion.
Updating investors on our strategic progress
During 2022, we continued to update the market on our progress against our strategic targets and sustainability ambitions,
and on the progress of our large sustainability-driven innovation projects.
In 2021, we announced the biggest step yet in the strategic transformation of the company into a Health, Nutrition &
Bioscience company. In May 2022, we announced our intention to enter into a merger of equals with Firmenich, a global
leader in flavor and fragrances, headquartered in Switzerland. Together we will aim to be the leading creation and
innovation partner in nutrition, beauty and well-being. DSM and Firmenich hosted a joint Capital Markets Day for
institutional investors and equity analysts in Paris, outlining key value drivers and demonstrating how the complementary
nature of the companies can enable enhanced innovation and co-creation with their customers.
There were many macro-economic disruptions in 2022, for instance, caused by COVID-19, turbulent geopolitics, and rising
energy costs and inflation. Financial markets continued to be impacted by uncertainty and volatility during 2022. We
intensified in-person and virtual contact with our investors in order to keep them informed about business conditions and
our actions to counter the situation.
In 2022, our Investor Relations team was ranked number one in its sector by Institutional Investor EMEA Research. Among
the recognitions we received were the number one positions for Best IR Team, Best IR program, Best ESG engagement, Best
Analyst/Investor Event, and Best Company Board. On an individual basis, both co-CEOs were ranked number 1 in our
sector, and two individual DSM IR members were ranked in the top 3 of Best IR Professional. In the Netherlands, the IR
team was awarded with Best IR Professional of the AEX in 2022, as well as Best Digital Investor Communication of listed AEX
companies.
Engaging with the market about purpose and ESG
Purpose and profit go hand in hand at DSM, as has been demonstrated by a continuing strong performance in terms of
both financial and non-financial metrics. In 2022, we actively advocated purpose-driven entrepreneurship among our
shareholders. We engaged with investors, including pension funds, to discuss their responsibility in long-term value
creation for their customers, but also for the society and the environment their participants live in.
We actively participated in projects of the World Business Council for Sustainable Development (WBCSD), including the CFO
network and the Capital Market engagement group. We participated in FCLT (Focusing Capital on the Long Term) projects
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 186
including the ‘Multistakeholder Capitalism in Practice’, on how stakeholder strategies are being integrated into long-term
decision making.
We are committed to staying ahead in sustainability reporting and ensuring we report against new and future
requirements of regulating authorities including the EU Sustainable Finance Action Plan, EU Green deal, EU Taxonomy, EU
Corporate Sustainability Reporting Directive and Sustainable Finance Disclosure Regulation (SFDR). We emphasize the
need to make reporting metrics uniform, comparable and auditable.
We continued our engagement with leading ESG Ratings and Benchmarks advisors to the financial sector, including
Sustainalytics, MSCI, Moody’s-Vigeo and ISS-ESG.
In 2022, we continued to see an increased focus in our engagement dialogues on nature and biodiversity, as well as social
topics including human rights and diversity, equity & inclusion. We also saw the number of direct engagements between
investors and DSM on ESG topics, including SDG impact, increase in 2022. ESG has become part of the regular agenda of
our investor meetings. Being recognized as a leader in sustainability and at the same time showing continued good
financial progress, we were frequently invited for in-depth engagement calls and meetings on how to include — and
compare — important non-financial parameters in our investors’ investment processes.
At the end of 2022, 89% of our shares held by institutional investors were held by signatories of the Principles for
Responsible Investment (PRI investors) and 17% of our outstanding shares at institutional investors were in dedicated
sustainability funds.
Society
We engage with society at multiple levels — from local community initiatives to collaborations with universities and
research institutes. Due to the ongoing effects of the pandemic, many of our regular engagements were postponed, or
moved online, such as our annual Earth Day activities. We continue to engage in philanthropic and sponsorship activities
to the average yearly amount of approximately €6 million, as well as via the in-kind contributions of our employees’
hours and expertise.
Showcasing science in Austria
During the Lange Nacht der Forschung (Long Night of Research), our scientists shared a program focusing on enzymes and
mycotoxins. More than 200 visitors came through the doors of our Science Center in Tulln (Austria), where they were able
to participate in interactive experiments demonstrating how enzymes work, solve hand-designed puzzles and see a three-
dimensional display of our enzyme ZENzyme.
Providing education and mentoring opportunities in Brazil
Our partnership with the Brazilian Municipal Department of Education supported young people with professional and
practical skills training, preparing them effectively for the labor market. This partnership is supported by volunteer
employees in Brazil. The mentoring program, in partnership with the Recycle Institute, contributes to skills development
and increases employment opportunities for students. An initiative within this program focuses specifically on supporting
black and indigenous students. Our ‘Solidarity Campaigns’ provided donations of food, personal and cleaning products,
and warm clothing to local communities in need.
Advocating sustainability in China
In collaboration with The National Animal Husbandry Service (NAHS) and FAO, we trained Chinese animal husbandry
players in international standards and guidelines for the assessment of the environmental footprint of livestock. Our China
Sustainability Forum 2022 brought together DSM experts and external stakeholder from FAO, industry associations and our
value chain partners to share best practices and explore synergies for boosting the sustainable development of the
industry and the region. Our DSM Bright Experience charity campaign continued for its 15
th
year and we continued our
support of the DSM Hope School.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 187
Engaging on health and the environment in the Netherlands
The Food Boost Challenge Limburg was organized in cooperation with local health, education and sports organizations. It
engaged young people on healthy food, environmental changes and how to improve the offering and availability of new,
sustainable products and services. We engaged, through Mr. de Vreeze and our President DSM Netherlands, with the NGO
Milieudefensie (‘Environmental Defense’) on our emissions reduction plans to reach net-zero across value chains. We
continued our participation in the environmental initiative MaasCleanUp with employees, and their families participating
in the clean-up of the river Maas.
Supporting start-ups in Switzerland
We continued our partnership with MassChallenge Switzerland to support start-up companies operating primarily in the
fields of personalized and precision nutrition and microbiome and gut health solutions. Our Co-CEO Geraldine Matchett
presented the Diamond Winner award at the MassChallenge Switzerland Awards Ceremony in Lausanne.
Assisting local communities in the US
We continued to support the Union County College Close the Gap initiative, contributing to raising graduation rates of
African American men from 5% to 25%. We likewise maintained our support for health care providers and teachers by
means of donations of essential COVID-19 personal protective equipment. Our sites supported local food banks and school
feeding programs. Our DSM North America Employee Relief Fund helped dozens of our colleagues to recover losses
incurred due to natural disasters such as hurricanes, floods, tornadoes and wildfires.
Royal DSM Integrated Annual Report 2022 188
Notes to the Sustainability statements
1 Management approach for material topics
In the following sections, we elaborate on the material topics defined in the Materiality matrix and describe how we
manage these topics.
Specific mechanisms and policies for our most important material topics are referenced below, while for less material
topics, we apply general mechanisms to identify and remediate potential negative impacts (for example, our DSM Alert
policy). Positive and negative impacts are monitored through our Risk Management process, while product-specific
positive and negative impacts are measured through our Brighter Living Solutions Plus methodology.
Environment
Climate change mitigation
This topic addresses the reduction of energy use and greenhouse gas emissions in our own operations, increasing the
share of energy coming from renewable sources and developing solutions to support our customers in reducing carbon
footprint across their value chains to enable the transition to a low carbon economy.
Management approach: We manage this topic by improving our own carbon footprint, enabling our customers through
innovative solutions and advocating actions toward a low-carbon future. We publicly disclose our impact and strategy via
this Report, CDP and other channels. Through our Food System Commitments, we commit to enable on-farm livestock
emissions reductions.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms and networks
Climate change mitigation
Review of business
SHE Policy (company website)
Climate adaptation
This topic addresses preparing for the physical and transition risks and opportunities associated with changing climate
by ensuring operational procedures are flexible and resilient, and developing solutions to support our customers in their
strategy for climate adaptation.
Management approach: We manage this topic through identifying our exposure to climate risks through our physical and
transition risk assessments. The outcome of these assessments is reviewed and validated with our businesses, sites and
other relevant functions. We publicly disclose our impact and strategy via this Report, CDP and other channels.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms and networks
Climate adaptation
Review of business
SHE Policy (company website)
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 189
Nature & biodiversity
Nature & biodiversity refers to the protection of natural capital and ecosystems, including the variety and variability of
life on earth and addressing issues such as biosecurity, land degradation, nature loss and ocean pollution.
Management approach: Nature & biodiversity is a global issue that is locally relevant, and that potentially has impact on
our operational locations. The DSM Responsible Care Plan defines how we monitor and assess the impact of our
operations on these locations. We support the ambitions of the Convention on Biological Diversity and we continue to
explore the role the Natural Capital Protocol can play in supporting our decision making. Through our Food System
Commitments, we commit to reach people with nutritious, delicious, sustainably produced plant-based foods.
For information on this topic, see:
Nature & biodiversity
Biodiversity position paper (company website)
SHE Policy (company website)
Raw materials & circularity
This topic covers securing our supply of raw materials and making use of raw materials in a circular manner (for instance
using raw materials coming from regenerative agriculture) and supporting our value chain in their use of sustainable raw
materials.
Management approach: We manage this topic through our Supplier Sustainability Program, by improving the value
extracted from our raw materials, supporting the transition to a circular economy through our solutions and advocating a
shift toward a circular economy.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms and networks
Waste & circularity
Review of business
Suppliers
SHE Policy (company website)
Water stewardship
Water is essential to life and all ecosystems. As water is becoming a scarcer resource, both the quality and quantity of
available water constitute a global issue that has local consequences that may extend from water scarcity to floods and
storms.
Management approach: We are committed to the sustainable use of water. Our approach is defined in the DSM
Responsible Care Plan, with the ambition to improve our water withdrawal efficiency in water-stressed areas. Water is not
a primary ingredient in our products, and we believe that water risks are local by nature, so we focus on local water risk
assessments and thorough follow-up on these. We are a signatory to the UN Global Compact CEO Water Mandate and
disclose our water management and strategy via CDP.
For information on this topic, see:
Water stewardship
SHE Policy (company website)
Water Policy (company website)
Pollution & waste management
This topic covers reducing air, land and marine pollution, minimizing waste, and using sustainable packaging in our
operations and across our value chain partners.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 190
Management approach: We manage this topic through our DSM Responsible Care Program. We measure and report on our
waste and pollution, with the ambition to reduce our landfilled waste and our VOC emissions. We minimize hazardous
landfill as part of our SHE requirements, aiming to recover this where possible. We work with our suppliers to improve the
use of sustainable packaging.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Waste & circularity
Nature & biodiversity
Suppliers
SHE Policy (company website)
Social
Healthy & nutritious diets
This topic is part of the transition to sustainable food systems within planetary boundaries that is needed to secure the
future availability of food. It addresses providing solutions that contribute to good nutrition and healthy diets for all.
This includes enabling affordable nutrition and ensuring tasty and delicious food is available and low in ingredients that
are linked to non-communicable diseases.
Management approach: We manage this topic by enabling healthy food systems through our businesses, which target
sustainable food solutions. We advocate for a change in food systems within planetary boundaries. Through our Food
System Commitments, we commit to supporting the immunity of people and reaching people with nutritious, delicious,
sustainably produced plant-based foods.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms & networks
Review of business
Food security
This topic is part of the transition to sustainable food systems within planetary boundaries that is needed to secure the
future availability of food. It includes developing sustainable solutions that will contribute to enabling to feed and
nurture the growing global population. This includes creating more resource-efficient food production, for instance by
improving Food Conversion Ratio.
Management approach: We manage this topic by enabling healthy food systems through our businesses, which target
health and well-being. We advocate for a change in food systems within planetary boundaries. Through our Food System
Commitments, we commit to help close the micronutrient gap of vulnerable people.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms & networks
Review of business
Human rights
This topic encompasses decent working conditions for DSM employees, suppliers and other partners across the value
chain. It addresses subjects including freedom of association, non-discrimination, the prohibition of child labor and
forced labor, and fair compensation. This is done by having a strong due diligence and risk assessment in place, and
implementing mitigation and remediation measures where needed.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 191
Management approach: DSM has installed a cross-functional Human Rights Steering Committee and working group to
manage our approach toward human rights, which is defined in our position paper. Our whistleblower policy (DSM Alert) is
available for employees and external stakeholders to report potential violations of human rights. We monitor and assess
our supply chain through EcoVadis and IntegrityNext assessments.
For information on this topic, see:
Human rights
DSM Code of Business Conduct
Suppliers
Human Rights position paper
Whistleblower policy – DSM Alert (company website)
Occupational health, safety & well-being
Occupational health, safety & well-being addresses the company’s ability to create and maintain a safe and healthy
workplace environment that is free of injuries, fatalities, and illness (both chronic and acute), and to take care of our
employees’ well-being at work.
Management approach: The occupational health, safety and well-being of all our employees and contractors is our highest
priority. Our approach to safety is defined in the DSM Responsible Care Plan and is spearheaded by our Life Saving Rules.
We apply an occupational health model whereby we strive to minimize exposure to potential health risks.
For information on this topic, see:
Safety
Health & well-being
DSM Code of Business Conduct
Talent attraction development & retention
This topic refers to the continuous development of employees’ skills through training and development programs, and
the company’s ability to attract and retain talent in order to execute the business strategy. This includes having a strong
employer branding, ensuring employees’ engagement, supporting people’s growth and promotion within the company.
Management approach: Talent attraction, development & retention fuels the growth of our employees and leaders, which
in turn enables our overall growth as an organization. Through our People & Organization strategy, we aim to reset the
context for leadership to create an inspiring, empowering and inclusive environment for our people and our business, and
to empower our people with the tools and an environment that enables them to take ownership of their performance,
development and careers.
For information on this topic, see:
Delivering on our P&O strategy
Employee diversity & inclusion
This topic revolves around equal opportunities, in particular ensuring that our company culture and hiring and
promotion practices embrace the building of an inclusive and diverse workforce that reflects the makeup of local talent
pools and its customer base.
Management approach: We focus our activities on increasing the representation of women and the under-represented
nationality diversity of our executive population and management pipeline. We have five diversity pillars – Gender, Race,
Ethnicity & National Identity, LGBTQ+, Disability and Generations - which are supported by Employee Resource Groups. Our
focus areas are in recruitment, development, and inclusion. Employee inclusion & diversity is addressed through our
Inclusion & Diversity (I&D) network, led by our I&D Council. Our employees are trained on Respectful behavior to
emphasize the importance of inclusiveness and diversity and to prevent inappropriate behavior including sexual
harassment.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 192
For information on this topic, see:
Inclusion & Diversity
Delivering on our P&O strategy
DSM Code of Business Conduct
Food loss & waste
This topic is part of the transition to sustainable food systems within planetary boundaries that is needed to secure the
future availability of food. It covers helping to prevent food loss and waste generated throughout food systems by
creating better animal nutrition, more resource-efficient food production, innovative packaging, and antioxidants that
keep food nutritious and safe.
Management approach: We manage this topic by enabling healthy food systems through our businesses, which prevent
food loss and waste. We enable our customers to improve the efficiency of the production of animal-based proteins as
well as produce products that keep food products fresher and safer for longer. We work with partners to ensure that
nutritious food reaches people in need.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms & networks
Review of business
Business & Governance
Product quality & safety
Product quality & safety ensures the highest product quality standards for our solutions, as well as controlling and
minimizing all possible safety risks and adverse effects on human or animal health and on the environment, that could
be caused by (the substances present in) our products throughout the value chain. It is about knowing the substances we
use and produce, being able to explain why we use them, taking the appropriate risk control measures, and sharing this
information with relevant and interested stakeholders.
Management approach: Quality has been accorded the same degree of scrutiny as safety, as we journey toward becoming
a company focused on Health, Nutrition & Bioscience. We focus on three areas to ensure that quality is embedded across
our organization – risk assessments, standards, and a learning organization. Product safety is addressed in our product
stewardship statement. We take a risk-based approach to product stewardship and will use alternatives where feasible,
and always where required. We also see the opportunities for safer products with fewer or no hazardous properties in the
circular economy.
For information on this topic, see:
Quality
Product stewardship
Product stewardship (company website)
Business ethics & transparency
This topic addresses the company’s approach to and public disclosure on ethical and fair business conduct, corporate
governance and compliance. This includes taxation, privacy, bioethics, fraud, bribery & corruption, and fiduciary
responsibilities.
Management approach: We take our responsibilities as a business seriously. Our approach to ethics and transparency is
led by the DSM Code of Business Conduct and our Supplier Code of Conduct. Our whistleblower policy (DSM Alert) supports
our employees and third parties in expressing their concerns about suspected misbehavior. DSM’s tax position is
consistent with the normal course of our business operations and reflects the corporate strategy as well as the geographic
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 193
spread of our activities. It is available through our position paper. We transparently report on our business through this
Report and our public statements.
For information on this topic, see:
DSM Code of Business Conduct
Corporate governance and risk management
DSM Alert policy (company website)
Taxation position paper (company website)
Sustainable agriculture
This topic is part of the transition to sustainable food systems within planetary boundaries that is needed to secure the
future availability of food. It covers developing solutions for resource-efficient and sustainable food production systems
(for instance, that protect animal welfare and health, reduce carbon emissions and increase yield) and supporting the
livelihoods of smallholder farmers across value chains together with partners.
Management approach: We manage this topic by enabling healthy food systems through our Nutrition businesses, which
target sustainable agriculture. We advocate for a change in food systems within planetary boundaries. Through our Food
System Commitments, we commit to enable on-farm livestock emissions reductions and to support the livelihoods of
smallholder farmers.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Collaborative platforms & networks
Review of business
Resilience to economic & political volatility
Resilience requires a strong, sustainable and agile business model and supply chain, that reduces exposure to economic
and political volatility, brought about by emerging risks such as geopolitical developments and global health crises.
Management approach: Our long-term strategy is toward becoming a company focused on Health, Nutrition & Bioscience
which addresses the urgent societal and environmental consequences associated with how the world produces and
consumes food. Our business model of ‘global products, local solutions’ gives us scalability and quantity combined with
local (customized) solutions. Through our risk management framework, we identify risks and define mitigating actions.
For information on this topic, see:
Our approach to the Sustainable Development Goals
Strategy
Risk Management
Suppliers
Cybersecurity
Preventing fraud and the unauthorized access to our networks, IT systems and data, while ensuring company and
employee data protection.
Management approach: Cybersecurity is under the accountability of the Cyber Security Office together with the Cyber
Security Governance Board. Awareness on cybersecurity is addressed through the Security e-learning covering our key
security behaviors and the Cyber Fraud Awareness e-learning. Global, as well as targeted, phishing tests are regularly
carried out to ensure our people stay alert.
For information on this topic, see:
DSM Code of Business Conduct
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 194
Consumer behavior
Addressing changes in consumer behavior and awareness by manufacturing products that consider future needs of
society and the environment.
Management approach: Consumer behavior can be both a risk and an opportunity to the company. We recognize shifts in
business models, industry and end-consumer behavior, and the ability to respond to changes in our emerging risks. We
have shifted our innovation approach to be platform-based, and have identified four growth themes that align to our
future strategic needs and support our growth ambitions. These themes align to major global societal, technological and
environmental trends.
For information on this topic, see:
Our focus in innovation
Risk management
Digital transformation
Digital transformation refers to the application of digital technologies to all aspects of business and society.
Management approach: Digital solutions support and strengthen our customer relationships. We monitor and mitigate
potential risks relating to digital through Group Risk Management. Our Information Security Office and Privacy Policy guide
our approach toward the security of information assets.
For information on this topic, see:
Risk management
Community relations
Minimizing a company’s impact on communities, engaging with the communities toward common understanding and
value creation, and giving back to society through corporate citizenship activities.
Management approach: DSM engages with the communities in which it operates at multiple levels — from local community
initiatives to collaborations with universities and research institutes. We engage in philanthropic and sponsorship
activities, as well as via the in-kind contributions of our employees’ hours and expertise.
For information on this topic, see:
Collaborative platforms & networks
Society
2 EU Taxonomy
The EU Taxonomy
The 2018 EU Action plan on financing sustainable growth sets out an EU strategy for sustainable finance with the aim of
redirecting capital flows. In this plan, an EU classification system was established to determine which economic activities
qualify as sustainable. This sustainability classification system is generally referred to as the EU Taxonomy and is part of
the EU's overall efforts to reach the objectives of the European Green Deal and make Europe climate-neutral by 2050.
The EU Taxonomy entered into force on 12 July 2020, establishing criteria for environmentally sustainable economic
activities related to six environmental objectives. The taxonomy regulation also amended the EU Accounting Directive
(2013/34/EU) on non-financial information by expanding the scope of content that needs to be disclosed by large
companies in the Management Report. It requires companies to disclose the proportion of their activities that qualify as
environmentally sustainable.
The disclosure requirements are set out in a Delegated Act under Article 8(4) of the Taxonomy Regulation (published 6 July
2021). From 2022 onward, companies are required to also disclose the proportion of taxonomy-aligned activities, in
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 195
addition to the information already provided on the proportion of taxonomy-eligible and taxonomy non-eligible economic
activities. For this purpose, DSM has to disclose the proportion of activities that meet the eligibility and alignment criteria
using the indicators turnover, capital expenditure, and operational expenditure, as well as qualitative information. We
have assessed our economic activities for eligibility and, if applicable, alignment in relation to the first two environmental
objectives as per the EU Taxonomy.
The first Delegated Act with climate objectives aims to identify those industries that can make the largest contribution
toward a carbon-neutral society. These include energy, selected manufacturing activities, transport and buildings. As a
Health, Nutrition & Bioscience company, we have concluded that our economic activities are not covered by the Climate
Delegated Act, and consequently, we are not in the primary scope of industries that are relevant to the two climate-related
objectives. As such, despite our significant efforts and investments in reducing greenhouse gas emissions with the aim of
reaching our specified Science Based Targets and net-zero commitments (see also Climate change mitigation), the
activities through which we try to achieve these goals are currently not included in the Taxonomy. These activities relate to
food system transformation, including the reduction of greenhouse gas emissions.
Our eligibility for the first two environmental objectives
In 2021, we provided information on the Taxonomy-eligible activities that related to the production of primary plastics.
These activities were classified as discontinued operations in 2022 following the announced divestment of our Materials
businesses, and so these activities are excluded from our Taxonomy disclosures (in accordance with Article 8 Delegated
Act, Annex 1.1.1). As our economic activities are not in the primary scope of the Taxonomy, we concluded that no turnover
currently qualifies as Taxonomy-eligible and, as a consequence, Taxonomy-aligned regarding the first two environmental
objectives (climate mitigation and climate adaptation). In line with our turnover, we also assessed the CAPEX and OPEX
that qualifies as Taxonomy-eligible and Taxonomy-aligned as negligible.
Based on the standard table as provided in the EU Taxonomy (Article 8 Delegated Act, Annex 2) and as no economic
activities qualify as Taxonomy-eligible, DSM reports the following condensed format of the table for 2022:
(in € million)
NACE-codes
Taxonomy
Activity
Substantial
contribution criteria
DNSH
criteria
Turnover¹
CAPEX² ³
OPEX⁴ ⁵
A1 Eligible and Aligned
n.a.
n.a.
n.a.
n.a.
0
0
0
A2 Eligible
n.a.
n.a.
n.a.
n.a.
0
0
0
Total
0
0
0
B Non-Eligible
8,390
(100%)
696
(100%)
406
(100%)
A + B Total
8,390
696
406
1 Based on continuing operations as reported on the face of the income statement in the Consolidated financial statements.
2 Total CAPEX is determined based on the 2022 additions to property, plant and equipment, intangible assets, and additions to right-of-use assets. See Note
8 and Note 9 to the Consolidated financial statements.
3 While a limited portion of our capital expenditures could potentially relate to the purchase of output of Taxonomy-aligned activities or are individual
measures that enable our activities to become low-carbon or lead to GHG reductions, the extent to which these expenditures are in line with the Taxonomy
is currently not tracked in our financial systems. In line with our conservative approach outlined below we therefore do not consider any of the before
mentioned limited CAPEX to be Taxonomy eligible or aligned.
4 Total OPEX consists of maintenance (including building renovations) and R&D costs, excluding costs and income related to bad debts, government grants,
depreciation and amortization, own work capitalized, and special / APM items.
5 Based on the considerations related to revenue and CAPEX eligibility, the OPEX that could be eligible and, in turn, aligned under the Taxonomy is also
deemed negligible.
We welcome the implementation of the EU Taxonomy and have assessed its impact on our company in line with its overall
objectives, albeit accepting that parts of the Taxonomy Regulation are subject to interpretation, which may lead to variety
in its application. Considering the level of complexity as well as the evolving character of the framework, we expect that
Taxonomy reporting will develop over time. As such, we shall apply a conservative approach to and interpretation of the
Taxonomy legislation until we believe it has sufficiently matured. We will periodically revalidate our methodology and our
reported KPIs based on the evolution of the regulations and forthcoming guidance from, among others, the European
Commission and the European Securities and Markets Authority (ESMA).
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 196
More information on our strategy and sustainability commitments can be found in the sections on Delivering a long-term,
purpose-led, positive impact, and the DSM Responsible Care Plan. For more information on our climate risk assessment,
our ambitions and actions, including our path to reduce emissions by 2030, please refer to Climate adaptation and
Climate-related risks.
3 Taskforce on Climate-related Financial Disclosures (TCFD)
The TCFD recommendations are a set of voluntary, climate-related financial disclosures for use by companies to provide
information to their stakeholders. We were among the first companies to commit to implementing, as fully as practicable,
these recommendations as outlined in the TCFD's implementation path. The recommendations are structured around four
elements ‒ Governance, Strategy, Risk Management, and Metrics and Targets. This Report includes various disclosures
relevant for the TCFD recommendations. To highlight this, for each TCFD theme reference is made to relevant sections.
TCFD elements
Recommended disclosures
References in this report
Governance
1. Managing Board's oversight on climate-related risks and
opportunities
Governance Framework - Sustainability
Report by the Supervisory Board -
Sustainability Committee
2. Management's role in assessing and managing climate related
risks and opportunities
Planet - Climate change mitigation
Planet – Progress against our DSM
Responsible Care Plan
Strategy
1. Description of climate related risks and opportunities
Risk Management
2. Impact of climate-related risks on the company's business
activities and strategic and financial planning
Planet - Climate change mitigation
Planet - Climate adaptation
Planet - Water stewardship
3. Resilience of the organization's strategy
Purpose
Strategy
Risk management
1. The company's processes for identifying and assessing climate-
related risks
Risk Management - Climate-related risks
2. The company's processes for managing climate-related risks
Risk Management – Performance
3. Integration of processes for identifying, assessing and
managing climate-related risks into the company's general risk
management system
Risk Management – Performance
Risk Management – Review & revision
Metrics and
targets
1. Metrics with which the company assesses climate-related risks
and opportunities
Planet – Progress against our DSM
Responsible Care Plan
Brighter Living Solutions Plus
2. Disclosure of scope-1, scope-2 and scope-3 GHG emissions
Planet - Climate change mitigation
five-year summaries: Sustainability tables
3. Targets used to manage climate-related opportunities and risks
against performance
Remuneration report
Note 27 Share-based compensation
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 197
4 SASB and WEF IBC mapping
We map our disclosures to other standards and frameworks to support our stakeholders who are using these. You can find
how our disclosures map to the Sustainability Accounting Standards Board’s Chemicals Standard and the WEF IBC
Stakeholder Capitalism metrics and disclosures below. SASB disclosures that are considered ‘not material’ have been
omitted from the table.
Topic
Reference
Location and WEF IBC notes
Governing purpose
WEF IBC: Setting Purpose
Purpose
Quality of governing body
WEF IBC: Governance Body Composition
Governance framework
Stakeholder engagement
WEF IBC: Material issues impacting stakeholders
Materiality
Management approach for material topics
Ethical behavior
WEF IBC: Anti-Corruption
Code of Business Conduct
WEF IBC: Protected ethics advice and reporting
mechanisms
Code of Business Conduct
Risk and opportunity oversight
WEF IBC: Integrating risk and opportunity into
business process
Risk management
Animal Nutrition & Health
Health, Nutrition & Care
Food & Beverage
Climate change
WEF IBC: Greenhouse Gas (GHG) emissions
SASB: RT-CH-110a.1
SASB: RT-CH-110a.2
Scope 1 + 2 GHG emissions
Scope 3 GHG emissions
WEF IBC: TCFD Implementation
Taskforce for Climate-related Financial
Disclosures (TCFD)
Nature loss
WEF IBC: Land use and ecological sensitivity
Nature & biodiversity – only % of sites in or
adjacent to protected sites is reported. IUCN
Red List species is currently unknown.
Freshwater availability
WEF IBC: Water consumption and withdrawal in
water-stressed areas
SASB: RT-CH-140a.1
SASB: RT-CH-140a.3
Water stewardship – water stress is only
measured for ‘non-OTC’ water withdrawal.
Air quality
SASB: RT-CH-120a.1
Other emissions to air
Energy management
SASB: RT-CH-130a.1
Renewable energy
Waste management
SASB: RT-CH-150a.1
Waste
Safety & environmental
stewardship of chemicals
SASB: RT-CH-410b.1
SASB: RT-CH-410b.2
Product stewardship
Product stewardship on the company
website
Genetically modified organisms
SASB: RT-CH-410c.1
Position paper on Industrial biotechnology
on the company website
Dignity and equality
WEF IBC: Diversity and inclusion (%)
Inclusion & diversity
WEF IBC: Pay equality (%)
Human rights
Fair remuneration framework on the
company website
Gender pay gap is reported at company
level. Additional analysis and validation is
ongoing.
Notes to the Sustainability statements
Royal DSM Integrated Annual Report 2022 198
Topic
Reference
Location and WEF IBC notes
WEF IBC: Wage level (%)
Human rights
Fair remuneration framework on the
company website
DSM focuses on living wage instead of
minimum wage.
WEF IBC: Risk for incidents of child, forced, or
compulsory labor
DSM figures: five-year summary – People
We have found no instances of child labor
within DSM, and child and forced labor are
part of the Code of Business Conduct. Risk
assessment is in progress for the Supply
Chain. It is included in the Supplier Code of
Conduct.
Health & well-being
WEF IBC: Health and safety (%)
SASB: RT-CH-320a.1
SASB: RT-CH-320a.2
Safety
Health & Well-being
We do not report on absenteeism.
Skills for the future
WEF IBC: Training provided (#, $)
Inclusion & diversity
We report on employee level only, as we do
not consider it material to our management
approach on training to break this number
down.
Safety incidents and response
SASB: RT-CH-540a.1
SASB: RT-CH-540a.2
Safety, Quality and Health & Well-being
Employment and wealth
generation
WEF IBC: Absolute number and rate of employment
DSM figures: five-year summary – People
We do not provide a breakdown using
multiple angles as we do not consider it
material to do so.
WEF IBC: Economic Contribution
Taxation position paper on the company
website
We do not report on the financial
contributions received from governments.
WEF IBC: Financial Investment Contribution
Strategy
Key business figures at a glance
Information on the DSM share
Innovation in better products
and services
WEF IBC: Total R&D Expenses ($)
Innovation
Community and social vitality
WEF IBC: Total tax paid
Taxation position paper on the company
website
Royal DSM Integrated Annual Report 2022 199
Consolidated financial statements
Summary of significant accounting policies
Basis of preparation
DSM’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and the provisions of section 362-8 of Book 2 of the Dutch Civil Code.
The accounting policies applied by DSM comply with IFRS and the pronouncements of the International Financial
Reporting Interpretation Committee (IFRIC) effective at 31 December 2022.
New or amended standards that are effective from 1 January 2022 do not have a material effect on DSM’s consolidated
financial statements. In addition, new or amended standards effective after 1 January 2023 were neither adopted early, nor
expected to have significant impact.
Consolidation including joint arrangements
The consolidated financial statements comprise the financial statements of Royal DSM and its subsidiaries (together ‘DSM’
or ‘group’). As a parent company, DSM is exposed, or has a right, to the variable returns from its involvement with its
subsidiaries and has the ability to affect the returns through its power over the subsidiary. The financial data of
subsidiaries are fully consolidated. Non-controlling interests in the group's equity and profit and loss are stated
separately. Subsidiaries are consolidated from the acquisition date until the date on which DSM ceases to have control.
From the acquisition date onwards, all intra-group balances and transactions and unrealized profits or losses from intra-
group transactions are eliminated, with one exception: unrealized losses are not eliminated if there is evidence of an
impairment of the asset transferred. In such cases, an impairment of the asset is recognized.
A joint arrangement is an entity in which DSM holds an interest and which is jointly controlled by DSM and one or more
other venturers under a contractual arrangement. A joint arrangement can either be a joint venture where DSM and the
other partner(s) have rights to the net assets of the arrangement, or a joint operation where DSM and the partner(s) have
rights to the assets and obligations for the liabilities of the arrangement. For joint ventures, the investment in the net
assets is recognized and accounted for in accordance with the equity method. For a joint operation, assets, liabilities,
revenues and expenses are recognized in the financial statements of DSM in accordance with the contractual entitlement
or obligations of DSM.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, including liabilities incurred, measured at acquisition date fair value, and the
amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed.
As of the acquisition date, identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree
are recognized separately from goodwill. Identifiable assets acquired and the liabilities assumed are measured at
acquisition date fair value. For each business combination, DSM elects whether it measures the non-controlling interest in
the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Any contingent
consideration payable is measured at fair value at the acquisition date.
For business combinations with the acquisition date in the prior reporting period, comparative information is revised in
case adjustments are made during the measurement period to the provisional amounts, determined as part of the
purchase price allocation (PPA), based on information available at the acquisition date.
Segmentation
Segment information is presented in respect of the group’s reportable operating segments, about which separate financial
information is available that is regularly evaluated by the Chief Operating Decision Maker. DSM has determined that
Animal Nutrition & Health (ANH), Health, Nutrition & Care (HNC), and Food & Beverage (F&B) represent reportable
operating segments in addition to the reportable segment Corporate Activities. The Managing Board decides how to
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 200
allocate resources and assesses the performance of the Business Groups. Business Group performance is reported and
reviewed down to the level of Adjusted EBITDA. The Business Groups are organized in accordance with the type of products
produced and the nature of the markets served. The same accounting policies that are applied for the consolidated
financial statements of DSM are also applied for the operating segments. Prices for transactions between segments are
determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can reasonably and consistently be allocated. Selected information on a country and
regional basis is provided in addition to the information about operating segments.
Foreign currency translation
The presentation currency of the group is the euro.
Each entity of the group records transactions and balance sheet items in its functional currency. Transactions
denominated in a currency other than the functional currency are recorded at the spot exchange rates prevailing at the
date of the transactions. Monetary assets and liabilities denominated in a currency other than the functional currency of
the entity are translated at the closing rates. Exchange differences resulting from the settlement of these transactions and
from the translation of monetary items are recognized in the income statement.
Non-monetary items that are measured on the basis of historical costs denominated in a currency other than the
functional currency continue to be translated against the rate at initial recognition and will not result in exchange
differences.
On consolidation, the balance sheets of subsidiaries that do not have the euro as their functional currency are translated
into euros at the closing rate. The income statements of these entities are translated into euros at the average rates for
the relevant period. Goodwill paid on acquisition is recorded in the functional currency of the acquired entity. Exchange
differences arising from the translation of the net investment in entities with a functional currency other than the euro are
recorded in Other comprehensive income. The same applies to exchange differences arising from borrowings and other
financial instruments insofar as those instruments hedge the currency risk related to the net investment. On disposal of
an entity with a functional currency other than the euro, the cumulative exchange differences relating to the translation of
the net investment are recognized in profit or loss.
Distinction between current and non-current
An asset (liability) is classified as current when it is expected to be realized (settled) within 12 months after the balance
sheet date.
Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet when DSM has a
legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the
liability simultaneously.
Intangible assets
Goodwill represents the excess of the cost of an acquisition over DSM’s share in the net fair value of the identifiable assets
and liabilities of an acquired subsidiary, joint venture or associate. Goodwill paid on acquisition of subsidiaries is included
in intangible assets. Goodwill paid on acquisition of joint ventures or associates is included in the carrying amount of
these entities. Goodwill recognized as an intangible asset is not amortized but tested for impairment annually, and when
there are indications that the carrying amount may exceed the recoverable amount. A gain or loss on the disposal of an
entity includes the carrying amount of goodwill relating to the entity sold.
Intangible assets acquired in a business combination are recognized at fair value on the date of acquisition and
subsequently amortized over their expected useful lives, which vary from 4 to 20 years.
Separately acquired licenses, patents, drawing rights and application software are carried at historical cost less straight-
line amortization and less any impairment losses. The expected useful lives vary from 4 to 15 years. Costs of software
maintenance are expensed when incurred. Capital expenditure that is directly related to the development of application
software is recognized as an intangible asset and amortized over its estimated useful life (5 to 8 years).
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 201
Research costs are expensed when incurred. Development expenditure is capitalized if the recognition criteria are met and
if it is demonstrated that it is technically feasible to complete the asset; that the entity intends to complete the asset; that
the entity is able to sell the asset; that the asset is capable of generating future economic benefits; that adequate
resources are available to complete the asset; and that the expenditure attributable to the asset can be reliably measured.
Development expenditure is amortized over the asset’s useful life. Development projects under construction are included
under ‘Development projects’.
Property, plant and equipment
Property, plant and equipment are measured at cost less depreciation calculated on a straight-line basis and less any
impairment losses. Interest during construction is capitalized when it meets the criteria of a qualifying asset. Expenditures
relating to major scheduled turnarounds are capitalized and depreciated over the period up to the next turnaround.
Property, plant and equipment are systematically depreciated over their estimated useful lives. The estimated remaining
lives of assets are reviewed every year, taking account of commercial and technological obsolescence as well as normal
wear and tear. The initially assumed expected useful lives are in principle as follows: for buildings 10–50 years; for plant
and machinery 5–15 years; for other equipment 4–10 years. Land is not depreciated.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use or the sale of the asset. Any gain or loss arising on derecognition of the asset is
recorded in profit or loss.
Leases
DSM recognizes a lease liability and a corresponding right-of-use asset at the commencement date of a lease. The lease
liability is initially measured at the present value of the remaining lease payments that are not paid at the commencement
date. In general, DSM splits the contractual consideration into a lease and a non-lease component based on their relative
stand-alone prices. For vehicle leases, however, DSM applies the practical expedient not to make this split but rather
accounts for the fixed consideration as a single lease component. If available, DSM applies the implicit interest rate in the
contract to discount the remaining lease payments; only if this is not the case, DSM uses the applicable incremental
borrowing rate as the discount rate. In determining the incremental borrowing rate, DSM applies the practical expedient to
use a single discount rate to portfolios of leases with reasonably similar characteristics. Over time, the lease liability is
increased by the interest expense related to the unwinding of the lease liability and decreased by the lease payments
made. The lease liability is remeasured when DSM reassesses or modifies the contractual terms and conditions, including
indexation.
The corresponding right-of-use assets are measured at cost less any depreciation on a straight-line basis over the
expected lease term, less any impairment losses, and adjusted for remeasurements of the lease liability. In line with the
initially assumed expected useful life of the corresponding asset class within Property, plant and equipment, the minimum
expected lease term for building leases is in principle 10 years. However, the contractual terms or specific circumstances
could require applying the shorter non-cancellable period in determining the expected lease term. For vehicle leases, the
expected lease term is set equal to the contractual term (4–5 years).
Payments related to short-term leases (leases with a term shorter than 12 months) are recognized on a straight-line basis
in profit or loss.
Impairment of non-financial assets
When there are indications that the carrying amount of a non-financial asset (an intangible asset or an item of property,
plant and equipment) may exceed the estimated recoverable amount (the higher of its value in use and fair value less
costs to sell), the possible existence of an impairment loss is investigated. If an asset does not generate largely
independent cash flows, the recoverable amount is determined for the cash generating unit (CGU) to which the asset
belongs. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market interest rates and the risks specific to the asset.
When the recoverable amount of a non-financial asset or a CGU is less than its carrying amount, the carrying amount is
impaired to its recoverable amount and an impairment charge is recognized in profit or loss. An impairment loss is
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 202
reversed when there has been a change in estimate that is relevant for the determination of the asset’s recoverable
amount since the last impairment loss was recognized. Impairment losses for goodwill are never reversed.
Associates and joint ventures
An associate is an entity over which DSM has significant influence but no control or joint control, usually evidenced by a
shareholding that entitles DSM to between 20% and 50% of the voting rights. A joint venture is an entity over which DSM
has joint control and is entitled to its share of the net assets and liabilities. Investments in associates and joint ventures
are accounted for by the equity method, which involves recognition in the income statement of DSM’s share of the
associate’s or joint venture’s profit or loss for the year determined in accordance with the accounting policies of DSM. Any
other results at DSM in relation to associated companies are recognized under Other results related to associates and
joint ventures. DSM’s interest in an associate or joint venture is carried in the balance sheet at its share in the net assets
of the associate or joint venture together with goodwill paid on acquisition, less any impairment loss.
When DSM’s share in the loss of an associate or joint venture exceeds the carrying amount of that entity, the carrying
amount is reduced to zero. No further losses are recognized unless DSM has responsibility for obligations relating to the
entity.
Financial instruments
Financial instruments are contractual rights and obligations resulting in an inflow or outflow of financial assets or the
issue of equity instruments. They are initially measured at fair value plus any directly attributable transaction costs.
Transaction costs for financial instruments assigned to the category ‘At fair value through profit and loss’ are recognized
directly in the income statement. Subsequent measurement is based on the classification of financial instruments defined
in IFRS 9.
Non-derivative financial instruments
DSM initially recognizes financial assets and financial liabilities on the date when DSM becomes a party to the contractual
provisions of the instrument. DSM derecognizes a financial asset when the contractual rights to the cash flows from the
asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred. DSM derecognizes a financial liability when its
contractual obligations are discharged or canceled, or expire.
Other financial assets
Other financial assets comprise loans to associates and joint ventures, other participating interests and other receivables.
DSM’s business model objective for loans is ‘held-to-collect contractual cash flows only’. Held to collect loans, other
receivables and other deferred items, for which the contractual cash flows consist solely of principal and interest, are
measured at amortized cost, using the effective interest method, which generally corresponds to the nominal value, less
an adjustment for expected credit loss. Upon disposal of these assets, the gain or loss is recognized in profit or loss.
Other receivables, for which the contractual cash flows are not solely principal and interest, are recognized at fair value,
with changes in fair value recognized in profit or loss.
Other participating interests comprise equity interests in entities in which DSM has no significant influence; these are
accounted for as assets at fair value through profit or loss, or DSM uses the irrevocable election to present the fair value
changes in other comprehensive income (Fair value reserve) instead of profit or loss. These fair value changes in other
comprehensive income (OCI) will not be recycled through profit and loss upon disposal of the interest. All dividends
received will be presented in profit or loss.
Expected credit loss
All financial assets measured at amortized cost include an allowance for expected credit loss as of the date of initial
recognition of the asset. Expected credit losses are measured as the present value of the difference between the cash
flows due to DSM, and the cash flows that DSM expects to receive. Expected credit losses are reassessed over time and
recognized in the income statement. Loss allowances for trade receivables are always measured at lifetime expected credit
loss.
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 203
Inventories
Inventories are stated at the lower of cost and net realizable value. The first in, first out (FIFO) method of valuation is used
unless the nature of the inventories requires the use of a different cost formula, in which case the weighted average cost
method is used. The cost of intermediates and finished goods includes directly attributable costs and related production
overhead expenses. Net realizable value is determined as the estimated selling price in the ordinary course of business,
less the estimated costs of completion and the estimated costs necessary to make the sale. Products whose
manufacturing cost cannot be calculated because of joint cost components are stated at net realizable value after
deduction of a margin for selling and distribution efforts.
Current receivables
Current receivables, for which the contractual cash flows are solely principal and interest, are initially recognized at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized
cost using the effective interest method, which generally corresponds to nominal value, less an adjustment for expected
credit loss.
Current investments
Current investments are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to
initial recognition, they are measured at amortized cost using the effective interest method. Deposits with banks with a
maturity between 3 and 12 months are classified as current investments.
Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and in hand and deposits held at call with banks with a maturity of less
than three months at inception. Bank overdrafts are included in current liabilities. Included in cash and cash equivalents
are investments in money market funds that do not meet the SPPI (Solely Payments of Principal & Interest) criterion but
are held to meet short-term cash demand. Cash and cash equivalents are measured at fair value through profit and loss,
or amortized cost.
Non-current assets and disposal groups held for sale
Non-current assets and disposal groups (assets and liabilities relating to an activity that is to be sold) are classified as
‘held for sale’ if their carrying amount is to be recovered principally through a sales transaction rather than through
continuing use. The reclassification takes place when the assets are available for immediate sale and the sale is highly
probable. These conditions are usually met as from the date on which a letter of intent or agreement to sell is ready for
signing. Non-current assets and disposal groups held for sale are measured at the lower of carrying amount and fair value
less costs to sell. Non-current assets held for sale are not depreciated or amortized. For transparency, non-current assets
and disposal groups that will contribute to joint ventures are reported separately from other assets and liabilities held for
sale.
Discontinued operations
Discontinued operations comprise those activities that were disposed of during the period or which were classified as held
for sale at the end of the period and represent a separate major line of business or geographical area that can be clearly
distinguished for operational and financial reporting purposes.
Royal DSM Shareholders’ equity
DSM’s ordinary shares and Cumulative Preference Shares are classified as Royal DSM Shareholders’ equity. This is the case
for the latter, as there is no mandatory redemption, and distributions to the shareholders are at the discretion of DSM. The
price paid for repurchased DSM shares (treasury shares) is deducted from Royal DSM Shareholders’ equity until the shares
are canceled or reissued. Treasury shares are presented in the treasury share reserve. When treasury shares are sold or
reissued, the amount received is recognized as an increase in equity. Dividend to be distributed to holders of Cumulative
Preference Shares is recognized as a liability when the Supervisory Board approves the proposal for profit distribution.
Dividend to be distributed to holders of ordinary shares is recognized as a liability when the Annual General Meeting of
Shareholders approves the profit appropriation.
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 204
Provisions
Provisions are recognized when all of the following conditions are met: (1) there is a present legal or constructive
obligation as a result of past events, (2) it is probable that a transfer of economic benefits will settle the obligation, and (3)
a reliable estimate can be made of the amount of the obligation.
The probable amount required to settle long-term obligations is discounted if the effect of discounting is material. Where
discounting is used, the increase in the provision due to the passage of time is recognized as financial expense.
Borrowings
Borrowings are not held for trading and are initially recognized at fair value of the proceeds received, net of transaction
costs. Subsequently, borrowings are stated at amortized cost using the effective interest method. Measurement at
amortized cost includes any discount or premium on the borrowing. Interest expenses are recorded as financial expense
in profit or loss.
If the interest rate risk relating to a long-term borrowing is hedged through a fair value hedge, and the hedge is effective,
the carrying amount of the long-term loan is adjusted for changes in fair value of the interest component of the hedged
loan.
Other liabilities
Other liabilities are measured at amortized cost, which generally corresponds to the nominal value, or at fair value
through profit and loss. The latter is mainly applied to acquisition-related liabilities.
Revenue from contracts with customers
Revenue from contracts with customers is recognized by identifying the contract and its performance obligations as well
as determination and allocation of the transaction price to these performance obligations. At DSM, revenue related to the
sale of goods is recognized in the income statement when the performance obligation is satisfied. This is at the point in
time when transfer of control of the goods passes to the buyer. Revenue recognized is measured at the fair value of the
contractual transaction price allocated to the performance obligation that is satisfied.
Income coming from the rendering of services is recognized when the service, i.e., the performance obligation, has been
performed. The revenue recognized is measured at the fair value of the contractual transaction price allocated to the
performance obligation that is satisfied.
Net sales represent the invoice value less estimated rebates, cash discounts, and indirect taxes.
Income related to the sale or licensing of technologies or technological expertise is recognized in the income statement
either at a point in time or over time, depending on when the contractually identified performance obligations are
satisfied. Performance obligations related to license income include the transfer of rights and obligations associated with
those technologies. License income is reported in Net sales when the income is part of the ordinary and recurring
activities of the business and, if this is not the case, it is reported in Other operating income.
Interest income is recognized on a time-proportionate basis using the effective interest method.
Dividend income is recognized when the right to receive payment is established.
Government grants
Government grants are recognized at their fair value if there is reasonable assurance that the grant will be received and all
related conditions will be complied with. Cost grants are recognized as income over the periods necessary to match the
grant on a systematic basis to the cost that it is intended to compensate. If the grant is an investment grant, its fair value
is initially recognized as deferred income in Other non-current liabilities and then released to profit or loss over the
expected useful life of the relevant asset.
Share-based compensation
Performance share units and restricted share units are granted free of charge to eligible staff and generally vest after
three years on the achievement of previously determined target vesting conditions. The cost of performance share units
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 205
and restricted share units is measured by reference to the fair value of the DSM shares on the date on which the
performance share units and restricted share units were granted or modified and is recognized in profit or loss (Employee
benefit costs) during the vesting period, together with a corresponding increase in equity. Vesting conditions other than
market conditions are taken into account by adjusting the number of equity instruments, so that the amount recognized
during the vesting period in employee benefit costs is based on the number of equity instruments that eventually vest.
The costs of option plans are measured by reference to the fair value of the options on the date on which the options are
granted. The fair value is determined using the Black-Scholes model, taking into account market conditions linked to the
price of the DSM share. The costs of these options are recognized in profit or loss (Employee benefit costs) during the
vesting period, together with a corresponding increase in Equity in the case of equity-settled options or Other non-current
liabilities in the case of cash-settled options. No expense is recognized for options that do not ultimately vest, except for
options where vesting is conditional upon a market condition.
Emission rights
DSM is subject to legislation encouraging reductions in greenhouse gas emissions and has been awarded emission rights
(principally CO
2
emission rights) in a number of jurisdictions. Emission rights are reserved for meeting delivery obligations
and are recognized at cost. Revenue is recognized when surplus emission rights are sold to third parties. When actual
emissions exceed the emission rights available to DSM, a liability is recognized for the expected additional costs.
Alternative performance measures (APMs)
DSM uses Alternative performance measures to present and discuss DSM’s financial results. To arrive at these APMs,
adjustments are made for material items of income and expense arising from circumstances such as acquisitions and
divestments, restructuring, impairments and other events.
Other APM adjusting events include site closure costs, environmental cleaning, litigation settlements or other non-
operational (contractual) arrangements. Other than items related to acquisition and integration costs incurred in the first
year from the acquisition date (including non-recurring inventory value adjustments) as well as adjustments due to
previously recognized APM adjusting events, the threshold is €10 million.
Income tax
Income tax expense is recognized in the income statement except to the extent that it relates to an item recognized
directly in Other comprehensive income or Shareholders’ equity.
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax rates enacted at the
balance sheet date, and any adjustment to tax payable with respect to previous years. The current tax position also
reflects any uncertainty related to income taxes. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the
carrying amount of assets and liabilities and their tax base. Deferred tax assets and liabilities are measured at the tax
rates that have been enacted or substantially enacted at the balance sheet date, and reflect any uncertainty related to
income taxes and are expected to apply when the related deferred tax assets are realized or the deferred tax liabilities are
settled. Deferred tax assets, including assets arising from losses carried forward and tax credits, are reassessed over time
and recognized to the extent that it is probable that future taxable profits will be available against which the deductible
temporary differences and unused tax losses can be utilized. Deferred tax assets and liabilities are stated at nominal
value.
Deferred taxes are not provided for the following temporary differences: the initial recognition of goodwill, the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax assets and deferred
tax liabilities are offset and presented net when there is a legally enforceable right to offset, and the assets and liabilities
relate to income taxes levied by the same taxation authority.
Consolidated financial statements – Summary of significant accounting policies
Royal DSM Integrated Annual Report 2022 206
Derivatives
Derivatives are measured at fair value at initial recognition and subsequent changes are recognized in profit or loss,
unless hedge accounting is applied.
Hedging
DSM uses derivatives such as foreign currency forward contracts and interest rate swaps to hedge risks associated with
foreign currency and interest rate fluctuations. In addition, DSM may use commodity swap or forward contracts to hedge
risks associated with exposure to fluctuations in commodity prices.
Derivatives used as a hedge instrument are recognized in the balance sheet at fair value and changes in fair value are
recognized in profit or loss unless cash flow hedge accounting or net investment hedge accounting is applied.
Cash flow hedge
Changes in the fair value of derivatives designated and qualifying as cash flow hedges are recognized in Other
comprehensive income (Hedging reserve) to the extent that the hedge is effective. Upon recognition of the related asset or
liability, the cumulative gain or loss is transferred from the hedging reserve and included in the carrying amount of the
hedged item if it is a non-financial asset or liability. Any ineffective portion of the changes of the fair value of the
derivative is recognized immediately in profit and loss. If the forecast transaction is no longer expected to occur, the
hedge no longer meets the criteria for hedge accounting, the hedging instrument expires or is sold, terminated or
exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is
no longer expected to occur, then the amount accumulated in equity is reclassified to profit or loss. If the hedged item is a
financial asset or liability, the gain or loss is transferred to profit or loss.
Net investment hedge
Changes in the fair value of derivatives designated and qualifying as net investment hedges are recognized in Other
comprehensive income (Translation reserve) to the extent that the hedge is effective and the change in fair value is
caused by changes in currency exchange rates. Accumulated gains and losses are released from Other comprehensive
income and are included in profit or loss when the net investment is disposed of.
Fair value hedge
Changes in the fair value of derivatives designated and qualifying as fair value hedges are immediately recognized in the
income statement, together with any changes in the fair value of the hedged assets or liabilities attributable to the hedged
risk.
Pensions and other post-employment benefits
For DSM’s defined contribution plans, the obligations are limited to the payment of contributions, which are recognized as
Employee benefit costs.
For defined benefit plans, the aggregate of the value of the defined benefit obligation and the fair value of plan assets for
each plan is recognized as a net defined benefit liability or asset. Defined benefit obligations are determined using the
projected unit credit method. Plan assets are recognized at fair value. If the fair value of plan assets exceeds the present
value of the defined benefit obligation, a net asset is only recognized to the extent that the asset is available for refunds
to the employer or for reductions in future contributions to the plan. Defined benefit pension costs consist of three
elements: service costs, net interest, and remeasurements. Service costs are part of Employee benefit costs and consist of
current service costs. Past service costs and results of plan settlements are included in Other operating income or
expense. Net interest is part of Financial income and expense and is determined on the basis of the value of the net
defined benefit asset or liability at the start of the year, and on the interest on high-quality corporate bonds.
Remeasurements are actuarial gains and losses, the return (or interest cost) on net plan assets (or liabilities) excluding
amounts included in net interest and changes in the effect of the asset ceiling. These remeasurements are recognized in
Other comprehensive income as they occur and are not recycled through profit or loss at a later stage.
Royal DSM Integrated Annual Report 2022 207
Consolidated financial statements
Consolidated income statement
x € million
Notes
2022
2021
Continuing operations
Net sales
5
8,390
7,269
Cost of sales
5
(5,700)
(4,657)
Gross margin
2,690
2,612
Marketing and sales
5
(1,235)
(1,172)
Research and development
5
(295)
(274)
General and administrative
5
(534)
(475)
Other operating income
5
107
82
Other operating expense
5
(51)
(62)
Operating profit
682
711
Financial income
6
71
24
Financial expense
6
(159)
(124)
Profit before income tax expense
594
611
Income tax expense
7
(124)
(123)
Share of the profit of associates and joint ventures
10
12
16
Other results related to associates and joint ventures
10
(7)
326
Net profit from continuing operations
475
830
Net profit from discontinued operations
3
1,240
850
Net profit for the year
1,715
1,680
Of which:
- Attributable to non-controlling interests
17
15
4
- Dividend on Cumulative Preference Shares
16
6
6
- Available to holders of ordinary shares
16
1,694
1,670
Earnings per share (EPS) total (in €):
2
- Net basic EPS
9.80
9.68
- Net diluted EPS
9.77
9.63
Earnings per share (EPS) continuing operations (in €):
2
- Net basic EPS
2.64
4.76
- Net diluted EPS
2.63
4.74
The accompanying notes are an integral part of these consolidated financial statements.
See Note 2 Alternative performance measures for the reconciliation to Adjusted EBITDA of €1,395 million (2021: €1,379
million) and other adjusted IFRS performance measures.
Consolidated financial statements
Royal DSM Integrated Annual Report 2022 208
Consolidated statement of comprehensive income
x € million
Notes
2022
2021
Net profit for the year
1,715
1,680
Other comprehensive income
Remeasurements of defined benefit pension plans
24
10
153
Fair value changes in Other participating interests and other financial
instruments
11
(61)
46
Exchange differences on translation of foreign operations relating to the non-
controlling interests
17
(3)
8
Tax related items that will not be reclassified to profit or loss
(10)
(20)
Items that will not be reclassified to profit or loss
(64)
187
.
Exchange differences on translation of foreign operations
16
- Change for the year
267
478
- Reclassification adjustment to the income statement
(16)
(13)
Hedging reserve
16
- Change for the year
(6)
(24)
- Reclassification adjustment to the income statement
53
7
Equity accounted investees – share of Other comprehensive income
-
1
Tax related items that may subsequently be reclassified to profit or loss
(7)
7
Items that may subsequently be reclassified to profit or loss
291
456
.
Total comprehensive income
1,942
2,323
Of which:
- Attributable to non-controlling interests
17
12
12
- Available to equity holders of Koninklijke DSM N.V.
16
1,930
2,311
Consolidated financial statements
Royal DSM Integrated Annual Report 2022 209
Consolidated balance sheet at 31 December
x € million
Notes
2022
2021
Assets
Intangible assets
8
5,147
5,309
Property, plant and equipment
9
3,576
3,964
Deferred tax assets
7
95
203
Prepaid pension costs
24
19
75
Share in associates and joint ventures
10
61
64
Derivatives
23
82
48
Other financial assets
11
295
227
Non-current assets
9,275
9,890
Inventories
12
2,339
2,297
Trade receivables
13
1,508
1,604
Income tax receivables
13
36
61
Other current receivables
13
78
32
Derivatives
23
42
30
Current investments
14
125
489
Cash and cash equivalents
15
2,755
1,561
Assets held for sale
3
1,245
56
Current assets
8,128
6,130
Total
17,403
16,020
.
Equity and liabilities
Shareholders' equity
10,743
9,318
Non-controlling interests
17
102
79
Equity
16
10,845
9,397
Deferred tax liabilities
7
476
490
Employee benefit liabilities
24
241
323
Provisions
18
74
96
Borrowings
19
2,978
2,995
Derivatives
23
4
9
Other non-current liabilities
20
205
280
Non-current liabilities
3,978
4,193
Employee benefit liabilities
24
22
21
Provisions
18
50
68
Borrowings
19
86
103
Derivatives
23
23
40
Trade payables
21
1,415
1,571
Income tax payables
21
64
77
Other current liabilities
21
490
540
Liabilities held for sale
3
430
10
Current liabilities
2,580
2,430
Total
17,403
16,020
Consolidated financial statements
Royal DSM Integrated Annual Report 2022 210
Consolidated statement of changes in equity (Note 16)
x € million
Share
capital
Share
premium
Treasury
shares
Other
reserves
Retained
earnings
Total
Non-
controlling
interests
Total
Equity
Balance at 1 January 2021
338
489
(976)
(243)
7,791
7,399
88
7,487
Dividend
-
-
-
-
(421)
(421)
(3)
(424)
Options / performance shares granted
-
-
-
22
-
22
-
22
Options / performance shares vested /
canceled
-
-
-
(24)
24
-
-
-
Cancellation of shares
(10)
(18)
746
-
(718)
-
-
-
Reissued shares
-
-
218
-
(25)
193
-
193
Acquisition of NCI without a change in
control
-
-
-
-
(20)
(20)
7
(13)
Acquisition (divestment) of subsidiary with
NCI
-
-
-
-
-
-
(24)
(24)
Repurchase of shares
-
-
(165)
-
-
(165)
-
(165)
Transfer
-
-
-
(101)
101
-
-
-
Other
-
-
-
1
(2)
(1)
(1)
(2)
Total comprehensive income
-
-
-
501
1,810
2,311
12
2,323
Balance at 31 December 2021
328
471
(177)
156
8,540
9,318
79
9,397
.
Dividend
-
-
-
-
(459)
(459)
-
(459)
Options / performance shares granted
-
-
-
34
-
34
-
34
Options / performance shares vested /
canceled
-
-
-
(29)
29
-
-
-
Reissued shares
-
-
191
-
(50)
141
-
141
Acquisition (divestment) of subsidiary with
NCI
-
-
-
-
-
-
(4)
(4)
Repurchase of shares
-
-
(210)
-
-
(210)
-
(210)
Transfer
-
-
-
(28)
17
(11)
11
-
Other
-
-
-
-
-
-
4
4
Total comprehensive income
-
-
-
230
1,700
1,930
12
1,942
Balance at 31 December 2022
328
471
(196)
363
9,777
10,743
102
10,845
Consolidated financial statements
Royal DSM Integrated Annual Report 2022 211
Consolidated cash flow statement (Note 26)
x € million
2022
2021
Operating activities
Net profit for the year
1,715
1,680
Share of the profit of associates and joint ventures (including discontinued operations)¹
(5)
(342)
Income tax (including discontinued operations)¹
190
245
Profit before income tax expense (including discontinued operations)¹
1,900
1,583
Financial income and expense (including discontinued operations)¹
94
106
Operating profit (including discontinued operations)¹
1,994
1,689
Depreciation, amortization and impairments (including discontinued operations)¹
652
681
EBITDA (including discontinued operations)¹
2,646
2,370
Adjustments for:
- (Gain) or loss from disposals
(1,024)
(649)
- Acquisition- / divestment-related in EBITDA
4
22
- Change in provisions
(33)
(20)
- Defined benefit plans
(15)
(39)
Adjustments for EBITDA
(1,068)
(686)
Income tax received
35
23
Income tax paid
(166)
(156)
Share-based compensation
34
22
Other
(19)
(2)
Adjustments for non-EBITDA
(116)
(113)
Operating cash flow before changes in working capital
1,462
1,571
Changes in operating working capital:
Inventories
(442)
(323)
Trade receivables
(133)
(194)
Trade payables
116
334
Changes in inventories, trade receivables and trade payables
(459)
(183)
Changes in non-operating working capital
(38)
39
Changes in working capital
(497)
(144)
Cash provided by operating activities
965
1,427
1 The Consolidated cash flow statement includes an analysis of all cash flows in total, therefore including both continuing and discontinued operations. For
the amounts related to discontinued operations split by activities and a reconciliation of profit from continuing operations to total, including discontinued
operations, see Note 3 Change in the scope of the consolidation.
Consolidated financial statements
Royal DSM Integrated Annual Report 2022 212
Consolidated cash flow statement (Note 26) continued
x € million
2022
2021
Cash provided by operating activities
965
1,427
Investing activities
Capital expenditure for:
- Intangible assets
(138)
(137)
- Property, plant and equipment
(506)
(433)
Payments regarding drawing rights
(7)
(7)
Proceeds from disposal of property, plant and equipment
17
27
Acquisition of subsidiaries and associates
(74)
(704)
Disposal of subsidiaries, businesses and associates
1,366
1,791
Additions to fixed-term deposits
(638)
(2,070)
Withdrawal from fixed-term deposits
1,001
1,625
Interest received
6
5
Other financial assets:
- Capital payments and acquisitions
(33)
(43)
- Dividends received
4
12
- Additions to loans granted
(152)
(10)
- Repayment of loans granted
-
29
- Proceeds from disposals
30
123
Cash from / (used in) investing activities
876
208
Financing activities
Contributions from non-controlling interests
5
3
Acquisition of non-controlling interests
-
(13)
Loans taken up
51
37
Repayment of loans
(29)
(513)
Payments of lease liabilities
(57)
(54)
Change in debt to credit institutions
(21)
12
Dividend paid
(345)
(266)
Interest paid
(52)
(65)
Proceeds from reissued treasury shares
25
34
Repurchase of shares
(210)
(165)
Other
(12)
6
Cash (used in) / from financing activities
(645)
(984)
Change in cash and cash equivalents
1,196
651
Cash and cash equivalents at 1 January
1,561
871
Exchange differences relating to cash held
(2)
39
Cash and cash equivalents at 31 December
2,755
1,561
Royal DSM Integrated Annual Report 2022 213
Notes to the consolidated financial statements of
Royal DSM
1 General information
Unless stated otherwise, all amounts are in € million.
A list of DSM participations has been filed with the Chamber of Commerce (Netherlands) and is available from the
company upon request. The list can also be downloaded from the company website.
On 31 May 2022, DSM and Firmenich announced that they have reached a business combination agreement with the
intention to enter into a merger of equals to create DSM-Firmenich. The merger is to be consummated in 2023 and it
impacts the 2022 financial statements in the following sections: Note 16 on ‘Equity’ specifically the dividend 2022, Note 23
‘Financial Instruments and Risks’ regarding a bridge facility, Note 2 ‘Alternative Performance Measures’ regarding merger-
related costs, and Note 18 ‘Provisions’ regarding a restructuring program. For further details on the merger plans refer to
‘Events after balance sheet date’.
The preparation of financial statements requires estimates and judgments that affect the reported amounts of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial
statements.
In addition to DSM’s significant accounting policies in the previous section, the policies that management considers to be
the most important for the presentation of the financial position and results of DSM’s operations are further discussed in
the relevant Notes. The same holds for the items that require management estimates and judgments about matters that
are inherently uncertain. Management cautions that future events often vary from forecasts and that estimates routinely
require adjustment. Areas of judgment that have the most significant effect on the amounts recognized in the financial
statements relate to the categorization of material items in profit or loss as ‘APM adjustments’, therefore impacting the
alternative performance measures, and the identification of cash generating units (CGUs), impacting goodwill impairment
testing.
Key estimates that need to be made by management relate to the useful lives of non-current assets (Notes 8 and 9), the
establishment of provisions for restructuring costs, environmental costs (Note 18) and retirement and other post-
employment benefits (Note 24), the recognition and measurement of income taxes (Note 7), the determination of fair
values for financial instruments (Note 23) and for share-based compensation (Note 27). The uncertainty concerning the
actual outflows of the aforementioned items relates to both the amounts and the timing of potential future events.
Furthermore, impairment testing of goodwill, intangible assets and development projects requires key estimates and
judgments by management. Apart from the determination of CGUs, the estimation of future cashflows, growth rates,
discount rates and fair values minus costs of disposal require estimates and judgments as well (Notes 2, 8, 9 and 10).
Significant estimates and judgment are also required for the determination of the fair value of assets acquired, and
liabilities assumed in business combinations (Note 3). Estimates are based on historical quoted market prices, experience
and assumptions that are considered reasonable under the circumstances.
For lease contracts under IFRS 16 that include renewal options, determining the lease term involves estimates and
judgments based on the underlying asset class, past practices and current business outlooks. The assessment of these
renewal options affects the lease term of these contracts and, in turn, the recognized lease liabilities and the
corresponding right-of-use assets.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 214
Exchange rates
The currency exchange rates that were used in preparing the consolidated financial statements are listed below for the
most important currencies.
1 euro =
Exchange rate at
balance sheet date
Average exchange rate
2022
2021
2022
2021
US dollar
1.07
1.13
1.05
1.18
Swiss franc
0.98
1.03
1.00
1.08
Brazilian real
5.64
6.31
5.44
6.38
Chinese renminbi
7.36
7.19
7.08
7.63
Presentation of Consolidated income statement
DSM presents expenses in the Consolidated income statement in accordance with their function. This allows the
presentation of gross margin on the face of the income statement, which is a widely used performance measure in the
industry. The composition of the costs allocated to the individual functions is explained below.
Cost of sales encompasses all manufacturing costs (including raw materials, employee benefits, and depreciation and
amortization) related to goods and services captured in net sales. These are measured at their actual cost based on FIFO,
or weighted average cost.
Marketing & Sales relates to the selling and marketing of goods and services, and also includes all costs that are directly
related to the sale of goods, but are not originated by the manufacturing of the goods (e.g., outbound freight).
Research & Development consists of:
- Research, which is defined as original and planned investigation undertaken with the prospect of gaining new
scientific or technical knowledge and understanding
- Development, which is defined as the application of research findings or other knowledge to a plan or design for
the production of new or substantially improved materials, devices, products, processes, systems or services
before the start of commercial production or use that do not meet the accounting requirements for capitalization
General and administrative relates to the strategic and governance role of the general management of the company as
well as the representation of DSM as a whole in the financial, political or business community. It also relates to business
support activities of staff departments that are not directly related to the other functional areas.
2 Alternative performance measures
In presenting and discussing DSM’s financial position, operating results and net results, management uses certain
Alternative performance measures not defined by IFRS. These Alternative performance measures (APMs) should not be
viewed in isolation as alternatives to the equivalent IFRS measures and should be used as supplementary information in
conjunction with the most directly comparable IFRS measures. Alternative performance measures do not have
standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other
companies.
To provide clear reporting on the developments of the business, APM adjustments, which represent material items of
income or expense, are made. These adjustments impact the EBIT(DA), operating profit, net profit, ROCE, cash provided by
operating activities and EPS. A reconciliation of the Alternative performance measures to the most directly comparable
IFRS measures can be found in the table Alternative performance measures.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 215
The APM adjustments to net profit, as included in the APMs, can be specified as follows:
2022
The main APM adjustments in 2022 are listed below:
- Restructuring costs of €87 million relate mainly to restructuring projects, following the new strategy and the
announced intention for the merger with Firmenich, including the redundancy schemes associated with the
dismissal of employees and costs of termination of contracts
2021
The main APM adjustments in 2021 are listed below:
- Acquisition and divestment costs of €21 million relate mainly to the acquisition and integration of Erber and First
Choice Ingredients
- Restructuring costs of €76 million relate mainly to restructuring projects, following the new strategy and the
restructuring project at Materials, including the redundancy schemes associated with the dismissal of employees
and costs of termination of contracts
- APM adjustments to the result from associates and joint ventures are a profit of €319 million and relate mainly to
the book profit of €303 million on the sale of DSM’s share of AOC and a profit of €13 million on a higher earn-out
relating to previous divestments
2022
2021
APM Adjustments (continuing operations)
- Acquisitions/divestments
4
21
- Restructuring
87
76
- Other
-
(6)
- Impairments/(reversals) of PPE and intangible assets
(6)
6
- Financial income and expense
8
-
- Income tax related to adjustments
(15)
(25)
- Adjustments to result from associates and joint ventures
2
(319)
Total APM adjustments (income)/expense
80
(247)
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 216
Alternative performance measures (continuing operations)
2022
2021
Operating profit
682
711
Depreciation, amortization and impairments
622
577
EBITDA
1,304
1,288
APM adjustments to EBITDA:
- Acquisitions/divestments
4
21
- Restructuring
87
76
- Other
-
(6)
Total APM adjustments
91
91
Adjusted EBITDA
1,395
1,379
Operating profit
682
711
APM adjustments to Operating profit:
- APM adjustments to EBITDA
91
91
- Impairments/(reversals) of PPE and Intangible assets
(6)
6
Total APM adjustments
85
97
Adjusted operating profit
767
808
Net profit from continuing operations
475
830
APM adjustments to:
- Operating profit
85
97
- Financial income and expense
8
-
- Result relating to associates / joint ventures
2
(319)
Income tax related to APM adjustments
(15)
(25)
Total APM adjustments
80
(247)
Adjusted net profit from continuing operations
555
583
Profit attributable to non-controlling interests
(13)
(2)
Dividend on Cumulative Preference Shares
(6)
(6)
.
Adjusted net profit from continuing operations available to holders of ordinary shares
536
575
The below table reflects the earnings per share (EPS) related to continuing operations and to total earnings including
discontinued operations.
2022
2021
Continuing
operations
Total
Continuing
operations
Total
Earnings per share (EPS)
Average number of ordinary shares outstanding (x
1,000)
172,827
172,648
Effect of dilution due to share options (x 1,000)
477
747
Adjusted average number of ordinary shares
outstanding (x 1,000)
173,304
173,395
.
x € million
Net profit available to holders of ordinary shares
456
1,694
822
1,670
Adjusted net profit available to holders of
ordinary shares
536
776
575
869
.
in €
Net basic EPS
2.64
9.80
4.76
9.68
Net diluted EPS
2.63
9.77
4.74
9.63
Adjusted net basic EPS
3.10
4.49
3.33
5.03
Adjusted net diluted EPS
3.09
4.48
3.32
5.01
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 217
Alternative performance measures
2022
2021
Capital employed
Intangible assets
5,147
5,309
Property, plant and equipment
3,576
3,964
Investment grants / drawing rights
(55)
(111)
Inventories
2,339
2,297
Current receivables
1,622
1,697
Current liabilities
(1,969)
(2,188)
Included discontinued operations
-
(954)
Capital employed at 31 December
10,660
10,014
Average capital employed
Capital employed at 1 January
10,014
8,741
Capital employed at 31 March
10,229
9,082
Capital employed at 30 June
10,626
9,100
Capital employed at 30 September
11,402
9,438
Capital employed at 31 December
10,660
10,014
Average capital employed
10,586
9,275
Adjusted operating profit, continuing operations
767
808
ROCE in %, continuing operations
7
9
Cash provided by operating activities
965
1,427
Cash impact APM adjustments
111
91
Capital expenditure
(644)
(570)
Payments regarding drawing rights
(7)
(7)
Adjusted net operating free cash flow
425
941
Adjusted net operating free cash flow, continuing operations
310
626
3 Change in the scope of the consolidation
Acquisitions
In 2022, DSM acquired businesses for a total consideration of €77 million (in 2021: €757 million).
Prodap
On 31 August 2022, DSM Nutritional Products acquired a 100% interest in Prodap, headquartered in Belo-Horizonte, Brazil
for a total consideration of €77 million. Prodap is a Brazilian animal nutrition and technology company that combines
technology offerings, consulting services, and customized nutritional solutions to drive efficiency and sustainability in
animal farming. The consideration consists of an upfront cash payment of €70 million and an additional earn-out amount
between €5 and €12 million, depending mainly on the EBITDA and customer loyalty, to be paid out in three installments in
2024, 2025 and 2026.
In accordance with IFRS 3, the purchase price was provisionally allocated to identifiable assets and liabilities acquired,
pending final confirmation of the local valuator. This allocation resulted in a non-tax-deductible goodwill amount of €51
million and intangible assets for technology of €20 million, customer relations of €11 million and trade names of €4
million.
The acquisition of Prodap contributed €9 million to net sales, -€2 million to operating result and -€1 million to Adjusted
EBITDA during a period of four months in 2022. If the acquisition had occurred on 1 January 2022, additional net sales
would have been approximately €26 million, operating result -€2 million and Adjusted EBITDA €1 million.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 218
Finalization of Vestkorn Milling PPA
In the reporting year, the Purchase Price Allocation (PPA) related to the acquisition of Vestkorn Milling in 2021 was
finalized, resulting in an additional allocation of €22 million to intangible assets, mainly for customer relations and
technology, a decrease of the goodwill amount by €23 million and an increase of other net assets by €1 million. The
comparative information for the reference year has been modified for these measurement period adjustments. As the
impact on the profit and loss account is negligible, no comparative information has been adjusted.
Valuation techniques intangible assets
Part of a Purchase Price Allocation is the recognition of intangible assets which are recognized apart from goodwill. The
valuation techniques DSM used for measuring the fair value of these intangible assets in 2022 were as follows:
The acquired technology and trade names were valued by applying the relief-from-royalty method, a form of the income
approach whereby the value of an asset is estimated by capitalizing the royalties saved as a result of owning the asset.
The fair values of customer relationships were determined by applying the multi-period excess earnings method (MEEM),
considering the present value of the projected cash flow revenues and adjusted for retention.
Summary acquisitions in 2022
The accounting of the acquisitions upon closing impacted DSM’s consolidated balance sheet 2022 as shown in below table
(measured at the date of acquisition).
Prodap
Brazil
Other
acquisitions
Total
Book
value
Fair
value
Fair
value
Book
value
Fair
value
Assets
Intangible assets
4
35
-
4
35
Property, plant and equipment
3
3
-
3
3
Inventories
3
3
-
3
3
Receivables
8
8
-
8
8
Cash and cash equivalents
-
-
-
-
-
Total assets
18
49
-
18
49
Liabilities
Non-current liabilities
3
13
-
3
13
Current liabilities
10
10
-
10
10
Total liabilities
13
23
-
13
23
Net assets
5
26
-
5
26
Acquisition price (in cash)
70
-
70
Acquisition price (payable)
7
-
7
Consideration
77
-
77
Goodwill
51
-
51
Acquisition costs recognized in APM adjustments
(1)
(2)
(3)
Divestments
Protective Materials
On 1 September 2022, DSM completed the divestment of its Protective Materials business (DPM) to Avient Corporation. Prior
to this divestment, DSM reclassified the results of this business (the ‘disposal group’) to ‘discontinued operations’.
Engineering Materials
On 31 May 2022, DSM announced that it had reached an agreement to sell its Engineering Materials business (DEM) to
Advent International and LANXESS. Completion of this transaction is expected in the first half of 2023. DSM reclassified the
results of this business (the ‘disposal group’) to ‘discontinued operations’.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 219
Summary divestments in 2022
See below table for the book result of the divestments that took place in the reporting year.
x € million
Protective Materials
(DPM)
Other
Total
Assets
Intangible assets
(62)
(3)
(65)
Property, plant and equipment
(234)
(1)
(235)
Other non-current assets
(55)
-
(55)
Inventories
(91)
(1)
(92)
Receivables
(64)
(6)
(70)
Cash and cash equivalents
(49)
(2)
(51)
Total assets
(555)
(13)
(568)
Liabilities
Non-current liabilities
(65)
-
(65)
Current liabilities
(92)
(4)
(96)
Total liabilities
(157)
(4)
(161)
.
Net assets
(398)
(9)
(407)
Non-controlling interest
(2)
(2)
(4)
Net assets DSM shareholders
(396)
(7)
(403)
.
Consideration
(net of selling costs, translation differences and net debt)
1,427
18
1,445
.
Book result 2022
1,031
11
1,042
Income tax
(13)
(3)
(16)
Net book result
1,018
8
1,026
Impact on comprehensive income
The impact of the business that has been presented as discontinued operations in the income statement and statement of
comprehensive income, is presented in the below tables.
2022
2021
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
Net sales
8,390
2,090
10,480
7,269
2,199
9,468
Adjusted EBITDA
1,395
330
1,725
1,379
463
1,842
EBITDA
1,304
1,342
2,646
1,288
1,082
2,370
Total expenses
7,708
778
8,486
6,558
1,221
7,779
Adjusted operating profit
767
304
1,071
808
359
1,167
Operating profit
682
1,312
1,994
711
978
1,689
Financial income and expense
(88)
(6)
(94)
(100)
(6)
(106)
Profit before income tax expense
594
1,306
1,900
611
972
1,583
Income tax expense
(124)
(66)
(190)
(123)
(122)
(245)
Results related to associates and joint
ventures
5
-
5
342
-
342
Net profit for the year
475
1,240
1,715
830
850
1,680
Of which:
- Attributable to non-controlling
interests
13
2
15
2
2
4
- Dividend on Cumulative Preference
Shares
6
-
6
6
-
6
- Available to holders of ordinary shares
456
1,238
1,694
822
848
1,670
Earnings per share (EPS)
- Net basic EPS
2.64
7.16
9.80
4.76
4.92
9.68
- Net diluted EPS
2.63
7.14
9.77
4.74
4.89
9.63
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 220
The Operating profit in discontinued operations amounting to €1,312 million comprises the regular activities of the DPM
business in the first eight months of the reporting year (€53 million), the book profit on the sale of the DPM business on 1
September 2022 (€1,031 million) and the full-year activities of the remaining Materials business (€228 million). The
business results reclassified to discontinued operations include also intercompany recharges that will cease to be
earned/incurred on disposal. Corporate costs have been excluded from the reclassification to discontinued operations.
The comparative numbers in the Income statement and OCI are re-presented as if the activities of the DPM and DEM
businesses had been discontinued from the start of the comparative year 2021. In addition, these comparative numbers
also include three months of business results related to DSM’s former Resins and Functional Materials business, which
was divested in April 2021.
See also the section Assets and liabilities held for sale.
2022
2021
Net profit from discontinued operations
1,240
850
Other comprehensive income
Remeasurements of defined benefit pension plans
1
2
Fair value changes in Other participating interests and other financial
instruments
(1)
-
Tax related items that will not be reclassified to profit or loss
-
-
Items that will not be reclassified to profit or loss
-
2
.
Exchange differences on translation of foreign operations
- Change for the year
(44)
42
Hedging reserve
- Change for the year
-
-
Tax related items that may subsequently be reclassified to profit or loss
-
-
Items that may subsequently be reclassified to profit or loss
(44)
42
.
Total comprehensive income discontinued operations
1,196
894
Of which:
- Attributable to non-controlling interests
1
4
- Available to equity holders of Koninklijke DSM N.V.
1,195
890
Impact on cash flow statement
The impact of the business that has been included as discontinued operations in the cash flow statement is shown in the
following table.
2022
2021
Net cash provided by / (used in):
- Operating activities
190
387
- Investing activities
1,291
1,339
Net change in cash and cash equivalents
1,481
1,726
See also Note 26 Notes to the cash flow statement.
Assets and liabilities held for sale
Engineering Materials business (DEM)
On 31 May 2022, DSM announced that it had reached an agreement to sell its Engineering Materials business to Advent
International and LANXESS. DSM reclassified the results of this business (the ‘disposal group’) to ‘discontinued operations’,
and reclassified all related assets and liabilities as held for sale on 1 April 2022. The related assets and liabilities of the
disposal group on 31 December 2022 have been reclassified as held for sale. Completion of the announced transaction,
which is subject to the customary conditions and approvals, is expected in the first half of 2023. Before reclassification,
these activities were reported in the segment Materials.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 221
Pentapharm
At the end of 2021, DSM had announced its intention to dispose of its Pentapharm business, and therefore classified the
relevant assets and liabilities as held for sale. As at the end of 2022, the closure of this divestment was not expected within
the year, the conditions for held for sale were no longer met, hence the related assets and liabilities were transferred back
from held for sale to the respective balance sheet line items in the reporting year.
Impact on balance sheet
The impact of the reclassification of the DEM activities on the DSM consolidated balance sheet is presented in the
following table.
x € million
2022
Assets
Non-current assets
Intangible assets
219
Property, plant and equipment
377
Other non-current assets
36
Current assets
-
Inventories
379
Receivables
234
Total assets
1,245
Liabilities
Non-current liabilities
78
Current liabilities
352
Total liabilities
430
Net assets
815
4 Segment information
Following the Health, Nutrition & Bioscience (HNB) structure becoming effective as of 1 January 2022, DSM’s reportable
operating segments were Animal Nutrition & Health (ANH), Health, Nutrition & Care (HNC) and Food & Beverage (F&B) in
2022. These operating segments mainly comprise the former operating segments Nutrition and Innovation. The Materials
business also continued to be a reportable operating segment throughout part of 2022; however, following the announced
sale of this business, it was reclassified to ‘discontinued operations’ in the first half of 2022.
DSM has segmented its operations by business activity from which revenues are earned and expenses incurred. These
operating results are regularly reviewed by the entity’s Chief Operating Decision Maker (CODM) to make decisions about
resources to be allocated to the operating segment and assess its performance. DSM uses Adjusted EBITDA as the main
indicator to evaluate the consolidated performance as well as the performance per operating segment. Discrete financial
information is available for each identified operating segment.
The accounting policies of the operating segments are the same as those described in the Summary of significant
accounting policies. Transactions between segments are generally executed at market-based prices. Interest income,
interest expense, and income tax expense or income are not allocated to segments as these amounts are not included in
the measure of segment profit or loss reviewed by the CODM, or otherwise regularly provided to the CODM.
Our operating segment Animal Nutrition & Health (ANH) drives the development of sustainable animal farming through its
essential products, performance solutions, and precision services serving the poultry, swine, ruminants and aquaculture
market segments around the globe.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 222
Our operating segment Health, Nutrition & Care (HNC) provides health, nutrition and care solutions for markets such as
early life nutrition, dietary supplements, pharma, medical and personal care.
Our operating segment Food & Beverage (F&B) supports healthy diets through nutritious, delicious and sustainable
solutions for several market segments including bakery, beverages & brewing, dairy, savory, plant-based alternative
proteins and pet food.
Any consolidated activities outside the three reportable operating segments above are reported as the reportable segment
‘Corporate Activities’. These consist of operating and service activities that are considered unallocated activities.
Following the change in the composition of DSM’s reportable segments in 2022 due to the HNB structure becoming
effective, for each individual line item of disclosure, DSM applied the guidance provided in IFRS8.29-30 in assessing
whether to restate the comparative segment information based on the information available. The 2021 segmentation
comparatives that have been restated relate to the previously reported operating segment Innovation Center in 2021. This
was restated for the purposes of comparison by redistributing the amounts to HNB and Corporate Activities.
DSM does not have a single external customer that represents 10% or more of total sales.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 223
Geographical information
Nether-
lands
Switzer-
land
Rest of
Europe
North
America
Latin
America
China
Rest of
Asia
Rest of
world
Total
2021
Net sales (by destination)
In € million
355
157
1,912
1,535
1,170
792
1,074
274
7,269
In %
5
2
26
21
16
11
15
4
100
.
Workforce at year-end (headcount)¹
3,006
2,174
4,161
3,018
2,290
4,704
1,709
296
21,358
Intangible assets and Property, plant
and equipment (carrying amount)
1,990
1,733
2,079
2,201
291
836
113
30
9,273
.
2022
Net sales (by destination)
In € million
402
156
2,154
1,869
1,507
803
1,188
311
8,390
In %
5
2
25
22
18
10
14
4
100
.
Workforce at year-end (headcount)¹
2,642
2,232
4,211
2,618
2,302
4,591
1,742
344
20,682
Intangible assets and Property, plant
and equipment (carrying amount)
1,304
1,852
2,099
2,143
404
774
113
34
8,723
1 Refers to total group, including discontinued operations.
Business segments
The following table represents the financial performance of the business segments based on the operating segments that
existed in 2021, and as disclosed in the Integrated Annual Report 2021.
Nutrition
Innovation
Center
Corporate
Activities
Total
continuing
operations
Discontinued
operations
Total
2021
Financial performance
Net sales
7,031
168
70
7,269
2,199
9,468
Adjusted EBITDA¹
1,447
26
(94)
1,379
463
1,842
EBITDA
1,396
17
(125)
1,288
1,082
2,370
Adjusted operating profit¹
940
4
(136)
808
359
1,167
Operating profit
889
(10)
(168)
711
978
1,689
R&D costs
255
Adjusted EBITDA margin (in %)
20.6
19.0
21.1
19.5
1 See Note 2 Alternative performance measures for the reconciliation to IFRS performance measures.
In the below table, the amounts that were included in the previously reported operating segment Innovation Center have
been redistributed to HNB and Corporate Activities for the purposes of comparison.
Animal
Nutrition
& Health
Health,
Nutrition
& Care
Food &
Beverage
Other
Total HNB
Corporate
Activities
Total
continuing
operations
Discontinued
operations
Total
2021
Financial performance
Net sales
3,347
2,516
1,256
47
7,166
103
7,269
2,199
9,468
Adjusted EBITDA¹
1,467
(88)
1,379
463
1,842
EBITDA
1,416
(128)
1,288
1,082
2,370
Adjusted operating profit¹
951
(143)
808
359
1,167
Operating profit
900
(189)
711
978
1,689
R&D costs
255
Adjusted EBITDA margin (in %)
20.5
19.0
21.1
19.5
.
2022
Financial performance
Net sales
3,788
2,939
1,546
46
8,319
71
8,390
2,090
10,480
Adjusted EBITDA¹
546
676
266
2
1,490
(95)
1,395
330
1,725
EBITDA
523
667
245
2
1,437
(133)
1,304
1,342
2,646
Adjusted operating profit¹
351
428
136
1
916
(149)
767
304
1,071
Operating profit
328
419
115
1
863
(181)
682
1,312
1,994
R&D costs
280
Adjusted EBITDA margin (in %)
14.4
23.0
17.2
17.9
16.6
15.8
16.5
1 See Note 2 Alternative performance measures for the reconciliation to IFRS performance measures.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 224
5 Net sales and costs (continuing operations)
Net sales
2022
2021
Goods sold
8,191
7,077
Services rendered
193
177
Royalties
6
15
Total
8,390
7,269
Fulfillment of the performance obligations related to goods sold is measured using the commercial shipment terms as an
indicator for the transfer of control. Fulfillment of the performance obligations for services rendered is identified
according to the individual contract. The payment terms are determined per business segment on a customer basis. DSM
has neither specific obligations for returns or refunds, nor specific warranties or other related obligations.
Disaggregation of net sales
2022
2021
Animal Nutrition & Health
3,788
3,347
Health, Nutrition & Care
2,939
2,516
Food & Beverage
1,546
1,256
Other
46
47
Total HNB
8,319
7,166
Corporate Activities
71
103
Total
8,390
7,269
Total costs
In 2022, total operating costs (the total costs included in operating profit) amounted to €7.7 billion, €1.1 billion higher than
in 2021, when these costs stood at €6.6 billion. Total operating costs in 2022 included Cost of sales amounting to €5.7
billion (2021: €4.7 billion); gross margin as a percentage of net sales stood at 32% (2021: 36%).
Employee benefit costs
2022
2021
Wages and salaries
1,353
1,289
Social security costs
169
150
Pension costs (see also Note 24)
102
97
Share-based compensation (see also Note 27)
35
22
Total
1,659
1,558
Depreciation, amortization and impairments
2022
2021
Amortization of intangible assets
234
199
Depreciation of property, plant and equipment owned
325
299
Depreciation of right-of-use assets
49
47
Impairment losses
14
32
Total
622
577
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 225
Other operating income
2022
2021
Release of provisions
10
15
Gain on sale of assets and activities
31
13
Insurance benefits
12
10
Amendments / settlements to pension plans
2
9
Earn-out payments and other settlements
9
2
Lease income
7
-
Royalties
4
2
Legal and other settlements
-
2
Sundry
32
29
Total
107
82
Other operating expense
2022
2021
Additions to provisions
4
5
Exchange differences
18
8
Acquisitions / disposals
3
20
Damages w.r.t insurance
4
-
Sundry
22
29
Total
51
62
6 Financial income and expense (continuing operations)
2022
2021
Financial income
Interest income
22
3
Fair value change in derivatives
46
10
Sundry
3
11
Total financial income
71
24
Financial expense
Interest expense
(101)
(91)
Interest relating to lease liabilities
(6)
(5)
Interest relating to defined benefit plans
(3)
(2)
Fair value change in derivatives
(14)
(17)
Capitalized interest during construction
3
4
Exchange differences
(2)
-
Unwinding of discounted payables
(23)
(10)
Sundry
(13)
(3)
Total financial expense
(159)
(124)
Financial income and expense
(88)
(100)
In 2022, the interest rate applied in the capitalization of interest during construction was 2.5% (in 2021 it was 3.0% for the
first 6 months and 2.5% for the last 6 months).
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 226
7 Income tax
The income tax expense on continuing operations was €124 million, which represents an effective income tax rate of 21.0%
(2021: €123 million, representing an effective income tax rate of 20.1%). The amount excludes tax expense from
discontinued operations of €66 million (2021: €122 million) and can be broken down as follows.
2022
2021
Current tax expense:
- Current year
(121)
(56)
- Prior-year adjustments
16
1
- Tax credits compensated
3
4
- Non-recoverable withholding tax
(5)
(6)
Total current tax expense
(107)
(57)
Deferred tax expense:
- Originating from temporary differences and their reversal
(16)
(24)
- Prior-year adjustments
(17)
5
- Change in tax rate
15
3
- Changes arising from write-down of deferred tax assets
7
(17)
- Changes in previously and newly recognized tax losses and tax credits
(6)
(21)
- Other changes in tax losses and tax credits
-
(12)
Total deferred tax expense
(17)
(66)
Total tax expense
(124)
(123)
Of which related to:
- Taxable result excl. APM adjustments
(139)
(148)
- APM adjustments
15
25
The relationship between the income tax rate in the Netherlands and the effective tax rate on the taxable result can be
explained as follows.
Effective tax rate (continuing operations)
In %
2022
2021
Domestic income tax rate
25.8
25.0
Tax effects of:
- Deviating rates
(5.0)
(7.2)
- Change in tax rates
(2.1)
(0.4)
- Tax-exempt income and non-deductible expense
0.6
(0.4)
- Other effects
0.9
3.9
Effective tax rate taxable result, excl. APM adjustments
20.2
20.9
APM adjustments (see Note 2)
0.8
(0.8)
Total effective tax rate
21.0
20.1
The total effective tax rate on the taxable result in 2022 was 21.0% (2021: 20.1%), excluding APM adjustments this was 20.2%
(2021: 20.9%).
The effective tax rate in 2022 compared to the Dutch statutory rate, was positively impacted by the geographical spread
and changes in tax rates under local tax law in various countries, partly offset by effects increasing the effective tax rate,
including non-deductible expenses.
Compared to prior year, the decrease of the effective tax rate excluding APM adjustments was mainly due to changes in tax
rates in various countries, partly compensated by the higher domestic tax rate and less impact of the geographical spread.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 227
The balance of the deferred tax assets and deferred tax liabilities increased by €96 million owing to the changes presented
in the following table.
Deferred tax assets and liabilities
2022
2021
Balance at 1 January
Deferred tax assets
203
240
Deferred tax liabilities
(490)
(431)
Total
(287)
(191)
Changes:
-
- Income tax income / (expense) in income statement
(52)
(77)
- Income tax: change in tax percentage
15
4
- Income tax: tax result share in associates
-
-
Total income statement
(37)
(73)
- Income tax expense in OCI
(17)
(13)
- Acquisitions and disposals
(6)
(12)
- Consolidation changes
-
(3)
- Exchange differences
(13)
(11)
- Reclassification to held for sale
(21)
9
- Transfer
-
7
Balance at 31 December
(381)
(287)
Of which:
- Deferred tax assets
95
203
- Deferred tax liabilities
(476)
(490)
In various countries, DSM has taken standpoints regarding its tax position which may at any time be challenged, or have
already been challenged, by the tax authorities, because the authorities in question interpret the law differently. These
uncertainties are taken into account in determining the probability of realization of deferred tax assets and liabilities.
The deferred tax assets and liabilities relate to the following balance sheet items.
Deferred tax assets and liabilities by balance sheet item
2022
2021
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
Intangible assets
28
(368)
19
(373)
Property, plant and equipment
15
(181)
19
(175)
Right-of-use assets
-
(34)
-
(38)
Financial assets
28
(25)
33
(25)
Inventories
36
(46)
56
(39)
Receivables
5
(22)
6
(22)
Lease liabilities non-current
25
-
31
-
Other non-current liabilities
1
(2)
16
(2)
Non-current provisions
41
-
70
-
Other current liabilities
66
(6)
83
(4)
Lease liabilities current
11
-
11
-
256
(684)
344
(678)
Tax losses carried forward
47
47
Set-off
(208)
208
(188)
188
Total
95
(476)
203
(490)
No deferred tax assets were recognized for loss carryforwards amounting to €153 million (2021: €203 million). Unrecognized
loss carryforwards amounting to €54 million will expire in the years up to and including 2027 (2021: €98 million up to and
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 228
including 2026), €30 million between 2028 and 2032 (2021: €37 million between 2027 and 2031) and the remaining €69
million in 2033 and beyond (2021: €68 million between 2032 and beyond). In addition, an amount of €17 million (2021: €23
million) of withholding taxes was unrecognized.
The valuation of deferred tax assets depends on the probability of the reversal of temporary differences and the utilization
of tax loss carryforwards, tax credits and withholding tax. Deferred tax assets are recognized for future tax benefits arising
from temporary differences and for tax loss carryforwards to the extent that the tax benefits are probable. DSM has to
assess the likelihood that deferred tax assets will be recovered from future taxable profits. Deferred tax assets are reduced
if, and to the extent that, it is not probable that all or some portion of the deferred tax assets will be realized. In the event
that actual future results differ from estimates, and depending on tax strategies that DSM may be able to implement,
changes to the measurement of deferred taxes could be required, which could have an impact on the company's financial
position and profit for the year.
8 Intangible assets
Goodwill
Customer-
and
marketing-
related
Technology-
based
Licenses,
patents,
and
application
software
Under
construction
Development
projects
Other
Total
Balance at 1 January 2021
Cost
2,487
1,147
579
527
115
380
603
5,838
Amortization and impairment losses
20
422
114
387
-
157
298
1,398
Carrying amount
2,467
725
465
140
115
223
305
4,440
- Capital expenditure
-
-
-
4
85
48
-
137
- Drawing rights
-
-
-
-
-
-
21
21
- Put into operation
-
-
-
38
(45)
-
7
-
- Acquisitions
329
109
294
12
-
-
-
744
- Amortization
-
(75)
(46)
(38)
-
(28)
(34)
(221)
- Impairment losses
(5)
-
-
(3)
-
(11)
-
(19)
- Exchange differences
138
13
21
9
1
7
12
201
- Reclassification to held for sale
(1)
-
-
-
-
(1)
-
(2)
- Transfers
-
(35)
-
31
-
-
4
-
- Other
-
-
3
4
-
2
(1)
8
461
12
272
57
41
17
9
869
Balance at 31 December 2021
Cost
2,943
1,257
898
592
156
414
659
6,919
Amortization and impairment losses
14
520
161
395
-
174
345
1,609
Carrying amount
2,928
737
737
197
156
240
314
5,309
- Of which acquisition related
2,928
737
737
35
-
-
68
4,505
.
Changes in carrying amount:
- Capital expenditure
-
-
-
8
88
42
-
138
- Put into operation
-
-
-
90
(100)
-
10
-
- Acquisitions
52
15
17
-
2
-
-
86
- Disposal subs
(46)
-
-
(7)
(4)
(3)
(4)
(64)
- Amortization
-
(76)
(58)
(49)
-
(34)
(23)
(240)
- Impairment losses
(4)
-
-
(3)
-
5
-
(2)
- Exchange differences
80
17
16
6
2
8
-
129
- Reclassification to held for sale
(26)
-
-
-
(9)
(2)
(182)
(219)
- Transfers
-
22
22
(1)
-
-
(43)
-
- Other
-
-
1
8
(1)
-
2
10
56
(22)
(2)
52
(22)
16
(240)
(162)
Balance at 31 December 2022
Cost
2,989
1,373
1,005
612
134
442
270
6,825
Amortization and impairment losses
5
658
270
363
-
186
196
1,678
Carrying amount
2,984
715
735
249
134
256
74
5,147
- Of which acquisition-related
2,984
715
735
2
-
-
36
4,472
The amortization of intangible assets is included in Cost of sales, Marketing & Sales, Research & Development and General
& Administrative expenses.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 229
Over the past few years, DSM has acquired several entities in business combinations that have been accounted for by the
acquisition method, resulting in recognition of mainly goodwill, customer- and marketing-related, and technology-based
intangible assets. The amounts assigned to the acquired assets and liabilities are based on assumptions and estimates
about their fair values. In making these estimates, management consults independent, qualified appraisers where
appropriate.
Customer- and marketing-related intangibles were, among other things, obtained during the acquisition of Erber Group
and Glycom in 2020, as well as CSK in 2019 and Fortitech in 2012. Technology-based intangibles were mainly obtained via
the acquisition of Erber Group and Glycom in 2020 and F&F Amyris and First Choice Ingredients in 2021. Intangible assets
are amortized on a straight-line basis and subject to impairment trigger testing. There are no intangible assets with an
indefinite useful life (same as in 2021).
The carrying amount of the development projects includes €143 million (2021: €121 million) that relates mainly to strategic
projects which are not being amortized yet. The recoverable amount of these projects was estimated based on the present
value of the future cash flows expected to be derived from the projects (value-in-use).
Goodwill
DSM’s Cash Generating Unit (CGU) structure changed in 2022 because the Health, Nutrition & Bioscience (HNB) structure
became effective as of 1 January 2022. More specifically, the CGUs DSM identified in 2022 were Animal Nutrition & Health
(ANH), Health, Nutrition & Care (HNC), and Food & Beverage (F&B). Following the change in DSM’s CGU structure, the
goodwill from continuing operations has been reallocated to the newly identified CGUs based on their relative value as
derived from the recoverable amounts of these CGUs. The breakdown of the carrying amount of goodwill at year-end 2022
is as follows.
Goodwill per Cash generating unit
Cash generating unit
2022
Animal Nutrition & Health¹
1,011
Health, Nutrition & Care
1,429
Food & Beverage
544
Total
2,984
1 Contains provisional PPA, see Note 3 Change in the scope of the consolidation.
The annual impairment tests of goodwill are performed in the fourth quarter. The recoverable amount of the CGUs is
based on a value-in-use calculation.
The cash flow projections are derived from DSM’s business plan as adopted by the Managing Board and updated
periodically — for example when the strategy is updated. Mature businesses come to a terminal value after five years. The
terminal value growth rate is determined with the assumption of limited inflationary growth. The key assumptions in the
cash flow projections relate to the market growth for the CGUs and the related revenue projections, EBITDA developments,
and the rates used for discounting cash flows.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 230
Key assumptions for goodwill impairment tests
2022
2021
Forecast period (years)
- Mature business
5
5
- Emerging business
10
10
Terminal value growth
1.5%
1.0%
Pre-tax discount rate
- Animal Nutrition & Health
10.7%
- Health, Nutrition & Care
9.1%
- Food & Beverage
8.7%
Organic sales growth (year 1–5)
- Animal Nutrition & Health
4%–7%
- Health, Nutrition & Care
5%–8%
- Food & Beverage
5%–8%
For ANH and HNC, the growth assumptions are based on the growth of the global food and feed markets, for F&B on the
growth assumptions of the global food and beverage market. A sensitivity test was performed on the impairment tests of
the CGUs and showed that the conclusions of these tests would not have been different if a reasonable possible adverse
change in key parameters had been assumed.
The market capitalization of DSM at 31 December 2022 amounted to €19,978 million (31 December 2021: €34,608 million) and
was clearly above the carrying amount of net assets, thus providing an additional indication that goodwill was not
impaired.
9 Property, plant and equipment
Composition of Property, plant and equipment
2022
2021
Property, plant and equipment owned
3,402
3,767
Right-of-use assets
174
197
Total
3,576
3,964
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 231
Property, plant and equipment owned
Land and
buildings
Plant and
machinery
Other
equipment
Under
construction
Not used for
operating
activities
Total
Balance at 1 January 2021
Cost
2,099
4,781
192
527
8
7,607
Depreciation and impairments
941
2,957
138
4
-
4,040
Carrying amount at 1 January 2021
1,158
1,824
54
523
8
3,567
Changes in carrying amount:
- Capital expenditure
7
52
4
414
-
477
- Put into operation
61
312
17
(390)
-
-
- Acquisitions
5
5
-
-
-
10
- Disposals and deconsolidations
(22)
(16)
-
-
-
(38)
- Depreciation
(78)
(277)
(19)
-
-
(374)
- Impairment losses
(3)
(11)
(2)
2
-
(14)
- Exchange differences
54
108
3
20
-
185
- Reclassification to held for sale
(17)
(13)
(1)
(2)
-
(33)
- Transfer to RoU assets
(5)
-
-
-
-
(5)
- Other changes
2
(6)
-
(4)
-
(8)
4
154
2
40
-
200
Balance at 31 December 2021
Cost
2,108
5,488
219
564
8
8,387
Depreciation and impairments
946
3,510
163
1
-
4,620
Carrying amount at 31 December 2021
1,162
1,978
56
563
8
3,767
.
Changes in carrying amount:
- Capital expenditure
7
42
6
443
-
498
- Put into operation
70
290
13
(373)
-
-
- Acquisitions
2
1
-
-
-
3
- Disposals and deconsolidations
(55)
(161)
-
(22)
-
(238)
- Depreciation
(71)
(253)
(18)
-
-
(342)
- Impairment losses
(2)
(14)
(2)
-
-
(18)
- Exchange differences
28
40
2
9
-
79
- Reclassification to held for sale
(55)
(234)
(9)
(42)
-
(340)
- Other reclassifications
2
(1)
(1)
(6)
(2)
(8)
- Other changes
2
(1)
-
-
-
1
(72)
(291)
(9)
9
(2)
(365)
Balance at 31 December 2022
Cost
1,929
4,429
196
572
6
7,132
Depreciation and impairments
839
2,742
149
-
-
3,730
Carrying amount at 31 December 2022
1,090
1,687
47
572
6
3,402
In 2022, impairment losses of €18 million (2021: €14 million) were recognized on Property, plant and equipment. See also
Note 2 Alternative performance measures.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 232
Right-of-use assets
Land and
buildings
Plant and
machinery
Other
equipment
Vehicles
Other
Total
Balance at 1 January 2021
147
7
31
21
2
208
Changes in carrying amount:
New leases / terminations
13
3
-
10
-
26
Remeasurements
(1)
1
2
-
-
2
Depreciation
(33)
(1)
(4)
(12)
(1)
(51)
Impairment losses
(2)
-
-
-
-
(2)
Transfer from PPE
5
-
-
-
-
5
Exchange rate differences
7
1
1
1
-
10
Reclassification to held for sale
-
(1)
-
-
-
(1)
(11)
3
(1)
(1)
(1)
(11)
Balance at 31 December 2021
Cost
217
13
39
39
2
310
Depreciation and impairments
(81)
(3)
(9)
(19)
(1)
(113)
Carrying amount at 31 December 2021
136
10
30
20
1
197
.
Changes in carrying amount:
New leases / terminations
8
-
-
14
-
22
Remeasurements
12
(1)
-
1
-
12
Depreciation
(33)
(1)
(4)
(12)
-
(50)
Disposals
(2)
-
-
-
-
(2)
Exchange rate differences
4
-
1
-
-
5
Reclassification to held for sale
(6)
-
-
(3)
(1)
(10)
(17)
(2)
(3)
-
(1)
(23)
Balance at 31 December 2022
Cost
219
11
40
40
1
311
Depreciation and impairments
(100)
(3)
(13)
(20)
(1)
(137)
Carrying amount
119
8
27
20
-
174
For the disclosures on the lease liabilities that correspond with the right-of-use assets, see Note 19 Borrowings.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 233
10 Associates and joint arrangements
Associates and joint ventures
The following table analyses, in aggregate, the carrying amount and share of profit of associates and joint ventures.
2022
2021
Associates
Joint
ventures
Total
Total
Balance at 1 January
57
7
64
93
- Share of the profit of associates and joint
ventures
1
9
10
15
- Other comprehensive income
-
-
-
4
- Capital payments
4
-
4
5
- Dividends received
(2)
-
(2)
(10)
- Acquisitions
-
-
-
-
- Consolidation changes
-
-
-
(17)
- Disposals
(7)
(2)
(9)
(34)
- Fair value adjustments
-
-
-
8
- Other
-
(6)
(6)
-
Balance at 31 December
53
8
61
64
Joint operations
The operations Veramaris (2017) and Avansya (2019) are accounted for in accordance with IFRS 11 for joint operations. DSM
therefore recognizes their amounts for the assets, liabilities, revenues and expenses in accordance with the contractual
entitlement and obligations of DSM.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 234
11 Other financial assets
Loans
associates
and joint
ventures
Other
participating
interests
Other
receivables
Other
Total
Balance at 1 January 2021
4
219
83
9
315
Changes:
- Charged to the income statement
-
-
(14)
(2)
(16)
- Disposals
-
(123)
-
-
(123)
- Capital payments
-
35
-
-
35
- Loans granted / prepayments
-
-
10
-
10
- Repayments / (receipts)
-
-
(31)
1
(30)
- Exchange differences
-
-
3
-
3
- Transfers
(3)
14
(20)
(4)
(13)
- Changes in fair value
-
46
-
-
46
Balance at 31 December 2021
1
191
31
4
227
.
Changes:
- Charged to the income statement
-
-
1
(1)
-
- Disposals
-
(24)
-
-
(24)
- Capital payments
-
28
-
-
28
- Loans granted / prepayments
1
-
127
-
128
- Repayments / (receipts)
-
-
1
3
4
- Exchange differences
-
-
(7)
-
(7)
- Transfers
-
-
16
-
16
- Changes in fair value
-
(66)
-
-
(66)
- Expected credit loss (ECL) adjustment and impairments
-
-
(11)
-
(11)
- Reclassification from/to held for sale
-
(4)
-
-
(4)
- Other changes
-
-
-
4
4
Balance at 31 December 2022
2
125
158
10
295
‘Disposals’ includes the divestment by DSM Venturing of its share in Natreon Inc. (€18 million) and S-Biomedic N.V. (€6
million).
‘Loans granted’ reflects a loan granted to Amyris, Inc. (€77 million) and Brains Bioceutical Corp. (€20 million) and to other
participating interests held by DSM Venturing.
‘Changes in fair value’ consists mainly of the value decrease of our minority share in Amyris, Inc. (-€56 million). These
changes are posted to the Fair value reserve in Other comprehensive income.
12 Inventories
2022
2021
Raw materials and consumables
596
621
Intermediates and finished goods
1,809
1,758
2,405
2,379
Adjustments to lower net realizable value
(66)
(82)
Total
2,339
2,297
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 235
Changes in the adjustment to net realizable value
2022
2021
Balance at 1 January
(82)
(79)
Additions charged to income statement
(31)
(20)
Utilization / reversals
20
20
Exchange differences
(2)
(3)
Disposal
15
-
Transfer
(10)
-
Reclassification to held for sale
24
-
Balance at 31 December
(66)
(82)
The carrying amount of inventories adjusted to net realizable value was €190 million (2021: €310 million).
13 Current receivables
Information about the expected credit loss that relates to trade accounts receivable resulting in a loss allowance is
included under Credit risk in Note 23 Financial instruments and risks.
Deferred items comprised €43 million (2021: €39 million) in prepaid expenses that include advance payments for any
expenditure that would have otherwise been made during the next 12 months.
14 Current investments
2022
2021
Trade receivables
Trade accounts receivable
1,306
1,391
Other trade receivables
182
190
Deferred items
31
34
Receivables from associates
1
12
1,520
1,627
Expected credit loss
(12)
(23)
Total Trade receivables
1,508
1,604
Income tax receivable
36
61
Other current receivables
-
Other taxes and social security contributions
23
20
Employee-related receivables
3
2
Acquisition- / disposal-related receivables
7
2
Loans
24
-
Other receivables
9
3
Deferred items
12
5
Total Other current receivables
78
32
Total current receivables
1,622
1,697
2022
2021
Fixed term deposits
125
489
Total
125
489
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 236
All fixed-term deposits have been placed with institutions with a high credit rating in line with our counterparty policy. The
purpose of the deposits is either to meet short-term cash commitments, or to manage liquidity to such extent that yields
are optimized while allowing DSM sufficient freedom in fulfilling its (strategic) goals.
For more information regarding the counterparty policy, see Note 23 Financial instruments and risks.
15 Cash and cash equivalents
Deposits will be classified as ‘cash equivalent’ if held at banks with a maturity of less than three months at inception.
Deposits will be classified as ‘current investments’ if the maturity is more than three months but less than or equal to one
year.
Money-market funds investments have been placed with institutions with a high credit rating in line with our counterparty
policy.
The purpose of the deposits and money-market funds is either to meet short-term cash commitments, or to manage
liquidity to such an extent that yields are optimized, while allowing DSM sufficient freedom in fulfilling its (strategic) goals.
Cash at year-end 2022 was not being used as collateral and therefore was not restricted (same as in 2021).
In a few countries, DSM faces cross-border foreign exchange controls and/or other legal restrictions that limit its ability to
make these balances available at short notice for general use by the group. The amount of cash held in these countries
was €105 million at year-end 2022 (2021: €87 million). The cash will generally be invested or held in the relevant country
and, given the other liquidity resources available to the group, does not significantly affect the ability of the group to meet
its obligations.
For more information regarding the counterparty policy, see Note 23 Financial instruments and risks.
16 Equity
2022
2021
Balance at 1 January
9,397
7,487
Net profit for the year
1,715
1,680
Other comprehensive income
227
643
Options / share units granted
34
22
Dividend
(459)
(424)
Proceeds from reissue of ordinary shares
141
193
Acquisition of NCI without a change in control
-
(13)
Acquisition (divestment) of subsidiary with NCI
(4)
(24)
Repurchase of shares
(210)
(165)
Other changes
4
(2)
Balance at 31 December
10,845
9,397
2022
2021
Deposits
23
318
Money-market funds
1,493
-
Cash at bank and in hand
1,221
1,243
Payments in transit
18
-
Total
2,755
1,561
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 237
Dividend
For the year 2022, the following dividends were proposed by the Managing Board.
2022
2021
Per cumulative preference share A: €0.13 (2021: €0.13)
6
6
Per ordinary share: €0.93 (2021: €2.50)
161
432
Total
167
438
The proposed final dividend on ordinary shares is subject to approval by the Annual General Meeting of Shareholders. See
also the paragraph on Profit appropriation in Note 6 Shareholders’ equity to the Parent company financial statements.
For a description of the rules of profit appropriation and of the statutory rights attached to Cumulative Preference Shares
A and B, see Note 6 Shareholders’ equity to the Parent company financial statements.
Share capital
On 31 December 2022, the authorized capital amounted to €1,125 million (2021: €1,125 million), distributed over 330,960,000
ordinary shares, 44,040,000 Cumulative Preference Shares A and 375,000,000 Cumulative Preference Shares B. All shares
have a nominal value of €1.50 each. The outstanding shares provide an entitlement of one vote per share at the General
Meeting of Shareholders. All rights attached to the Company’s shares held by the Group (treasury shares) are suspended
until those shares are reissued.
Every year the Managing Board, with the approval of the Supervisory Board, shall decide which part of the profit shall be
set aside. Out of the profit remaining, a dividend based on EURIBOR, plus a premium at the company’s discretion, shall be
distributed insofar as possible on the Cumulative Preference Shares B. From the amount remaining of the profit, a
dividend shall be distributed insofar as possible on the Cumulative Preference Shares A, the percentage based on the
effective return on government loans, increased by a mark-up to be determined at the company’s discretion. If, for any
financial year, the distributions on the Cumulative Preference Shares B and A cannot be effected or cannot be fully
effected because the profit after reservation does not suffice, the deficit shall be distributed to the debit of the following
financial years. In that case, each time as much as possible, the overdue dividend, augmented by the dividend for the last
expired financial year, shall be distributed, first on Cumulative Preference Shares B and next on Cumulative Preference
Shares A. The remaining profit shall be put at the disposal of the General Meeting of Shareholders.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 238
The changes in the number of issued and outstanding shares in 2021 and 2022 are shown in the following table.
Overview of shares
Issued shares
Issued shares
Treasury shares
Ordinary
Cumprefs A
Ordinary
Balance at 1 January 2021
181,425,000
44,040,000
9,205,661
Cancellation of issued shares
(6,638,971)
(6,638,971)
Reissue of shares in connection with share-based
payments
(803,049)
Repurchase of shares
1,050,000
Bearer share certificates that have become void
7,466
Dividend in the form of ordinary shares
(1,003,808)
Balance at 31 December 2021
174,786,029
44,040,000
1,817,299
Number of treasury shares at 31 December 2021
(1,817,299)
Number of shares outstanding at 31 December 2021
172,968,730
44,040,000
.
Balance at 1 January 2022
174,786,029
44,040,000
1,817,299
Reissue of shares in connection with share-based
payments
(617,967)
Repurchase of shares
1,330,000
Dividend in the form of ordinary shares
(818,700)
Balance at 31 December 2022
174,786,029
44,040,000
1,710,632
Number of treasury shares at 31 December 2022
(1,710,632)
Number of shares outstanding at 31 December 2022
173,075,397
44,040,000
The average number of ordinary shares outstanding in 2022 was 172,826,732 (2021: 172,647,995). All shares issued are fully
paid.
The Cumulative Preference Shares A have been classified as equity, because there is no mandatory redemption and
distributions to the shareholders are at the discretion of DSM. On 31 December 2022, no Cumulative Preference Shares B
were outstanding (same as 2021).
Share premium
Of the total share premium of €471 million (2021: €471 million), an amount of €87 million (2021: €89 million) can be
regarded as entirely free of tax.
Treasury shares
In 2022, DSM repurchased 0.7 million shares for an amount of €116 million to cover commitments for stock dividend, and
0.6 million shares for an amount of €95 million to fulfill its obligations under share-based compensation plans.
At 31 December 2022, DSM possessed 1,710,632 (2021: 1,817,299) ordinary shares with a nominal value of €3 million, or 0.78%
(2021: 0.83%) of the share capital. The average purchase price of the ordinary treasury shares as at 31 December 2022 was
€114.81 (2021: €97.50). At 31 December 2022, 1,647,106 (2021: 1,665,073) of the total number of treasury shares outstanding
were held for servicing share-option rights and share plans and 63,526 (2021: 152,226) shares for stock dividend.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 239
Other reserves in Shareholders’ equity
Translation
reserve
Hedging
reserve
Reserve for
share-based
compensation
Fair
value
reserve
Total
Balance at 1 January 2021
(289)
(68)
41
73
(243)
Changes:
Fair-value changes of derivatives
-
(24)
-
-
(24)
Release to income statement
(13)
7
-
-
(6)
Fair-value changes of other financial assets
-
-
-
46
46
Exchange differences
478
-
-
-
478
Options and performance shares granted
-
-
22
-
22
Options and performance shares exercised/canceled
-
-
(24)
-
(24)
Transfer to retained earnings
-
-
-
(101)
(101)
Changes in joint ventures and associates
1
-
-
-
1
Income tax
-
8
-
(1)
7
Total changes
466
(9)
(2)
(56)
399
Balance at 31 December 2021
177
(77)
39
17
156
.
Changes:
Fair-value changes of derivatives
-
(6)
-
-
(6)
Release to income statement
(16)
53
-
-
37
Fair-value changes of other financial assets
-
-
-
(61)
(61)
Exchange differences
267
-
-
-
267
Options and performance shares granted
-
-
34
-
34
Options and performance shares exercised/canceled
-
-
(29)
-
(29)
Transfer to retained earnings
-
-
-
(28)
(28)
Income tax
(4)
(3)
-
-
(7)
Total changes
247
44
5
(89)
207
Balance at 31 December 2022
424
(33)
44
(72)
363
The increase in the Translation reserve in 2022 is mainly caused by a weakening of the euro against the US dollar, Swiss
franc and Brazilian real versus a strengthening against the Chinese renminbi. As a consequence, the total value of the
subsidiaries increased, which led to a positive exchange difference of €267 million.
The Translation reserve, Hedging reserve and Fair value reserve (partly) are legal reserves in accordance with Dutch law
and cannot be distributed to shareholders. Additional information is provided in Note 6 Shareholders' equity to the Parent
company financial statements.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 240
17 Non-controlling interests
2022
2021
Andre
Pectin
Yimante
Other
Total
% of non-controlling interest
25%
25%
Balance at 1 January
42
24
13
79
88
Changes:
- Share of profit/charged to
income statement
5
13
(3)
15
4
- Divestments
-
-
(4)
(4)
(23)
- Transfers
-
11
-
11
-
- Other consolidation changes
-
-
-
-
2
- Capital payments
-
-
4
4
3
- Dividend paid
-
-
-
-
(3)
- Exchange differences
(1)
(1)
(1)
(3)
8
Total changes
4
23
(4)
23
(9)
Balance at 31 December
46
47
9
102
79
The shareholding by DSM in Yimante Health Ingredients (Jingzhou) Company Ltd. is 75%. The profit will be distributed in a
50:50 proportion. The impact of this arrangement has led to a transfer of €11 million within equity from shareholders’
equity to non-controlling interest.
Not fully-owned subsidiaries on a 100% basis
2022
2021
Andre
Pectin
Yimante
Other
Total
Assets
Intangible assets
52
23
17
92
104
Property, plant and equipment
43
136
131
310
328
Other non-current assets
2
38
51
91
70
Inventories
33
20
15
68
62
Receivables
68
53
32
153
103
Cash and cash equivalents
7
10
24
41
49
Total assets
205
280
270
755
716
.
Liabilities
Provisions (non-current)
12
1
1
14
14
Borrowings (non-current)
1
78
88
167
172
Other non-current liabilities
-
1
1
2
2
Borrowings and derivatives
(current)
-
20
30
50
67
Other current liabilities
9
37
66
112
118
Total liabilities
22
137
186
345
373
Net assets (100% basis)
183
143
84
410
343
Net sales
98
6
55
159
189
Net profit for the year
21
50
(15)
56
6
Cash provided by / (used in)
operating activities
37
55
(1)
91
71
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 241
18 Provisions
Restructuring
costs and
termination
benefits
Environmental
costs
Other long-
term
employee
benefits
Other
provisions
Total
Balance at 1 January 2021
50
40
41
53
184
Of which current
42
7
5
7
61
Changes:
- Additions
56
-
6
9
71
- Releases
(10)
-
-
(12)
(22)
- Uses
(43)
(3)
(6)
(17)
(69)
- Other change
-
-
(1)
1
-
Total changes
3
(3)
(1)
(19)
(20)
Balance at 31 December 2021
53
37
40
34
164
Of which current
49
4
5
10
68
.
Changes:
- Additions
44
-
(3)
8
49
- Releases
(15)
(5)
-
(8)
(28)
- Uses
(41)
(3)
(4)
(7)
(55)
- Other change
-
-
-
(2)
(2)
- Reclassification to held for sale
-
-
(4)
-
(4)
Total changes
(12)
(8)
(11)
(9)
(40)
Balance at 31 December 2022
41
29
29
25
124
Of which current
40
2
4
4
50
In cases where the effect of the time value of money is material, provisions are measured at the present value of the
expenditures expected to be required to settle the obligation. The discount rate used increased from 1.3% to 4.2%.
Depending on the risk profile, the discount rates used at the end of 2022 vary from 4.2% to 5.8%. The balance of provisions
measured at present value increased by less than €1 million in 2022 in view of the passage of time (same as in 2021).
The provisions for restructuring costs and termination benefits mainly relate to the costs of redundancy schemes
connected to the dismissal of employees and costs of termination of contracts. These provisions generally have a term of 1
to 3 years.
The restructuring program following up on the new strategy of DSM, which was launched at the end of 2021, was continued.
An additional €9 million was recognized for this program, and €25 million was used during the year. Furthermore, a
restructuring program following up on the announced merger of DSM with Firmenich was launched in 2022. A provision of
€16 million was recognized for this program. The other additions to the provisions for restructuring costs and termination
benefits in 2022 relate mainly to the various smaller restructuring projects (same as in 2021).
The provisions for environmental costs relate to soil clean-up obligations, among other things. These provisions have an
average life of around 30 years.
The provisions for other long-term employee benefits relate mainly to length-of-service and end-of-service payments. The
average life of this provision is estimated to be between 10 and 12 years.
Several items have been combined under Other provisions, for example, demolition costs, onerous contracts and legal
claims. These provisions have an average life of 1 to 10 years.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 242
19 Borrowings
2022
2021
Total
Of which
current
Total
Of which
current
Debenture loans
2,741
-
2,739
-
Private loans
116
14
115
12
Lease liabilities
179
44
202
49
Credit institutions
28
28
42
42
Total
3,064
86
3,098
103
In agreements governing loans with a residual amount at year-end 2022 of €2,741 million (31 December 2021: €2,739
million), negative pledge clauses have been included that restrict the provision of security.
The documentation of the €500 million bond issued in March 2014, the €500 million bond issued in April 2015, the €750
million bond issued in September 2016, and both €500 million bonds issued in June 2020 include a change-of-control
clause. This clause allows the bond investors to request repayment at par if 50% or more of the DSM shares are controlled
by a third party and if the company is downgraded below investment grade (< BBB-). DSM’s credit rating has been kept
stable throughout 2022 and is set out as follows: Moody’s: “A3”/stable outlook and S&P: “A-”/stable outlook. At 31
December 2022, there was €1,044 million in borrowings outstanding with a remaining term of more than 5 years (at 31
December 2021, €1,043 million).
The schedule of repayment of borrowings is as follows.
Borrowings by maturity
2022
2021
2022
-
103
2023
86
74
2024
558
550
2025
579
555
2026 and 2027
797
823
After 2027
1,044
993
Total
3,064
3,098
A breakdown by currency is given in the following table.
Borrowings by currency
2022
2021
EUR
2,833
2,864
CNY
80
93
USD
84
80
CHF
20
20
BRL
19
10
Other
28
31
Total
3,064
3,098
On balance, total borrowings decreased by €34 million due to the following changes.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 243
Movements of borrowings
2022
2021
Balance at 1 January
3,098
3,586
Loans taken up
51
37
Repayments
(29)
(513)
Unwinding (interest)
9
7
Acquisitions / consolidation changes
9
16
Disposals
(28)
(30)
Reclassification to held for sale
(8)
-
Changes in debt to credit institutions
(21)
12
New lease arrangements (incl. remeasurements)
34
19
Payment of lease liabilities
(57)
(54)
Exchange differences
6
18
Balance at 31 December
3,064
3,098
The average effective interest rate on the portfolio of borrowings outstanding in 2022, including hedge instruments related
to these borrowings, amounted to 1.90% (2021: 1.86%).
A breakdown of debenture loans is given below.
Debenture loans
Nominal amount
2022
2021
EUR loan
2.38%
2014—2024
500
500
499
EUR loan
1.00%
2015—2025
500
499
499
EUR loan
0.75%
2016—2026
750
749
749
EUR loan
0.25%
2020—2028
500
496
498
EUR loan
0.625%
2020—2032
500
498
495
Total
2,750
2,741
2,739
All debenture loans have a fixed interest rate and are listed on the AEX.
- The 2.375% EUR bond 2014–2024 of €500 million was pre-hedged by means of forward starting swaps, resulting in
an effective interest rate for this bond of 3.97%, including the settlement of the pre-hedge
- The 1% EUR bond 2015–2025 of €500 million was pre-hedged by means of forward starting swaps, resulting in an
effective interest rate for this bond at 3.65%, including the settlement of the pre-hedge
- The 0.75% EUR bond 2016–2026 of €750 million was pre-hedged by means of a collar resulting in an effective
interest rate for this bond of 1.08%, including the settlement of the pre-hedge
- The 0.25% EUR bond 2020–2028 of €500 million has an effective interest rate of 0.29%
- The 0.625% EUR bond 2020–2032 of €500 million has an effective interest rate of 0.70%
A breakdown of private loans is given below.
Private loans
2022
2021
CNY loan
63
73
Other loans
53
42
Total
116
115
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 244
A breakdown of the lease liabilities is given below.
Lease liabilities by maturity
2022
2021
2022
-
48
2023
49
39
2024
40
31
2025
28
23
2026
20
17
2027
15
12
After 2027
60
48
Total undiscounted lease liabilities at 31 December
212
218
Lease liabilities included in the Balance Sheet at 31 December
179
202
Current
44
49
Non-current
135
153
In addition to the contractual lease commitments, DSM has identified explicit renewal options available to DSM, which are
currently not reasonably certain to be exercised and are therefore not included in the measurement of the lease. The
associated future lease payments which are uncommitted and optional for DSM, are estimated around €86 million
(undiscounted; 2021: €79 million).
The interest expense on the lease liabilities was €6 million (2021: €5 million) and the total repayments of the lease
liabilities amounted to €57 million in 2022 (2021: €54 million). These cash flows are reported as financing cash flows.
DSM’s policy regarding financial risk management is described in Note 23 Financial instruments and risks.
20 Other non-current liabilities
The decrease in the Other non-current liabilities mainly relates to the reclassification to liabilities held for sale and to
current liabilities. See also Note 3 Change in the scope of the consolidation.
2022
2021
Investment grants / customer funding
55
62
Deferred items
25
24
Drawing rights
-
49
Acquisition- / divestment-related liabilities
123
143
Other non-current liabilities
2
2
Total
205
280
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 245
21 Current liabilities
2022
2021
Trade payables
Received in advance
4
10
Trade accounts payable
1,410
1,550
Notes and cheques due
1
4
Owing to associates and joint ventures
-
7
Total Trade payables
1,415
1,571
Income tax payable
64
77
Other current liabilities
-
Other taxes and social security contributions
46
60
Interest
23
20
Pensions
2
2
Investment creditors
118
145
Employee-related liabilities
246
302
Payables associates and joint ventures relating to cash facility
2
1
Acquisition- / divestment related liabilities
53
10
Total Other current liabilities
490
540
Total current liabilities
1,969
2,188
Included in trade accounts payable are amounts due to suppliers which could be part of a supply chain finance
arrangement between the supplier and a third-party bank. DSM suppliers have the option to enter into such supply chain
finance arrangements with third party banks, which provides them with the option of earlier payment based on terms
linked to DSM’s investment grade credit rating. If a supplier chooses to participate in such an arrangement, this does not
impact the classification of the trade payable for DSM, as these supply chain finance arrangements are concluded between
the banks and the suppliers and do not alter the payment conditions between the supplier and DSM. Therefore, these
amounts remain classified as trade payables.
22 Contingent liabilities and other financial obligations
The contingent liabilities and other financial obligations in the following table are not recognized in the balance sheet.
2022
2021
Guarantee obligations on behalf of associates and third parties
178
206
Outstanding orders for projects under construction
6
11
Other
104
108
Total
288
325
Guarantee obligations are principally related to VAT and duties on the one hand and to financing obligations of associated
companies or related third parties on the other. Guarantee obligations will only lead to a cash outflow when called upon.
At year-end, no obligations had been called upon. Most of the outstanding orders for projects under construction will be
completed in 2023. Other relates mainly to contingent liabilities in contracts for catalysts.
Litigation
DSM has a process in place to monitor legal claims periodically and systematically.
DSM is involved in several legal proceedings, most of which are related to the ordinary course of business. DSM does not
expect these proceedings to result in liabilities that have a material effect on the company's financial position. In cases
Royal DSM Integrated Annual Report 2022 246
Notes to the consolidated financial statements of Royal DSM
where it is probable that the outcome of the proceedings will be unfavorable, and the financial outcome can be measured
reliably, a provision has been recognized in the financial statements and disclosed in 18 Provisions.
In 2015, an award was issued against DSM Sinochem Pharmaceuticals India Private Ltd. (DSP India) in a protracted
arbitration case in India going back to 2004 involving a joint venture that DSP India had formed with Hindustan Antibiotics
Ltd., which suspended its operations in 2003. DSP India (renamed to Centrient Pharmaceuticals after divestment by DSM in
2018) is covered by an indemnity from Koninklijke DSM N.V. for this case. In 2015, DSP India made an application with the
Civil Court in Pune (India) to set aside the arbitral award. The award amounts to INR 127.5 crore (approximately €14 million
as at year-end 2022) excluding interest of 12% per year as of 2004. In 2019, DSM provided the Bombay High Court a bank
guarantee of INR 150 crore (approximately €17 million as at year-end 2022). At the end of 2022, the application proceedings
were still pending. DSM has always viewed this case as unfounded and is of the opinion that the likelihood of the award
being ultimately set aside is high. Therefore, no liability is recognized in respect of this case.
In 2019, Brazilian tax authorities disagreed with certain tax treatment as applied by the company in 2014–2016, which would
have an effect on such prior year income tax returns of around BRL 65 million (approximately €12 million as at year-end
2022), including penalties and interest. DSM views this case as unfounded and considers that the possibility of winning this
case is high, as confirmed by external legal counsel. Therefore, no liability relating to this case is recognized. During 2022
no relevant developments took place that alter this view.
On 8 March 2022, DSM was informed by the district court of Munich (Germany) that TransnetBW GmbH (Transnet),
responsible for collecting the renewable energy levy (EEG Levy) from companies supplying energy to end users, filed a
claim against KGW-Kraftwerk Grenzach-Whylen GmbH (KGW). KGW is the owner of the cogeneration plant on DSM’s site in
Grenzach (Germany), which is leased to and operated by DSM. DSM and KGW are of the opinion that DSM is exempted from
the EEG levy, which for the period 2010 until 2020 for electricity consumed by DSM would amount to approximately €50
million. KGW filed its statement of defense on 30 June 2022. So far, DSM has not joined the proceedings and is therefore
not a party to the claim. Depending on how this case progresses, it is still considered possible that either KGW will assert a
recourse claim against DSM, or Transnet will assert an alternative payment claim against DSM. A court hearing is expected
to take place not before the summer of 2023. DSM has not recognized a provision in respect of this case.
23 Financial instruments and risks
Policies on financial risks
As an international company, DSM is exposed to financial risks in the normal course of business. A major objective of our
group policy is to minimize the impact of market, liquidity and credit risk on the value of the company and its profitability.
In order to achieve this, a systematic financial and risk management system has been established. For the purpose of
securing compliance with the risk management policies, an internal control framework has been implemented, and the
controls are monitored and tested periodically.
The derivatives contracts used by DSM are entered into exclusively in connection with the corresponding underlying
transaction (hedged item) relating to normal operating business. The instruments used are customary products, such as
currency swaps, cross-currency interest rate swaps, collars, forward exchange contracts and interest rate swaps.
An important element of DSM’s financial policy and capital management is the allocation of cash flow. DSM primarily
allocates cash flow to investments aimed at strengthening its business positions and securing the payment of dividends to
its shareholders. The remaining cash flow is further used for acquisitions and partnerships that strengthen DSM’s
competences and market positions. The net debt to equity ratio (gearing) is 0.8 (2021: 9.7), see also Note 25 Net debt.
Liquidity risk
Liquidity risk is the financial risk that an entity does not have and/or cannot access enough liquid cash and/or assets to
meet its obligations. This can happen if the entity’s credit rating falls, or when it experiences sudden unexpected cash
outflows or an unexpected drop in cash inflows, or some other event that causes counterparties to avoid trading with or
lending to the entity. Additionally, an entity can be indirectly exposed to market liquidity risk if the financial markets on
which it depends are subject to loss of liquidity.
Royal DSM Integrated Annual Report 2022 247
Notes to the consolidated financial statements of Royal DSM
The primary objective of liquidity management is to optimize the corporate cash position, among other things, by securing
availability of sufficient liquidity for execution of payments by DSM entities, at the right time and in the right place.
At 31 December 2022, DSM had cash and cash equivalents of €2,755 million (2021: €1,561 million).
At the end of 2022, DSM had a committed credit facility amounting to €1.0 billion, maturing on 28 May 2025. The agreement
for the committed credit facility has neither financial covenants nor material adverse changes clauses. The committed
credit facility links the interest rate to DSM’s greenhouse gas (GHG) emission reduction. At year-end 2022, no loans had
been taken up under the committed credit facilities.
On 31 May 2022, DSM and Firmenich announced their intention to enter into a merger of equals to create DSM-Firmenich.
The merger is planned to take place in 2023 through a public offer for DSM shares in exchange for DSM-Firmenich shares
and the contribution of Firmenich shares to DSM-Firmenich in exchange for DSM-Firmenich shares and €3.5 billion cash.
DSM will finance the cash payment to be made in connection with the combination from available cash resources. To
assist DSM therein, it has entered into a bridge financing facility of €2.0 billion, with final maturity day on 30 November
2024.
Furthermore, DSM has a commercial paper program amounting to €2.0 billion (2021: €2.0 billion). The company will use the
commercial paper program to a total of not more than €1.0 billion (2021: €1.0 billion). At 31 December 2022, €0 million had
been issued as commercial paper (2021: €0 million).
DSM has no derivative contracts to manage currency risk or interest rate risk outstanding under which margin calls by the
counterparty would be permitted.
Floating-rate and fixed-rate borrowings and monetary liabilities analyzed by maturity are summarized in the following
table. Borrowings excluding credit institutions are shown after taking into account related interest rate derivatives in
designated hedging relationships. DSM manages financial liabilities and related derivative contracts on the basis of the
remaining contractual maturities of these instruments. The remaining maturities presented in the following table provide
an overview of the timing of the cash flows related to these instruments. Financial assets are not linked to financial
liabilities in order to meet cash outflows on these liabilities.
Financial liabilities
Carrying
amount
Within 1
year
1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years After 5
years
2021
Borrowings 3,098 103 74 550 554 772 1,045
Monetary liabilities 2,399 2,188 67 37 57 18 32
Guarantees 206 - - - - - 206
Derivatives 49
40 7 2 - - -
Interest payments 127 27 27 27 15 10 21
Cash at redemption¹ 11 2 2 2 1 1 3
Total 5,890 2,360 177 618 627 801 1,307
.
2022
Borrowings 3,064 86 558 579 775 22 1,044
Monetary liabilities 2,110 1,969 45 59 15 10 12
Guarantees 178 14 28 - - - 136
Derivatives 27 23 3 1 - - -
Interest payments 100 27 27 15 10 4 17
Cash at redemption¹ 9 2 2 1 1 1 2
Total 5,488 2,121 663 655 801 37 1,211
1 Difference between nominal redemption and amortized costs.
Royal DSM Integrated Annual Report 2022 248
Notes to the consolidated financial statements of Royal DSM
2022 2023 2024 2025 2026 2027 Total
2021
Inflow 2,092 107 39 8 13 2,259
Outflow (2,109) (112) (39) (9) (13) (2,282)
2022
Inflow - 2,287 52 33 29 4 2,405
Outflow - (2,270) (52) (34) (33) (4) (2,393)
Market risk
Market risk can be subdivided into interest rate risk, currency risk and price risk.
Interest rate risk
Interest rate risk is the risk that adverse movements of interest rates lead to high costs on interest-bearing debt or assets,
which negatively impact the company’s capability to honor its commitments. DSM’s interest rate risk policy is aimed at
minimizing the interest rate risks associated with the financing of the company and thus at the same time optimizing the
net interest costs. This policy translates into a certain desired profile of fixed-interest and floating-interest positions,
including cash and cash equivalents, with the floating-interest position not exceeding 60% of net debt.
At 31 December 2022, there was a CNY 101 million credit facility held by DSM Inner Mongolia Rainbow, based on floating
rate SHIBOR (2021: CNY 166 million). There were no outstanding fixed-floating interest rate swaps (end of 2021 none).
The following analysis of the sensitivity of borrowings, assets and related derivatives to interest rate movements assumes
an instantaneous 1% change in interest rates for all maturities from their level on 31 December 2022, with all other
variables held constant. A 1% reduction in interest rates would result in a €28 million pre-tax loss in the income statement
and equity on the basis of the composition of financial instruments on 31 December 2022, as floating-rate borrowings are
more than compensated for by floating-rate assets (mainly cash). The opposite applies in the case of a 1% increase in
interest rates. The sensitivity of financial instruments with a floating interest rate on 31 December 2022 to changes in
interest rates is set out in the following table.
For more information regarding fixed or floating interest, see Note 19 Borrowings.
Sensitivity to change in interest rate
2022 2021
Carrying
amount
Sensitivity Carrying
amount
Sensitivity
+1% (1%) +1% (1%)
Loans to associates and joint
ventures 2 - - 1 - -
Current investments 125 1 (1) 489 5 (5)
Cash and cash equivalents 2,755 28 (28) 1,561 16 (16)
Short-term borrowings (86) - - (103) (1) 1
Long-term borrowings (2,978) (1) 1 (2,995) (2) 2
Currency risk
Currency risk is the risk that adverse movements of foreign currencies negatively impact the results of operations and the
financial condition of the company, for example due to losses on assets or liabilities in foreign currencies. It is DSM’s
policy to hedge 100% of the currency risks resulting from sales and purchases at the moment of recognition of the
The following table reflects the exposure of the derivatives to liquidity risk. It contains the cash flows from derivatives with
positive
fair values and from derivatives with negative fair values so as to provide a complete overview of the derivative-
related cash flows. The amounts are gross and undiscounted.
Derivatives cash flow
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 249
receivables and payables. This is realized by transferring at spot rates the respective exposures to the group, which are,
consequently (on a netted basis), hedged externally.
In addition, operating companies may — under strict conditions — opt for hedging currency risks from firm commitments
and forecast transactions. The currencies giving rise to these risks are primarily USD, CHF and JPY. The risks arising from
currency exposures are regularly reviewed and hedged when appropriate. DSM uses currency forward contracts, spot
contracts, and average-rate currency forwards and options to hedge the exposure to fluctuations in foreign exchange
rates. At year-end, these instruments had remaining maturities of less than one year. For the hedging of currency risks
from firm commitments and forecast transaction cash flows, hedge accounting is applied. Hedge accounting is not applied
for hedges of recognized trade receivables and trade payables hedged with short-term derivatives.
To hedge intercompany loans, receivables and payables denominated in currencies other than the functional currency of
the subsidiaries, DSM uses currency swaps or forward contracts.
The following analysis of the sensitivity of net borrowings and derivative financial instruments to currency movements
against the euro assumes a 10% change in all foreign currency rates against the euro from their level on 31 December
2022, with all other variables held constant. A +10% change indicates a strengthening of the foreign currencies against the
euro. A -10% change represents a weakening of the foreign currencies against the euro.
Sensitivity to change in exchange rate
2022
2021
Carrying
amount
Sensitivity
Carrying
amount
Sensitivity
+10%
(10%)
+10%
(10%)
Loans to associates and joint ventures
2
-
-
1
-
-
Current investments
125
5
(5)
489
2
(2)
Cash and cash equivalents
2,755
29
(29)
1,561
24
(24)
Short-term borrowings (excluding lease liabilities)
(42)
(4)
4
(54)
(2)
2
Long-term borrowings (excluding lease liabilities)
(2,843)
(6)
6
(2,842)
(7)
7
Lease liabilities
(179)
(14)
14
(202)
(14)
14
Currency forward contracts
1
14
(14)
(11)
8
(8)
Currency forwards related to net investments in
foreign entities¹
-
-
-
-
(8)
8
Average-rate forwards used for economic hedging²
18
(19)
19
(10)
22
(22)
Other derivatives
78
1
(1)
50
3
(3)
1 Fair-value change reported in Translation reserve.
2 Fair-value change reported in Hedging reserve.
Sensitivity changes on these positions will generally be recognized in profit or loss or in the translation reserve in equity,
with the exception of the instruments for which cash flow hedge accounting or net-investment hedge accounting is
applied.
In case of a strengthening or weakening of the euro against USD, CHF and CNY (being the key currencies), this would affect
the translation of financial instruments denominated in these currencies taking into account the effect of hedge
accounting and assuming all other variables being constant.
Profit or loss
Equity
Strengthening
Weakening
Strengthening
Weakening
EUR
USD (10% movement)
(154)
154
(303)
303
CHF (10% movement)
27
(27)
(251)
251
CNY (10% movement)
(5)
5
(100)
100
Price risk
Financial instruments that are subject to changes in stock exchange prices or indexes are subject to a price risk. At year-
end 2022, mainly other participating interests are subject to price risks.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 250
Credit risk
Credit risk is the risk that a (commercial or financial) counterparty may not be able to honor a financial commitment
according to the contractual agreement with DSM. The company manages the credit risk to which it is exposed by applying
credit limits per institution and by dealing exclusively with institutions that have a high credit rating.
At the balance sheet date, there were no significant concentrations of credit risks.
For all financial assets measured at amortized cost, the estimation of the loss allowance for doubtful accounts receivable
is based on an expected credit loss (ECL) model.
For trade receivables, DSM uses an allowance matrix to measure the lifetime ECL for trade receivables. The loss rates
depend among other things on the specified aging categories and are based on historical write-off percentages, taking
market developments into account.
For other financial assets, DSM applies an ECL model that reflects the size and significance of DSM’s exposure to credit
loss. The ECL is based on the allocation of a credit risk grade which is based on data that is determined to be predictive of
the risk of loss (including but not limited to external ratings, audited financial statements, management accounts and cash
flow projections and available press information about customers) and applying experienced credit judgement. Credit risk
grades are defined using qualitative and quantitative factors that are indicative of the risk of default and are aligned to
external credit rating definitions from Moody’s.
Risk of default is herewith considered as the risk of bankruptcy, or any legal impediment to the timely payment of either
interest and/or principal, as well as missed or delayed disbursement of either interest and/or principal.
The loss allowance on non-current financial assets that has been taken into consideration at the end of 2022 was €2
million (2021: nil).
With regard to treasury activities (for example cash, cash equivalents and derivatives held with banks or financial
institutions) it is ensured that financial transactions are only concluded with counterparties that have at least a Moody’s
credit rating of A3 for long-term instruments. At Business Group level, outstanding receivables are continuously monitored
by management. Appropriate allowances are made for any credit risks that have been identified in line with the expected
credit loss policy.
The development of the outstanding trade accounts receivable per aging category is as follows.
2022
2021
Neither past due nor impaired
1,117
1,070
1–29 days overdue
69
179
30–89 days overdue
100
118
90 days or more overdue
20
24
Total
1,306
1,391
The table below provides information about the credit risk exposure per aging category and the ECL for trade accounts
receivable of €12 million at 31 December 2022 (31 December 2021: €23 million), see Note 13 Current receivables.
2022
2021
Weighted
average
loss rate
Gross
carrying
amount
Expected
credit
loss
Weighted
average
loss rate
Gross
carrying
amount
Expected
credit
loss
Neither past due nor impaired
0.1%
1,117
(1)
0.3%
1,070
(3)
1–29 days overdue
0.0%
69
-
1.0%
179
(2)
30–89 days overdue
1.0%
100
(1)
4.0%
118
(5)
90 days or more overdue
53.0%
20
(10)
55.0%
24
(13)
Total
1,306
(12)
1,391
(23)
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 251
The changes in the expected credit loss for trade accounts receivable are as follows.
2022
2021
Balance at 1 January
(23)
(28)
Net remeasurement of expected credit loss
7
2
Deductions
3
2
Disposals
1
1
Balance at 31 December
(12)
(23)
The maximum exposure to credit risk is represented by the carrying amounts of financial assets that are recognized in the
balance sheet, including derivative financial instruments. DSM has International Swaps and Derivatives Association (ISDA)
agreements in place with its financial counterparties that allow for the netting of exposures in case of a default of either
party, but do not meet the criteria for offsetting in the balance sheet. The following table presents the carrying amounts of
the derivative financial instruments subject to these agreements. No significant agreements or financial instruments were
available at the reporting date that would reduce the maximum exposure to credit risk.
Exposure to credit risk related to derivatives
2022
2021
Receivables from derivatives presented in the balance sheet
124
78
Related amounts not offset in the balance sheet
(23)
(14)
Net amount
101
64
.
Liabilities from derivatives presented in the balance sheet
(27)
(49)
Related amounts not offset in the balance sheet
23
14
Net amount
(4)
(35)
Notional value of derivative financial instruments
2022
2021
Non-
current
Current
Total
Non-
current
Current
Total
Cross-currency interest rate
swaps
(29)
(87)
(116)
(170)
(90)
(260)
Forward exchange contracts,
currency options, currency swaps
(7)
(973)
(980)
(3)
(2,019)
(2,022)
Other derivatives
-
(1)
(1)
39
16
55
Total
(36)
(1,061)
(1,097)
(134)
(2,093)
(2,227)
Information about financial assets is presented in Note 10 Associates and joint arrangements, Note 11 Other financial
assets, Note 13 Current receivables, Note 14 Current investments, Note 15 Cash and cash equivalents and Note 23 Financial
instruments and risks.
DSM's policy is to grant corporate guarantees for credit support of subsidiaries and associates, to get access to credit
facilities which are necessary for their operating working capital needs and which cannot be funded by the corporate cash
pools and/or for bank guarantees needed for local governmental requirements. Information on guarantees is presented in
Note 22 Contingent liabilities and other financial obligations.
Hedge accounting
DSM uses derivative financial instruments to manage financial risks relating to business operations and does not enter
into speculative derivative positions. The purpose of cash flow hedges is to minimize the risk of volatility of future cash
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 252
flows. These may result from a recognized asset or liability or a forecast transaction that is considered highly probable
(firm commitment). DSM determines the existence of an economic relationship between the hedging instrument and
hedging item based on currency, amount and timing of their respective cash-flows. The hedge ratio is dependent on the
risk analysis related to the specific cash flow, and can vary from 50% to 100%. Changes in fair value as a result of changes
in interest (for cash flows hedges) or as a result of changes in exchange rate (for firm commitment hedges) are recognized
in Other comprehensive income (Hedging reserve), and ineffectiveness (mainly as a result of changes in timing of the
hedged transactions) will be recognized in the income statement. As soon as the forecast transaction is realized (the
underlying hedged item materializes), the amount recognized in the Other comprehensive income will be reclassified to
the income statement. In case the hedged future transaction is a non-financial asset or liability, the gain or loss
recognized in Other comprehensive income will be included in the cost of acquisition of the asset or liability.
The purpose of a hedge of a net investment is to reduce the foreign currency translation risk of an investment in a
company whose functional currency is not the euro. Changes in fair value are recognized in Other comprehensive income
(Translation reserve), and ineffectiveness will be recognized in the income statement. The amount recognized in Other
comprehensive income will be reclassified to the income statement, upon divestment of the respective foreign subsidiary.
The purpose of a fair value hedge is to hedge the fair value of assets or liabilities reflected on the balance sheet. Changes
of fair value in hedging instruments, as well as hedged items, will be recognized in the income statement.
Cash flow hedges
In 2022, DSM hedged USD 611 million (2021: USD 572 million) of its 2023 projected net cash flow in USD against the EUR by
means of average-rate currency forward contracts at an average exchange rate of USD 1.07 per EUR for the four quarters of
2023. Each quarter, the relevant hedges for that quarter will be settled and recognized in the income statement. In 2022,
DSM also hedged JPY 5,687 million (2021: JPY 6,771 million) of its 2023 projected net cash flow in JPY against the EUR by
means of average-rate currency forward contracts at an average exchange rate of JPY 136.21 per EUR for the four quarters
of 2023. DSM also hedged the projected CHF obligations against the EUR, namely CHF 417 million (2021: CHF 375 million) at
an average exchange rate of CHF 1.01 per EUR. These hedges have fixed the exchange rate for part of the USD and JPY
receipts and CHF payments in 2023. Cash flow hedge accounting is applied for these hedges. As a result of similar hedges
concluded in 2021 for the year 2022, €30 million negative was recognized in the 2022 operating profit of the segments
involved in accordance with the realization of the expected cash flows. There was no ineffectiveness in relation to these
hedges.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 253
Net investment hedges
The partial hedging of the currency risk associated with the translation of DSM’s CHF-denominated investments was zero
(2021: CHF 80 million). There was no material ineffectiveness in relation to these hedges.
Cash flow hedges
Net investment hedges
Foreign currency risk
Foreign exchange - denominated
debt (CHF currency)
Inventory
purchases
Other¹
Assets
Liabilities
2021
Nominal amount hedged item
23
184
-
77
Carrying amount assets
5
-
-
-
Carrying amount liabilities
-
(10)
-
-
Line item balance sheet
Derivatives
Derivatives
Derivatives
Derivatives
Change in the value of the
hedging instrument
(5)
45
-
-
Costs of hedging recognized in
OCI
(5)
29
-
1
Reclassified from hedging
reserve to income statement
9
(16)
-
-
Line item income statement
Cost of sales
Sales
Finex²
Finex²
.
2022
Nominal amount hedged item
29
194
-
-
Carrying amount assets
1
18
-
-
Carrying amount liabilities
-
-
-
-
Line item balance sheet
Derivatives
Derivatives
Derivatives
Derivatives
Change in the value of the
hedging instrument
4
(28)
-
-
Costs of hedging recognized in
OCI
4
1
-
-
Reclassified from hedging
reserve to income statement
10
30
-
-
Line item income statement
Cost of sales
Sales
Finex²
Finex²
1 Forward contracts, sales, receivables and borrowings.
2 Financial income and expense.
For movements in Hedging or Translation reserve, see also Note 16 Equity.
Fair value of financial instruments
The following methods and assumptions were used to determine the fair value of financial instruments: cash, current
investments, current receivables, current borrowings (excluding current portion of long-term instruments) and other
current liabilities are stated at carrying amount, which approximates fair value in view of the short maturity of these
instruments. The fair value of derivatives and long-term instruments are based on calculations, quoted market prices or
quotes obtained from intermediaries.
The portfolio of derivatives consists of average-rate forward contracts that are valued against average foreign exchange
forward rates obtained from Bloomberg and other derivatives that are valued using a discounted cash flow model,
applicable market yield curves and foreign exchange spot rates. Inputs for the fair value calculations represent observable
market data that are obtained from external sources that are deemed to be independent and reliable.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 254
DSM uses the following hierarchy for determining the fair value of financial instruments:
- Level 1: quoted prices in active markets for identical assets or liabilities
- Level 2: other techniques for which all inputs that have a significant effect on the fair value are observable, either
directly or indirectly
- Level 3: techniques that use inputs that have a significant effect on the fair value that are not based on
observable market data
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their
levels in the fair value hierarchy.
Fair value of financial instruments
Carrying amount
Fair Value
Amort.
Cost
Fair value
hedging
instr.
FVTPL
FVOCI
Total
Level 1
Level 2
Level 3
Total
Assets 2021
Non-current derivatives
-
1
47
-
48
-
48
-
48
Other participating interests
-
-
-
191
191
86
44
61
191
Non-current loans to associates and JVs
1
-
-
-
1
-
1
-
1
Other non-current receivables
31
-
-
-
31
-
-
31
31
Trade receivables
1,604
-
-
-
1,604
-
-
1,604
1,604
Other current receivables
32
-
-
-
32
-
-
32
32
Current derivatives
-
30
-
-
30
-
30
-
30
Current investments
489
-
-
-
489
-
-
489
489
Cash and cash equivalents
1,541
-
20
-
1,561
20
-
1,541
1,561
Liabilities 2021
Non-current borrowings
(2,995)
-
-
-
(2,995)
(2,920)
-
(153)
(3,073)
Non-current derivatives
-
(9)
-
-
(9)
-
(9)
-
(9)
Other non-current liabilities
(137)
-
(143)
-
(280)
(137)
-
(143)
(280)
Current borrowings
(103)
-
-
-
(103)
(54)
-
(49)
(103)
Current derivatives
-
(40)
-
-
(40)
-
(40)
-
(40)
Trade payables
(1,571)
-
-
-
(1,571)
-
-
(1,571)
(1,571)
Other current liabilities
(540)
-
-
-
(540)
-
-
(540)
(540)
.
Assets 2022
Non-current derivatives
-
4
78
-
82
-
82
-
82
Other participating interests
-
-
-
125
125
27
62
36
125
Non-current loans to associates and JVs
2
-
-
-
2
-
2
-
2
Other non-current receivables
158
-
-
-
158
-
-
158
158
Trade receivables
1,508
-
-
-
1,508
-
-
1,508
1,508
Other current receivables
78
-
-
-
78
-
-
78
78
Current derivatives
-
42
-
-
42
-
42
-
42
Current investments
125
-
-
-
125
-
-
125
125
Cash and cash equivalents
1,262
-
1,493
-
2,755
1,493
-
1,262
2,755
Liabilities 2022
Non-current borrowings
(2,978)
-
-
-
(2,978)
(2,534)
-
(135)
(2,669)
Non-current derivatives
-
(4)
-
-
(4)
-
(4)
-
(4)
Other non-current liabilities
(82)
-
(123)
-
(205)
(82)
-
(123)
(205)
Current borrowings
(86)
-
-
-
(86)
(42)
-
(44)
(86)
Current derivatives
-
(23)
-
-
(23)
-
(23)
-
(23)
Trade payables
(1,415)
-
-
-
(1,415)
-
-
(1,415)
(1,415)
Other current liabilities
(490)
-
-
-
(490)
-
-
(490)
(490)
During the year there were no material transfers between individual levels of the fair value hierarchy.
24 Post-employment benefits
The group operates a number of defined benefit plans and defined contribution plans throughout the world, the assets of
which are generally held in separately administered funds. The pension plans are generally funded by payments from
employees and from the relevant group companies. The group also provides certain additional healthcare benefits to
retired employees in the US.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 255
Post-employment benefits are employee benefits (other than termination benefits and short-term employee benefits) that
are payable after the completion of employment. The defined benefit obligation is valued using the projected unit credit
method as prescribed under IAS 19 ‘Employee Benefits’. Post-employment benefit accounting is intended to reflect the
recognition of post-employment benefits over the employee’s approximate service period, based on the terms of the plans
and the investment and funding. The accounting requires management to make assumptions regarding variables such as
discount rate, future salary increases, life expectancy, and future healthcare costs. Management consults with external
actuaries regarding these assumptions at least annually for significant plans.
Changes in these key assumptions can have a significant impact on the projected defined benefit obligations, funding
requirements and periodic costs incurred.
The charges for pension costs recognized in the income statement (Note 5 Net sales and costs (continuing operations))
relate to the following.
Pension costs
2022
2021
Defined benefit plans:
- Current service costs pension plans
38
34
- Other post-employment benefits
3
3
Defined contribution plans
61
60
Total pension costs included in employee benefit costs
102
97
- Pension costs included in Other operating (income) /
expense
(2)
(9)
Total in operating profit, continuing operations
100
88
Pension costs included in Financial income and expense
3
2
Total continuing operations
103
90
Discontinued operations
19
22
Total
122
112
Of which:
- Defined contribution plans
79
81
- Defined benefit plans
43
31
For 2023, costs for the defined benefit plans relating to pensions are expected to be €40 million (2022: €40 million).
Changes in Employee benefit net liabilities recognized in the balance sheet are shown in the following overview.
Employee benefit net liabilities
2022
2021
Balance at 1 January
269
454
Changes:
- Balance of actuarial (gains)/losses
(5)
(153)
- Employee benefit costs
43
30
- Contributions by employer
(56)
(66)
- Exchange differences
(2)
(1)
- Other
-
5
- Reclassification from/to held for sale
(5)
-
Total changes
(25)
(185)
Balance at 31 December
244
269
The Employee benefit net liabilities of €244 million (2021: €269 million) consist of €228 million related to pensions (2021:
€251 million), €4 million related to healthcare and other costs (2021: €5 million) and €12 million related to other post-
employment benefits (2021: €13 million). See also the table below.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 256
Net assets/liabilities
2022
2021
Major plans:
Present value of funded obligations
(1,452)
(1,810)
Fair value of plan assets
1,593
1,887
Net
141
77
Present value of unfunded obligations
(245)
(325)
Effect of asset ceiling
(129)
-
Net (liabilities) / net assets major plans
(233)
(248)
Net (liabilities) / net assets other plans
(11)
(21)
Total (net liabilities) / net assets
(244)
(269)
Of which:
Liabilities (Employee benefit liabilities)
(263)
(344)
Assets (Prepaid pension costs)
19
75
Pensions
The DSM group companies have various pension plans, which are geared to the local regulations and practices in the
countries in which they operate. As these plans are designed to comply with the statutory framework, tax legislation, local
customs and economic situation of the countries concerned, it follows that the nature of the plans varies from country to
country. The plans are based on local legal and contractual obligations.
DSM's current policy is to offer defined contribution retirement benefit plans to new employees wherever possible.
However, DSM still has a (small) number of defined benefit pension and healthcare schemes from the past or in countries
where legislation does not allow us to offer a defined contribution scheme. Generally, these schemes have been funded
through external trusts or foundations, where DSM faces the potential risk of funding shortfalls. The most significant
defined benefit schemes are:
- Pension Plan at DSM Nutritional Products AG in Switzerland (DNP AG)
- DSM UK Pension Scheme in the UK
- Consolidated Pension Plan of DSM North America, Inc. in the US
- Pension Plan at DSM Nutritional Products GmbH in Germany (DNP GmbH)
For each plan, the following characteristics are relevant:
DNP AG Pension Plan in Switzerland
The DNP AG Pension Plan is a typical Swiss Cash Balance plan. For accounting purposes, this plan is qualified as a defined
benefit plan. It is a contribution-based plan. There is no promise of indexation for on-going pensions. The Swiss state
minimal requirements for occupational benefit plans have however to be respected; the Minimum Guaranteed Interest
Return that needs to be applied on the cash balance accounts according to the Swiss BVG legislation was 1.0% for 2022
(2021: 1.0%). The actual return that was granted to the cash balance accounts in 2022 was 1.0% (4.5% in 2021). There is also
a minimal conversion rate applicable. The weighted average duration of the defined benefit obligation is 10.0 years (2021:
14.9 years) which could be seen as an indication of the maturity profile of the scheme.
The pension plan is managed and controlled by a DSM company pension fund. The Board of Trustees consists of
representatives of the employer and the employees who have an independent role. The plan assets are collectively
invested (no individual investment choice). The current (estimated) funding level, based on local standards, is 107% (2021:
124%), which is above the legally required minimum funding level and also above the long-term buffer target.
DSM UK Pension Scheme
The DSM UK Pension Scheme was closed as of 30 September 2016 for all pension accruals. An unconditional indexation
policy is applicable for the vested pension rights. The weighted average duration of the defined benefit obligation is 14.3
years (2021: 18.9 years), which could be seen as an indication of the maturity profile of the scheme.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 257
The pension plan is managed and controlled by a DSM company pension fund. The Board of Trustees consists of
representatives of the employer and the employees who have an independent role. There are two company guarantees in
place: (1) a guarantee from DNP AG (capped at GBP 14 million) related to the 2012 valuation, and (2) a guarantee from Royal
DSM (capped at GBP 11 million) related to arrangements with respect to former UK divestments. There is a long-term de-
risking strategy for the DSM UK Pension Scheme in place with the objective to align the company’s intentions and the
Trustees responsibility with respect to this plan. The current funding level, based on local standards, is estimated at 91%
(2021: 101%).
Consolidated Plan in the US
The Consolidated Plan in the US has been closed to new entrants since 2014. As of 31 December 2016, the plan was closed
for pension accrual of the non-unionized employees and as a result of the DRF divestment in 2021, it was fully frozen for
all unionized employees as well.
There is no indexation applicable for the vested pension rights. The weighted average duration of the defined obligations
is 9.7 years (2021: 11.8 years), which could be seen as an indication of the maturity profile of the scheme.
The pension plan is managed and controlled by a DSM company pension fund. The Board of Trustees consists of
representatives of the employer and the employees, who have an independent role.
The internal funding policy of this plan is based on IFRS valuation. This implies a stricter funding policy than the minimum
requirements on local funding. The current IFRS funding level is 108% (2021: 107%) and the funding on local standards
(Pension Protection Act) will be substantially higher. The minimum required funding level on local standards is 80% on the
basis of this Act, so this plan is well funded.
DNP GmbH Pension Plan in Germany
The DNP GmbH Pension Plan in Germany has been closed to new entrants as of 31 December 2008. The accrual is still
applicable for employees who have been participating in the plan since 2008. The pension plan is a final-pay pension plan
(averaged over the last 12 months prior to retirement) and service-related benefit. The liability is on the balance sheet of
DSM Nutritional Products GmbH. No assets are allocated to this liability. All reimbursements will be paid out by the local
company. The weighted average duration of the defined benefit obligation is 12.9 years (2021: 14.5 years), which could be
seen as an indication of the maturity profile of the scheme.
The most important unfunded plans are in Germany, for which the associated liability amounts to €236 million (2021: €316
million).
The changes in the present value of the defined benefit obligations and in the fair value of plan assets of the major plans
are listed below.
Present value of defined benefit obligations
2022
2021
Balance at 1 January
2,135
2,110
Changes:
- Service costs
40
35
- Interest costs
18
13
- Contributions
19
16
- Actuarial (gains) / losses
(498)
(52)
- Past service costs
-
(11)
- Exchange differences
64
94
- Disbursements
(82)
(72)
- Other
1
2
Total changes
(438)
25
Balance at 31 December
1,697
2,135
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 258
Fair value of plan assets
2022
2021
Balance at 1 January
1,887
1,676
Changes:
- Interest income on plan assets
16
11
- Actuarial gains/(losses)
(369)
101
Actual return on plan assets
(353)
112
- Contributions by employer
42
47
- Contributions by employees
19
16
- Disbursement
(70)
(60)
- Acquisition / Divestment
-
(1)
- Exchange differences
69
97
- Other
(1)
-
Total changes
(294)
211
Balance at 31 December
1,593
1,887
The fair value of the plan assets consists of 94% of quoted assets (2021: 96%).
The actuarial gains/losses as included in the previous tables can be specified as follows.
Remeasurement effects as included in Other comprehensive income
2022
2021
Defined benefit obligation major pension plans
Actuarial (gain)/loss due to experience
2
68
Actuarial (gain)/loss due to demographic assumption
changes
-
(62)
Actuarial (gain)/loss due to financial assumption changes
(500)
(58)
Total
(498)
(52)
Plan assets major pension plans
Change in irrecoverable surplus other than interest
124
-
Return on plan assets (greater) / less than discount rate
369
(101)
Total
493
(101)
Actuarial (gain) / loss major plans
(5)
(153)
Actuarial (gain) / loss other plans
-
-
Total actuarial (gain) / loss
(5)
(153)
The major categories of pension-plan assets as a percentage of total plan assets are as follows.
Pension-plan assets by category
2022
2021
Bonds¹
46%
46%
Equities¹
24%
26%
Property funds
20%
20%
Other
10%
8%
1 With quoted market price in active market.
The pension-plan assets include neither ordinary DSM shares nor property occupied by DSM.
In 2023, DSM is expected to contribute €40 million (actual 2022: €42 million) to its major defined benefit plans.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 259
The main actuarial assumptions for the year (weighted averages) are:
Actuarial assumptions for major plans outside the Netherlands
2022
2021
Discount rate
3.01%
0.85%
Price inflation
1.52%
1.49%
Salary increase
2.34%
2.06%
Pension increase
0.80–
2.90%
0.84–
3.15%
Year-end amounts for the current and previous periods are as follows.
Major defined benefit plans per year
2022
2021
2020
2019
2018
Defined benefit obligations
(1,697)
(2,135)
(2,110)
(2,079)
(1,808)
Plan assets
1,593
1,887
1,676
1,644
1,370
Funded status of asset / (liability)
(104)
(248)
(434)
(435)
(438)
Experience adjustments on plan assets, gain / (loss)
(369)
101
89
192
(94)
Experience adjustments on plan liabilities, gain / (loss)
(2)
(68)
(9)
(36)
(35)
Gain/(loss) on liabilities due to changes in assumptions
500
120
(105)
(180)
52
Sensitivities of significant actuarial assumptions
The discount rate, the future increase in wages and salaries and the pension increase rate were identified as significant
actuarial assumptions. The following impacts on the defined benefit obligation are to be expected.
- A 0.25% increase/decrease in the discount rate would lead to a decrease/increase of 2.5% (2021: 3.5%) in the
defined benefit obligation
- A 0.25% increase/decrease in the expected increase in salaries/wages would lead to an increase/decrease of
0.3% (2021: 0.3%) in the defined benefit obligation
- A 0.25% increase/decrease in the expected rate of pension increase would lead to an increase/decrease of less
than 0.6% (2021: 1.0%) in the defined benefit obligation
The sensitivity analysis is based on realistically possible changes as at the end of the reporting year. Each change in a
significant actuarial assumption was analyzed separately as part of the test. Interdependencies were not taken into
account.
Healthcare and other costs
In some countries, particularly the US, group companies provide retired employees and their surviving dependents with
post-employment benefits other than pensions, mainly allowances for healthcare expenses and life-insurance premiums.
Some of these are unfunded; in these cases, approved expense claims are reimbursed out of the financial resources of the
group companies concerned. These plans are not sufficiently material to warrant the individual disclosures required by
IAS 19.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 260
25 Net debt
The development of the components of net debt is as follows.
Cash and
cash
equivalents
Current
investments
Non-current
borrowings
Current
borrowings
Credit
institutions
Derivatives
Total
Balance at 1 January 2021
871
43
(3,484)
(49)
(53)
95
(2,577)
Change from operating activities
1,427
-
(7)
-
-
(66)
1,354
Change from investing activities
208
445
(9)
(2)
25
-
667
Reclassification from non-current to current
-
-
516
(516)
-
-
-
Transfers
(522)
-
24
506
(12)
4
-
Dividend
(266)
-
-
-
-
-
(266)
Interest
(65)
-
-
-
-
-
(65)
Proceeds from reissued shares
34
-
-
-
-
-
34
New/unwinding leases
-
-
(19)
-
-
-
(19)
Repurchase of shares
(165)
-
-
-
-
-
(165)
Other
-
-
-
-
-
(4)
(4)
Change from financing activities
(984)
-
521
(10)
(12)
-
(485)
Exchange differences
39
1
(16)
-
(2)
-
22
Total changes
690
446
489
(12)
11
(66)
1,558
Balance at 31 December 2021
1,561
489
(2,995)
(61)
(42)
29
(1,019)
.
Change from operating activities
965
-
(9)
-
-
65
1,021
Change from investing activities
876
(364)
7
25
(5)
-
539
Reclassification from non-current to current
-
-
40
(40)
-
-
-
Transfers
(58)
-
17
18
21
2
-
Dividend
(345)
-
-
-
-
-
(345)
Interest
(52)
-
-
-
-
-
(52)
Proceeds from reissued shares
25
-
-
-
-
-
25
New/unwinding leases
-
-
(34)
-
-
-
(34)
Repurchase of shares
(210)
-
-
-
-
-
(210)
Other
(5)
-
-
-
-
(5)
(10)
Change from financing activities
(645)
-
23
(22)
21
(3)
(626)
Exchange differences
(2)
(4)
(1)
(1)
6
(2)
Total changes
1,194
(364)
17
2
15
68
932
Balance at 31 December 2022
2,755
125
(2,978)
(59)
(27)
97
(87)
In 2022, the gearing (net debt / equity plus net debt) was 0.8% (in 2021: 9.7%).
26 Notes to the cash flow statement
The cash flow statement provides an explanation of the changes in cash and cash equivalents. It is prepared on the basis
of a comparison of the balance sheets at 1 January and 31 December. Changes that do not involve cash flows, such as
changes in exchange rates, amortization, depreciation, impairment losses and transfers to other balance sheet items, are
eliminated.
Changes in working capital due to the acquisition or disposal of consolidated companies are included under Investing
activities.
The Consolidated cash flow statement includes an analysis of all cash flows in total, therefore including both continuing
and discontinued operations. For the amounts related to discontinued operations split by activities and a reconciliation of
results from continuing operations to total, see Note 3 Change in the scope of the consolidation.
Most of the changes in the cash flow statement can be traced back to the detailed statements of changes for the balance
sheet items concerned. For those balance sheet items for which no detailed statement of changes is included, the table
below shows the link between the change according to the balance sheet and the change according to the cash flow
statement.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 261
Change in operating working capital
2022
2021
Operating working capital
Balance at 1 January
2,330
2,052
Balance at 31 December
2,432
2,330
Balance sheet change
102
278
Adjustments:
- Exchange differences
(63)
(108)
- Changes in consolidation (including acquisitions and disposals)
399
98
- Transfers/non-cash value adjustments
21
(85)
Total change in operating working capital according to the cash flow statement
459
183
In 2022, the operating working capital continuing operations was €2,432 million (2021: €2,018 million), which amounts to
29.0% of annualized fourth-quarter net sales (2021: 26.1%).
The disposal of subsidiaries, businesses and associates of €1,366 million consists primarily of the cash impact of the
divestment of the Protective Materials business for €1,363 million.
27 Share-based compensation
The Royal DSM Restricted- and Performance Share Unit Plan provides rules for the grant of Restricted Share Units (RSU)
and/or Performance Share Units (PSU) to eligible employees. Considering the plan rules that allow multiple grant dates,
best practice is to effectuate the grant of share units on the last trading day at the Amsterdam Stock Exchange in March.
The number of share units to be granted is based on job level and the face value of the DSM share. As a result, the number
of share units to be granted annually will fluctuate with the share price development.
RSUs and PSUs are subject to a vesting period of 3 years starting at the grant date. Vesting of RSUs is subject to continued
employment until the vesting date (‘time vesting’). In addition, vesting of PSUs is also subject to the achievement of
predefined performance targets at the end of the performance period. In view of the intended merger of equals between
DSM and Firmenich, it is decided (as included in the Offering Circular) that the PSUs granted under the Long-Term
Incentive plan in 2021 and 2022, respectively, shall vest against the average of the vesting result achieved over the vesting
that occurred in 2020, 2021 and 2022.
Non-vested share units will be forfeited. If employment is terminated prior to the vesting date, specific rules regarding
vesting and forfeitures apply.
Prior to 2017, stock options were granted to eligible executives. Stock options have a term of 8 years and are subject to a
vesting period of 3 years. All outstanding stock options are vested.
Share units and stock options are settled by delivery of DSM shares.
In September 2022, a group of senior key employees (excluding the Co-CEOs) received an RSU grant, subject to completion
of the merger between DSM and Firmenich. The respective grant will be settled in cash.
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 262
Overview of stock options
Year of grant
Outstanding
at 31 Dec. 2021
In 2022
Outstanding
at 31 Dec.
2022
Fair value
on grant
date (€)
Exercise
price
(€)
Expiry
date
Exercised
Average
price (€)
Forfeited/
expired
2014
49,540
(49,540)
150
-
-
11
52
9 May 2022
2015
244,850
(66,675)
129
-
178,175
10
51
5 May 2023
2016
421,200
(63,950)
147
-
357,250
9
53
3 May 2024
2022 Total
715,590
(180,165)
141
-
535,425
Of which vested
715,590
535,425
at 31 Dec. 2020
at 31 Dec. 2021
2021 Total
1,066,920
(343,830)
168
(7,500)
715,590
Of which vested
1,066,920
715,590
Overview of share units
1
Year of issue
Outstanding at
31 Dec. 2021
Adjustment
PSUs to
at-target grant
In 2022
Outstanding at
31 Dec. 2022
Share price
at date of
grant (€)
Expiry date
Granted
Vested
Forfeited/
expired
2
2019
157,578
38,307
-
(192,435)
(3,450)
-
98
31 Mar 2022
2020
127,637
-
-
(18,625)
(4,894)
104,118
104
31 Mar 2023
2021
109,195
-
364
(14,842)
(5,050)
89,667
144
31 Mar 2024
2022
-
-
90,122
(2,418)
(1,651)
86,053
163
31 Mar 2025
2022
-
-
103,064
-
(898)
102,166
117
30 Sep 2025
2022 Total
394,410
38,307
193,550
(228,320)
(15,943)
382,004
at 31 Dec. 2020
at 31 Dec. 2021
2021 Total
690,351
(175,775)
114,894
(207,637)
(27,423)
394,410
1 This table also forms part of the Remuneration report 2022 as included in the Supervisory Board Report.
2 Restricted- and Performance Share Units may partly vest upon termination of employment in connection with, for example, divestments, retirement or
early retirement.
Whereas the grant of PSUs to members of the Managing Board and the Executive Committee is based on the maximum
number to vest, the grant to other eligible employees is – as of 2021 – based on the ‘at-target’ grant level (in previous
years this was the ‘maximum number’ that could vest). An ‘at-target’ grant level includes RSUs as well as PSUs. In the
future this may, upon vesting and depending on the achievement of underlying goals, result in a performance correction,
i.e., the forfeiture of outstanding PSUs (if performance goals are not or only partly achieved) or in an additional number of
PSUs to vest (if performance goals are overachieved). The switch to an ‘at-target’ grant was applied retroactively for the
grants made in previous years. As a result of this, the table above includes a correction of outstanding PSUs for grants in
previous years (i.e. 2019 and 2020). The shift towards a grant on ‘at-target’ level did not impact the valuation of the
outstanding share units nor the share-based compensation in the income statement.
Certain employees in the Netherlands are entitled to employee stock options, to be granted on the first day on which the
DSM stock is quoted ex-dividend following the Annual General Meeting of Shareholders. The opening price of the DSM
stock on that day is the exercise price of such stock options. Employee stock options can immediately be exercised and
have a term of five years.
Overview of stock options for employees
Year of grant
Outstanding
at
31 Dec. 2021
In 2022
Outstanding
at
31 Dec. 2022
Fair
value
on grant
date (€)
Exercise
price (€)
Exercise
period
until
Granted
Exercised
Average
price
(€)
Forfeited/
expired
2017
28,745
-
(26,940)
158
(1,805)
-
6
67
May 2022
2018
61,555
-
(15,695)
147
(1,215)
44,645
9
85
May 2023
2019
102,515
-
(22,060)
144
(1,635)
78,820
9
98
May 2024
2020
71,540
-
(14,315)
145
(1,175)
56,050
10
112
May 2025
2022
-
481,350
(60,905)
153
(33,720)
386,725
14
138
May 2027
2022 Total
264,355
481,350
(139,915)
151
(39,550)
566,240
at 31 Dec. 2020
at 31 Dec. 2021
2021 Total
447,120
-
(179,110)
159
(3,655)
264,355
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 263
Measurement of fair value
The costs of share units are measured by reference to the fair value of the DSM share at the date on which the share units
are granted, ex-dividend as the share units do not accumulate dividend during the three-year vesting period.
The costs of option plans are measured by reference to the fair value of the options at the date on which the options are
granted. The fair value is determined using the Black-Scholes model, taking into account market conditions linked to the
price of the DSM share. Stock-price volatility is determined on the basis of historical volatilities of the DSM share price
measured each month over a period equal to the expected option life. The costs of these options are recognized in the
income statement (Employee benefit costs).
Assumptions determining fair value
The following assumptions were used to determine the fair value at grant date.
Plan assumptions
2022
2021
Equity settled
Cash settled
Equity settled
Share units
Risk-free rate
0.25%
-0.67%
Expected share life in years
3
3
3
Nominal share life in years
3
3
3
Share price in €
162.50
117.45
144.30
Expected dividend in €
2.50
2.50
7.20
Fair value of share granted in €
156.37
116.01
137.10
Employee options
Risk-free rate
0.17%
-
Expected option life in years
2
-
Nominal option life in years
5
-
Share price in €
137.85
-
Exercise price in €
137.85
-
Volatility
20.0%
-
Expected dividend
2.50
-
Fair value of option granted in €
13.58
-
An amount of €35 million is included in the costs for wages and salaries for share-based compensation (2021: €22 million).
The following table specifies the share-based compensation.
Share-based compensation
2022
2021
Employee stock options
6
-
Other stock options
1
2
Restricted and Performance
share units
28
20
Total expense
35
22
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 264
28 Related parties
Koninklijke DSM N.V. is the group holding company that is listed on the Euronext Amsterdam stock exchange. The financial
statements of the company are included in the section Parent company financial statements.
In the ordinary course of business, DSM buys and sells goods and services from/to various related parties in which DSM
has significant influence. Transactions are conducted under terms and conditions that are equivalent to those that apply
to arm’s length transactions.
Transactions and relationships with related parties are reported in the table below.
Transactions with related parties
Associates and joint ventures
2022
2021
Sales to
18
13
Purchases from
35
87
Loans to
1
1
Receivables from
17
15
Payables to
4
7
Interest from
1
1
Commitments to
-
4
Transactions with joint ventures are immaterial.
DSM may issue guarantees as credit enhancement of associates to acquire bank facilities for these associates. DSM has
provided guarantees to third parties for debts of associates and to a third party (a former associate) for an amount of €60
million (2021: €81 million).
Other related-parties disclosures relate entirely to key management of DSM, being represented by the company’s
Managing Board, Executive Committee and the Supervisory Board. For further details about their remuneration, see Note 12
Remuneration of Managing Board and Supervisory Board to the Parent company financial statements.
29 Service fees paid to external auditors
The service fees recognized in the financial statements 2022 for the services of KPMG amounted to €8.8 million (2021: €5.8
million). The amounts per service category are shown in the following table.
Total service fee
Of which
KPMG
KPMG
KPMG NL
KPMG NL
2022
2021
2022
2021
Audit of the Group financial statements
4.7
4.5
3.2
3.0
Audit of other (statutory) financial statements
0.9
0.7
0.1
0.1
Other assurance services
3.2
0.6
2.8
0.6
Total assurance services charged to DSM
8.8
5.8
6.1
3.7
Of which: Assurance services related to transactions
2.6
-
2.3
-
The service fees mentioned in the table for the audit of the financial statements 2022 (2021) relate to the total fees for the
audit of the financial statements 2022 (2021), irrespective of whether the activities have been performed during the
financial year 2022 (2021).
The other assurance services rendered by KPMG in 2022 mainly relate to assurance engagements required for the
divestment of DSM Materials as well as for the announced merger plans. Assurance costs related to the divestment were
Notes to the consolidated financial statements of Royal DSM
Royal DSM Integrated Annual Report 2022 265
partly recharged to the buyer. The remainder of other assurance services include assurance engagements on non-financial
information and on internal controls of DSM Pension Services, assurance engagements on government grants and
regulatory filings. KPMG did provide permitted non-assurance services in 2022 related to regulatory filings, agreed-upon
procedures on certain information for the Remuneration Committee of Royal DSM and the pension fund and their external
auditor (the same as in 2021).
30 Events after the balance sheet date
On 23 January 2023, the DSM shareholders voted in favor of all resolutions related to the merger with Firmenich at the
Extraordinary General Meeting. As a result, the acceptance threshold was automatically adjusted from 95% to 80% of DSM’s
aggregate issued and outstanding ordinary share capital. Furthermore, the acceptance period, which period was set to
expire on 31 January 2023, was extended until two weeks after the announcement that the Indian competition clearance
has been obtained, but not before 17:40 hours CET on 7 March and no later than 17:40 hours CET on 11 April 2023.
Royal DSM Integrated Annual Report 2022 266
Parent company financial statements
Balance sheet at 31 December of Koninklijke DSM N.V. before profit appropriation
x € million
Notes
2022
2021
Assets
Intangible assets
2
466
464
Financial assets
3
15,634
13,789
Deferred tax assets
4
52
97
Other deferred items
1
2
Non-current assets
16,153
14,352
Receivables
5
51
77
Cash and cash equivalents
1
1
Current assets
52
78
Total
16,205
14,430
.
Shareholders' equity and liabilities
Share capital
6
328
328
Share premium
6
471
471
Treasury shares
6
(196)
(177)
Legal reserves
6
833
460
Other reserves, incl. retained earnings
6
7,770
6,700
Undistributed results:
6
- Net profit for the year
6
1,700
1,676
- Less: interim dividend
6
(163)
(140)
Shareholders' equity
6
10,743
9,318
Borrowings
7
2,741
2,739
Other non-current liabilities
8
8
Non-current liabilities
2,749
2,747
Current liabilities
Other current liabilities
8
2,713
2,365
Current liabilities
2,713
2,365
Total
16,205
14,430
The accompanying notes are an integral part of these parent company financial statements.
Parent company financial statements
Royal DSM Integrated Annual Report 2022 267
Income statement of Koninklijke DSM N.V.
x € million
Notes
2022
2021
Other income
1
18
18
Cost of outsourced work and other external costs
(21)
(21)
Wages and salaries
10
(8)
(5)
Other movements in the value of intangible assets
-
(5)
Other operating expense
(1)
(1)
Total operating expenses
(30)
(32)
Operating profit
(12)
(14)
Financial expense
11
(107)
(106)
Profit before income tax
(119)
(120)
Income tax
4
25
(3)
Share of the profit of subsidiaries
3
1,794
1,784
Profit after income tax
1,700
1,661
Income from receivables attributable to non-current assets and from investments
-
15
Net profit available to equity holders of Koninklijke DSM N.V.
1,700
1,676
Royal DSM Integrated Annual Report 2022 268
Notes to the parent company financial statements
1 General
Unless stated otherwise, all amounts are in € million.
Summary of the accounting policies
These separate financial statements have been prepared in accordance with Title 9, Book 2 of the Dutch Civil Code. The
accounting policies used are the same as those used in the consolidated EU-IFRS financial statements, in accordance with
the provisions of article 362-8 of Book 2 of the Dutch Civil Code.
In these separate financial statements, investments in subsidiaries are accounted for using the net asset value, with
separate presentation of the goodwill component under intangible fixed assets. Results on transactions involving the
transfer of assets and liabilities between the Company and its participating interests and mutually between participating
interests themselves are eliminated to the extent that they can be considered as not realized. For an appropriate
interpretation of these statutory financial statements, the separate financial statements should be read in conjunction
with the consolidated financial statements.
Participating interests with a negative net asset value are valued at nil. This measurement also covers any receivables
provided to the participating interests that are, in substance, an extension of the net investment. In particular, this relates
to loans for which settlement is neither planned nor likely to occur in the foreseeable future. A share in the profits of the
participating interest in subsequent years will only be recognised if and to the extent that the cumulative unrecognised
share of loss has been absorbed. If the Company fully or partially guarantees the debts of the relevant participating
interest, or if has the constructive obligation to enable the participating interest to pay its debts (for its share therein),
then a provision is recognised accordingly to the amount of the estimated payments by the Company on behalf of the
participating interest.
Information on the use of financial instruments and on related risks for the group is provided in Note 23 of the
consolidated financial statements. The Company makes use of the option to eliminate intragroup expected credit losses
against the book value of loans and receivables from the Company to participating interests, instead of elimination against
the equity value / net asset value of the participating interests.
Other income consists mainly of the charge out of the parent company related corporate overhead and services to the
group companies, which is fully realized in the Netherlands.
Statutory and fiscal seat
The statutory seat of Koninklijke DSM N.V. is Het Overloon 1, Heerlen (Netherlands). A list of Koninklijke DSM N.V.’s
participations has been filed with the Chamber of Commerce (Netherlands) and is available from the company upon
request, as well as on the company website. DSM is registered in the Dutch Commercial Register under number 14022069.
The company forms a fiscal unity for corporate income tax and VAT purposes together with the group companies in the
Netherlands. Each of the companies recognizes the portion of corporate income tax that the relevant company would owe
as an independent tax payer, taking into account tax liabilities applicable to the company, as well as the tax position of the
fiscal unity.
Merger between DSM and Firmenich
On 31 May 2022, DSM and Firmenich announced their intention to enter into a merger of equals to create DSM-Firmenich.
The merger is planned to take place in 2023 and it impacts the 2022 Consolidated financial statements as specified in Note
1 General Information and the 2022 Parent company financial statements in the following sections: Note 6 Shareholders’
Equity, Note 7 Borrowings and Note 11 Financial expense. For further details on the merger plans, refer to Note 30 Events
after balance sheet date in the Consolidated financial statements.
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 269
2 Intangible assets
The carrying amount of intangible assets comprises goodwill on the acquisition of the Erber Group in 2020 (€423 million),
Pentapharm in 2007 (€34 million) and Crina in 2006 (€9 million). For full information on these assets including the
discussion of the related impairment tests, see Note 8 Intangible assets to the ‘Consolidated financial statements’.
Intangible assets of Koninklijke DSM N.V.
Total
Balance at 1 January 2021
Cost
825
Carrying amount
825
Changes in carrying amount:
- Exchange rate difference
2
- Disposal subsidiaries
(358)
- Impairment
(5)
Balance at 31 December 2021
Cost
469
Amortization and impairment losses
5
Carrying amount
464
Changes in carrying amount:
- Exchange rate difference
2
Balance at 31 December 2022
Cost
471
Amortization and impairment losses
5
Carrying amount
466
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 270
Share in
Subsidiaries
Other
participating
interests
Receivables
Total
Balance at 1 January 2021
11,953
41
22
12,016
Changes:
- Share in profit
1,784
-
-
1,784
- Dividend received
(385)
-
-
(385)
- Disposal of subsidiaries
(239)
-
-
(239)
- Net actuarial gains/(losses)
132
-
-
132
- Change in Fair value reserve
81
(36)
-
45
- Change in Hedging reserve
(33)
-
-
(33)
- Exchange differences
479
-
-
479
- Intra-group transfers
32
-
-
32
- Other
(20)
-
(22)
(42)
Balance at 31 December 2021
13,784
5
-
13,789
.
Changes:
- Share in profit
1,794
-
-
1,794
- Dividend received
(99)
-
-
(99)
- Disposal of subsidiaries
(74)
-
-
(74)
- Net actuarial gains/(losses)
(3)
-
-
(3)
- Change in Fair value reserve
(62)
-
-
(62)
- Change in Hedging reserve
22
-
-
22
- Exchange differences
272
-
-
272
- Intra-group transfers
-
-
-
-
- Other
(7)
2
-
(5)
Balance at 31 December 2022
15,627
7
-
15,634
The disposal of subsidiaries relates to the divestment of the DPM (DSM Protective Materials) business.
4 Deferred tax assets
The deferred tax asset of €52 million relates to net operating losses and temporary differences in the Dutch fiscal unity, of
which €33 million is recoverable within 1 year. The decrease of the deferred tax asset in 2022 relates mainly to movements
of temporary differences and partly relating to the DPM divestment. The increase in the effective tax rate from 2.5% in 2021
to 21% in 2022 was mainly due to a one-time effect related to the divestment of the RFM business in 2021.
5 Receivables
2022
2021
Receivables from subsidiaries
13
58
Other receivables
38
19
Total
51
77
The carrying values of the receivables are a reasonable approximation of their respective fair values, given the short
maturities of the positions and the fact that allowances for doubtful debts have been recognized, if necessary. All
receivables have an estimated maturity shorter than one year.
3 Financial assets
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 271
The Receivables from subsidiaries of €13 million (2021: €58 million) mainly include receivables relating to the Dutch fiscal
unity. Other receivables €38 million (2021: €19 million) mainly consist of VAT and other tax receivables and prepaid
expenses.
6 Shareholders’ equity
x € million
Share
capital
Share
prem.
Treas.
shares
Legal reserves
Other reserves
Undistri
buted
results
Total
share-
holder
equity
Trans-
lation
res.
Capital
dev.
costs
Part.
inte-
rest
Reval.
reserve
Hedg.
reserve
Fair
value
res.
Share-
based
comp.
Ret.
Earn.
Balance at 31 December
2020
338
489
(976)
(289)
223
120
-
(68)
73
41
7,082
366
7,399
Added to other reserves
-
-
-
-
-
-
-
-
-
-
366
(366)
-
Net profit
-
-
-
-
-
-
-
-
-
-
-
1,676
1,676
Dividend
-
-
-
-
-
-
-
-
-
-
(281)
(140)
(421)
Reissued shares
-
-
218
-
-
-
-
-
-
-
(25)
-
193
Acquisition of NCI without a
change in control
-
-
-
-
-
-
-
-
-
-
(20)
-
(20)
Cancellation of treasury
shares
(10)
(18)
746
-
-
-
-
-
-
-
(718)
-
-
Repurchase of shares
-
-
(165)
-
-
-
-
-
-
-
-
-
(165)
Fair value changes of
derivatives
-
-
-
-
-
-
-
(24)
-
-
-
-
(24)
Release to income
statement
-
-
-
(13)
-
-
-
7
-
-
-
-
(6)
Fair value changes of other
financial assets
-
-
-
-
-
-
-
-
46
-
-
-
46
Transfer fair value reserve
-
-
-
-
-
-
-
-
(8)
-
8
-
-
Exchange differences
-
-
-
478
-
-
-
-
-
-
-
-
478
Options and performance
shares granted
-
-
-
-
-
-
-
-
-
22
-
-
22
Options and performance
shares exercised/canceled
-
-
-
-
-
-
-
-
-
(24)
24
-
-
Transfer to retained
earnings
-
-
-
-
16
1
-
-
(93)
-
76
-
-
Changes in joint ventures
and associates
-
-
-
1
-
-
-
-
-
-
-
-
Income tax
-
-
-
-
-
-
-
8
(1)
-
-
-
7
Remeasurements of defined
benefit pension plans
-
-
-
-
-
-
-
-
-
-
132
-
132
Balance at 31 December
2021
328
471
(177)
177
239
121
-
(77)
17
39
6,644
1,536
9,318
.
Added to other reserves
-
-
-
-
-
-
-
-
-
-
1,536
(1,536)
-
Net profit
-
-
-
-
-
-
-
-
-
-
-
1,700
1,700
Dividend
-
-
-
-
-
-
-
-
-
-
(296)
(163)
(459)
Reissued shares
-
-
191
-
-
-
-
-
-
-
(50)
-
141
Repurchase of shares
-
-
(210)
-
-
-
-
-
-
-
-
-
(210)
Fair value changes of
derivatives
-
-
-
-
-
-
-
(5)
-
-
-
-
(5)
Release to income
statement
-
-
-
(16)
-
-
-
53
-
-
-
-
37
Fair value changes of other
financial assets
-
-
-
-
-
-
-
-
(61)
-
-
-
(61)
Transfer fair value reserve
-
-
-
-
-
-
-
(28)
-
28
-
-
Exchange differences
-
-
-
267
-
-
-
-
-
-
-
-
267
Options and performance
shares granted
-
-
-
-
-
-
-
-
-
33
-
-
33
Options and performance
shares exercised/canceled
-
-
-
-
-
-
-
-
-
(29)
29
-
-
Transfer to retained
earnings
-
-
-
-
17
61
-
-
-
-
(78)
-
-
Changes in joint ventures
and associates
-
-
-
-
-
-
-
-
-
-
(11)
-
(11)
Income tax
-
-
-
(4)
-
-
-
(3)
-
-
(10)
-
(17)
Remeasurements of defined
benefit pension plans
-
-
-
-
-
-
-
-
-
-
10
-
10
Balance at 31 December
2022
328
471
(196)
424
256
182
-
(32)
(72)
43
7,802
1,537
10,743
For details see the consolidated statement of changes in Note 16 Equity to the ‘Consolidated financial statements’.
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 272
Legal reserves
In Shareholders’ equity, a total amount of €830 million (2021: €460 million) is included for legal reserves required by Dutch
law. The translation reserve relates to exchange gains and losses arising from the translation of the functional currency of
foreign operations to the reporting currency of Koninklijke DSM N.V. Further, a legal reserve is recorded for capitalized
development costs. The legal reserve for participating interests is recorded to the extent that there are limitations for
Koninklijke DSM N.V. to arrange profit distributions from its participating interests. The hedging reserve relates to cash flow
hedge accounting. The negative hedge reserve of -€32 million (2021: -€77 million) as part of the legal reserve should be
deducted from the freely distributable reserve. In addition, a revaluation reserve has been included for fair value changes
of unquoted equity instruments of participating interests with no frequent notations owned by DSM; debit balances are
recorded as part of Other reserves, which are considered freely distributable reserves.
Other reserves
The Other reserves comprise a Fair value reserve for fair value changes of unquoted equity instruments of participating
interests with frequent notations, debit balances of the legal reserve for fair value changes of unquoted equity
instruments of participating interests owned by DSM, and a Reserve for share-based compensation.
In the ‘Consolidated financial statements’, the Other reserves consist of the Translation reserve, Fair value reserve,
Hedging reserve and Reserve for share-based compensation. See Note 16 Equity to the ‘Consolidated financial statements’.
Profit appropriation
According to article 32 of the Articles of Association of Koninklijke DSM N.V. and with the approval of the Supervisory Board,
every year the Managing Board determines the portion of the net profit to be appropriated to the reserves. For the year
2022, the net profit is €1,700 million (2021: €1,676 million) and the amount to be appropriated to the reserves has been
established at €1,533 million (2021: €1,238 million). From the subsequent balance of the net profit of €167 million (2021:
€438 million), dividend is first distributed on the Cumulative Preference Shares B. At the end of 2022, no Cumulative
Preference Shares B were in issue (same as for 2021). Subsequently, 2.52% (2021: 2.52%) dividend is distributed on the
Cumulative Preference Shares A, based on a share price of €5.2942 (2021: €5.2942) per Cumulative Preference Share A. For
2022, this distribution amounts to €0.13 (2021: €0.13) per share, which is €6 million in total. An interim dividend of €0.04 per
Cumulative Preference Share A paid in August 2022, the final dividend will then amount to €0.0934 per Cumulative
Preference Share A.
The profit remaining after distribution of these dividends on the Cumulative Preference Shares A of €161 million
(2021: €432 million) will be put at the disposal of the Annual General Meeting of Shareholders in accordance with the
provisions of Article 32, section 5 of the Articles of Association.
The Managing Board proposes a dividend on ordinary shares outstanding for the year 2022 of €0.93 (2021: €2.50) per share.
An interim dividend for the year 2022 of €0.93 per ordinary share was recognized as a liability in the second quarter of
2022. The total distribution amounted to €161 million. This interim dividend was paid as from 26 August 2022 in cash after
deduction of 15% Dutch dividend withholding tax.
If the Annual General Meeting of Shareholders decides in accordance with the proposal, the net profit will be appropriated
as follows.
Upon a successful completion of the merger transaction between DSM and Firmenich, DSM-Firmenich intends to offer a
gross dividend to all DSM-Firmenich shareholders of in total €423 million.
in € million
2022
2021
Net profit for the year
1,700
1,676
Profit appropriation:
- To be added to the reserves
1,533
1,238
- Dividend on Cumulative Preference Shares A
6
6
- Interim dividend on ordinary shares
161
138
- Final dividend distributable on ordinary shares
-
294
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 273
7 Borrowings
2022
2021
Total
Of which
current
Total
Of which
current
Debenture loans
2,741
-
2,739
-
Total
2,741
-
2,739
-
At 31 December 2022, there were five debenture loans (€2,741 million, maturing in 2024, 2025, 2026 and from 2026 through
2032). During 2021, the debenture loan in the amount of €500 million originally maturing in 2022, was early redeemed.
The repayment schedule for borrowings is as follows.
Borrowings by maturity
In agreements governing loans with a residual amount at year-end 2022 of €2,741 million (31 December 2021: €2,739
million), clauses have been included which restrict the provision of security. More information on borrowings is provided
in Note 19 Borrowings to the 'Consolidated financial statements'.
8 Other current liabilities
2022
2021
Liabilities to subsidiaries
2,691
2,347
Other liabilities
22
18
Total
2,713
2,365
The Liabilities to subsidiaries concern mainly the current account toward the DSM internal financing company. These
liabilities carry a short-term maturity and are interest-bearing. The increase of this current account in 2022 is mainly
caused by changing financing needs.
The carrying values of the recorded liabilities are a reasonable approximation of their respective fair values, given the
short maturities of the positions. All liabilities have an estimated maturity shorter than one year.
9 Contingent liabilities
Guarantee obligations on behalf of affiliated companies and third parties amounted to €591 million (31 December 2021:
€628 million). Koninklijke DSM N.V. has declared in writing that it accepts several liabilities for debts arising from acts in
law of a number of consolidated companies (including relating to the Dutch fiscal unity for income tax and VAT). These
debts are included in the consolidated balance sheet.
10 Personnel
During the 2022 financial year, the average number of staff employed by DSM N.V. amounted to 2 employees (2021: 2). Both
were employed inside the Netherlands.
2022
2021
2024
500
499
2025 and 2026
1,248
1,248
After 2026
993
992
Total
2,741
2,739
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 274
11 Financial expense
Financial expense of €107 million (2021: net €106 million) mainly consists of the interest costs on bonds issued and the
counterpart of the net investment hedge. See also Note 19 Borrowings and Note 23 Financial instruments and risks to the
‘Consolidated financial statements’.
12 Remuneration of Managing Board and Supervisory Board
Disclosure of the total board remuneration is based on section 383 book 2 of the Dutch Civil Code. Furthermore, the
members of the Executive Committee (which includes the Managing Board) and the Supervisory Board meet the definition
of key management personnel as defined in IAS 24 ‘Related Parties’. IAS 24 requires disclosure of the total of short-term
employee benefits (salary and Short-Term Incentive), post-employment (pension expenditure) and other long-term
benefits (none), termination benefits and share-based payment cost (share-based compensation), which are reported in
the table below.
Key management personnel remuneration and total board remuneration
2022
2021
Salary
6,521
4,443
Short-Term Incentive
3,399
3,474
Pension contributions
1,197
801
Share-based compensation
7,778
3,774
Other
6,612
2,216
Total key management personnel remuneration
25,507
14,708
Of which: Managing Board remuneration¹
6,717
5,830
.
Supervisory Board remuneration
844
805
1 See Remuneration report 2022.
Total remuneration for key management increased by €10.8 million in 2022 compared to 2021.
Approximately €3.9 million of this figure (excluding LTI) was related to an extension of the Executive Committee as of
January 2022. With their appointment to the Executive Committee, the four new members took on additional
responsibilities on top of their existing roles. The impact on total costs for the company is limited.
An amount of around €2.7 million was caused by the change in vesting conditions of the Performance Share Units granted
in 2021 and 2022 under the Long-Term Incentive plan. Those grants will now vest against the average of the vesting result
recorded for the years 2020, 2021 and 2022.
The 2022 amount referred to as ‘Other’ includes €3.4 million (2021: 0) subject to article 32bb of the Dutch Wage Tax Act,
related to key position-holders leaving the company. The respective amount is to a large extent driven by the vesting of
Performance Share Units granted in prior years.
Notes to the parent company financial statements
Royal DSM Integrated Annual Report 2022 275
Heerlen, 1 March 2023
Heerlen, 1 March 2023
Managing Board,
Supervisory Board,
Geraldine Matchett, Co-CEO
Thomas Leysen, Chair
Dimitri de Vreeze, Co-CEO
John Ramsay, Deputy Chair
Eileen Kennedy
Carla Mahieu
Erica Mann
Frits van Paasschen
Pradeep Pant
Corien Wortmann-Kool
Royal DSM Integrated Annual Report 2022 276
Other Information
Independent auditor’s report
To: the Annual General Meeting of Shareholders and the Supervisory Board of Koninklijke DSM N.V.
Report on the audit of the financial statements 2022 included in the
Integrated Annual Report
Our opinion
In our opinion:
- the accompanying consolidated financial statements give a true and fair view of the financial position of
Koninklijke DSM N.V. (hereafter: ‘Royal DSM’, ‘DSM’ or the ‘Company’) as at 31 December 2022 and of its result and
its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted
by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code
- the accompanying parent company financial statements give a true and fair view of the financial position of Royal
DSM as at 31 December 2022 and of its result for the year then ended in accordance with Part 9 of Book 2 of the
Dutch Civil Code
What we have audited
We have audited the financial statements 2022 of Royal DSM based in Heerlen. The financial statements include the
consolidated financial statements and the parent company financial statements.
The consolidated financial statements comprise:
1. the consolidated balance sheet as at 31 December 2022;
2. the following consolidated statements for 2022: the income statement, the statements of comprehensive income,
changes in equity and cash flows; and
3. the notes comprising a summary of the significant accounting policies and other explanatory information
The parent company financial statements comprise:
1. the parent company balance sheet as 31 December 2022;
2. the parent company income statement for 2022; and
3. the notes comprising a summary of the accounting policies and other explanatory information
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities
under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section
of our report.
We are independent of Royal DSM 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) and
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 277
other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening
gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our
opinion thereon. The information in respect of going concern, fraud and non-compliance with laws and regulations,
climate and the key audit matters was addressed in this context, and we do not provide a separate opinion or conclusion
on these matters.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Information in support of our opinion
Summary
Materiality
- Materiality of EUR 32.5 million
- 5.4% of normalized profit before income tax expense
Group audit
- Audit coverage of 78% of total assets
- Audit coverage of 75% of net sales
Fraud/Noclar, Going concern and Climate related risks
- Fraud & Non-compliance with laws and regulations (Noclar) related risks: presumed fraud risks of
management override of controls and revenue recognition identified
- Going concern related risks: no going concern risks identified
- Climate related risks: We have considered the impact of climate-related risks on the financial statements
and described our approach and observations in the section ‘Audit response to climate-related risks’.
Key audit matters
- Transformation of the DSM businesses
- Announced divestment Engineering Materials business
- Divestment Protective Materials business
Opinion
- Unqualified
Royal DSM Integrated Annual Report 2022 278
Other information – Independent auditor’s report
Materiality
Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 32.5
million (2021: EUR 45 million). The materiality is determined with reference to profit before income tax expense, normalized
for acquisition/divestment related expenses, resulting in a percentage of 5.4% (2021: 4.8%). We consider this normalized
profit before income tax expense as the most appropriate benchmark following our analysis of the common information
needs of users of the financial statements. The reduction in materiality is the result of the (announced) divestments of the
Engineering Materials business and Protective Materials business. Although included in net profit for the year, the results
of these businesses and related activities, including the book result from the disposal of the Protective Materials business
in 2022, have been presented separate from continuing operations, and are no longer part of (normalized) profit before
income tax expense. We have also taken into account misstatements and/or possible misstatements that in our opinion
are material for the users of the financial statements for qualitative reasons.
We agreed with the Supervisory Board that misstatements identified during our audit in excess of EUR 1.5 million would be
reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
Royal DSM is at the head of a group of components. The financial information of this group is included in the financial
statements of Royal DSM.
Because we are ultimately responsible for the auditor’s report, we are also responsible for directing, supervising and
performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be
carried out for components reporting for group audit purposes. Decisive were the size and/or the risk profile of the
components or operations. Based on our risk assessment, we selected 18 components (2021: 23 components) to perform
audits for group reporting purposes on a complete set of reporting packages. In addition, we selected 17 components
(2021: 13 components) to perform specified audit procedures for group reporting purposes on specific items of the
reporting packages.
This resulted in a coverage of 75% (2021: 76%) of total net sales and 78% (2021: 79%) of total assets. The remaining 25% of
total net sales (2021: 24%) and 22% of total assets (2021: 21%) is represented by a significant number of components
(‘Remaining components’), none of which individually represent more than 1% of total net sales and 2% of total assets.
For these remaining components, we performed central procedures such as analytical procedures to validate our
assessment that there are no risks of material misstatement within these components.
Our procedures as described above can be summarized as follows:
Total assets
12%
66%
Audit of the complete
reporting package
Specified audit procedures
22%
Central procedures remaining
components
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 279
Total net sales
25%
52%
Audit of the complete
reporting package
23%
Specified audit procedures
Central procedures remaining
components
We have:
- performed audit procedures at group level in respect of areas such as the annual goodwill impairment tests,
other asset impairment (trigger) assessments, income tax for the Dutch fiscal unities, acquisitions of subsidiaries,
accounting for (announced) divestments, restructuring provisions, treasury and shared service centers; and
- used the work of local KPMG (‘component auditors’) when auditing reporting packages or performing specified
audit procedures at component level
The group audit team has set materiality levels for the components, which ranged from EUR 5 million to EUR 12.5 million
(2021: EUR 5 million to EUR 12.5 million), based on the mix of size and risk profile of the respective components.
The group audit team provided detailed instructions to all Business Group and component auditors part of the group
audit, covering the significant audit areas, including the relevant risks of material misstatement, and the information
required to be reported back to the group audit team.
The group audit team scheduled (virtual) site visit meetings with local component auditors and local component
management in the United States of America, Switzerland, China, the Netherlands and the shared service center in India.
For these components, as well as the components in Brazil and Mexico, the group audit team reviewed selected
component auditor documentation.
Virtual meetings were held with all component auditors that participated in the group audit, to discuss the audit approach
and the audit findings and observations reported to the group audit team.
By performing the procedures mentioned above at group components, together with additional procedures at group level,
we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide
an opinion about the financial statements.
Audit response to the risk of fraud and non-compliance with laws and
regulations
In the chapter “Corporate governance and risk management” of the Integrated Annual Report, the Managing Board describes
its procedures in respect of the risks of fraud and non-compliance with laws and regulations. In the chapter “Supervisory
Board Report”, the Supervisory Board reflects on this.
As part of our audit, we have gained insights into Royal DSM and its business environment, and evaluated the design and
implementation of Royal DSM’s risk assessment in relation to fraud and non-compliance. Our procedures included, among
other things, assessing Royal DSM’s code of business conduct, alert cases (whistleblowing procedures), compliance
policies and its procedures to investigate indications of possible fraud and non-compliance. Furthermore, we performed
relevant inquiries with the Managing Board, Supervisory Board and other relevant functions, such as the Corporate
Operational Audit department, Legal Counsel and Fraud Committee.
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 280
As part of our audit procedures, we:
- obtained an understanding of how the company uses information technology (IT) and the impact of IT on the
financial statements, including the potential for cybersecurity incidents to have a material impact on the financial
statements;
- assessed other positions held by Managing Board members and Executive Committee members and paid special
attention to procedures and governance in view of possible conflicts of interest;
- evaluated indications of possible fraud and non-compliance;
- evaluated correspondence with relevant supervisory authorities and regulators as well as legal confirmation
letters
In addition, we performed procedures to obtain an understanding of the legal and regulatory frameworks that are applicable
to Royal DSM and identified the following areas as those most likely to have a material effect on the financial statements:
- Health and safety regulation (reflecting the nature of Royal DSM’s production and distribution processes);
- Environmental regulation (reflecting the environmental clean-up responsibilities related to mainly Royal DSM’s
former production and distribution processes);
- Competition legislation (reflecting Royal DSM’s operations across the world and potential investigations by
national competition authorities);
- Employment legislation (reflecting Royal DSM’s significant and geographically diverse work force);
- Consumer product law relating to product safety (reflecting the nature of Royal DSM’s diverse product base)
We, together with our forensics specialists, evaluated the fraud and non-compliance risk factors to consider whether those
factors indicate a risk of material misstatement in the financial statements.
Based on the above and the auditing standards, we identified the following fraud risks that are relevant to our audit,
including the relevant presumed risks laid down in the auditing standards, and responded as follows:
Management override of controls (a presumed risk)
Risk:
- Fraud risk related to management override and alteration of (financial) results to meet external expectations, to
maintain/increase current stock price and to meet bonus targets
Responses:
- We evaluated the design and the implementation of internal controls that mitigate fraud risks such as controls
related to journal entries
- We performed data analyses on high-risk journal entries and evaluated key estimates and judgements for bias by
management, such as estimates relating to impairment testing of goodwill, development projects and acquisition-
related intangibles, accounting for retirement and other post-employment benefits and accounting for
acquisitions, including retrospective reviews of prior year's estimates. Furthermore, we evaluated bias in the
adjustments made to arrive at the alternative performance measures used by management. Where we identified
instances of unexpected journal entries or other risks through our data analytics, we performed additional audit
procedures to address each identified risk. These procedures also included testing of transactions back to source
information
- We incorporated elements of unpredictability in our audit, including changes in the scope of the group audit and
increasing the scope of the data analytics procedures in the sales cycle
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 281
Revenue recognition (a presumed risk)
Risk:
- Fraudulent revenue recognition on sales cut-off before the end of the reporting period is an inherent risk within
Royal DSM
Responses:
- In addition to the procedures related to management override mentioned above, we evaluated the design and
the implementation of internal controls that mitigate fraud risks with respect to revenue recognition
- In their nine months’ 2022 trading update, DSM lowered the full year 2022 outlook. We assessed the effect thereof
on our fraud risk assessment, and concluded to focus the fraud risk with respect to revenue recognition
specifically to sales cut-off before the end of the reporting period. This was also confirmed by the risk
assessment of our component auditors based on an assessment of local facts and circumstances
- To assess whether revenue was recognized in the appropriate period, for selected sales transactions recognized
before year-end we inspected agreements with the customers and shipping documents
- Further, we inspected selected credit notes issued before year-end to assess whether revenue was recognized
appropriately
Our procedures to address the identified risks of fraud did not result in a key audit matter.
We communicated our risk assessment, audit responses and results to the Managing Board and the Supervisory Board.
Our audit procedures did not reveal indications and/or reasonable suspicion of fraud and non-compliance that are
considered material for our audit.
Audit response to going concern
The Managing Board has performed its going concern assessment and has not identified any significant going concern
risks. To assess management’s assessment, we have performed, among other things, the following procedures:
- we considered whether the Managing Board’s assessment of the going concern risks includes all relevant
information of which we are aware as a result of our audit;
- we inspected the financing agreements for terms or conditions that could lead to significant going concern risks;
- we analyzed the operating results forecast and the related cash flows compared to the actual results of 2022,
developments in the business sector, macro-economic developments impacting amongst others energy and raw
material prices and any information of which we are aware as a result of our audit;
- we analyzed the company’s financial position as at year-end and compared it to the previous financial year in
terms of indicators that could identify significant going concern risks
The outcome of our risk assessment procedures did not give reason to perform additional audit procedures on
management’s going concern assessment.
Audit response to climate-related risks
Royal DSM has set out its commitments and ambitions relating to climate change in the ‘Climate mitigation’ chapter
included in the ‘Planet’ section of the Integrated Annual Report. Royal DSM has set targets on Greenhouse Gas (GHG)
Emissions Scope 1 and 2 (absolute reduction of 59% by 2030) and Scope 3 emissions (intensity reduction of 28% by 2030)
compared to a baseline in 2016. The targets were set based on the goals in the Paris Agreement. In addition, Royal DSM
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 282
commits to 100% renewable electricity from purchased sources by 2030 and to reaching net-zero emissions across its own
operations and its value chain by 2050. In addition, Royal DSM has set sub-targets in relation to energy, water and waste.
Against the background of Royal DSM’s business and operations, management has appropriately assessed how climate-
related risks and opportunities and Royal DSM’s own commitments and ambitions could have a significant impact on its
business or could impose the need to adapt its strategy and operations. As described in the ‘Climate-related risks’ chapter,
included in the ‘Corporate Governance and risk management’ section of the Integrated Annual Report, Management has
considered the impact of physical- and transition risks on the financial statements, more specifically relating to policy,
legal and market effects, such as impact of carbon pricing schemes on operating costs, emission regulations limiting
emissions-intensive manufacturing activities, lowering demand due to emission regulations or demand shifting to
products with lower carbon footprint or dietary changes and negative impact on availability and price levels of raw
materials.
Management prepared the financial statements, including considering whether the implications from material climate-
related risks and commitments have been appropriately accounted for and disclosed, in accordance with the applicable
financial reporting framework. The material climate-related risks are managed by Royal DSM as part of its regular risk
management process and as such are taken into account in the preparation of the financial statements.
As part of our audit we performed a risk assessment of the impact of climate-related risk and the commitments and
ambitions made by Royal DSM in respect of climate change on the financial statements and our audit approach. In doing
this we performed the following:
— To understand management’s assessment and processes, against the background of Royal DSM’s business and
operations, of the potential impact of climate-related risks and opportunities on Royal DSM’s financial statements, we:
- held inquiries with relevant functions at Royal DSM including the Managing Board and the Sustainability
Committee;
- inspected documents such as internal climate-related risk assessments (both on physical and transition risks);
- read minutes of meetings (including those of Audit- and Sustainability Committee) and draft disclosures in the
Integrated Annual Report;
- performed an analysis of the external environment and obtained an understanding of relevant sustainability
themes and issues, and the characteristics of Royal DSM
— We have evaluated climate-related fraud risk factors, including sustainability goals, such as climate related KPIs
Energy Efficiency Improvement and GHG Emissions, being linked to board remuneration.
— We have made use of KPMG climate risk subject matter experts to:
- Support in obtaining an understanding of management’s assessment processes, participate in inquiry sessions
and inspect the aforementioned documentation;
- Assess Royal DSM’s climate-related risk assessment, both on physical and transition risks, climate-related
disclosures and reporting in line with TCFD recommendations in the Integrated Annual Report;
- Obtain insights into potential business implications of the climate-related risks and opportunities identified
impacting Royal DSM. These insights provided us with a better understanding of how climate-related risks and
opportunities may affect Royal DSM and its accounting in the 2022 financial statements
Based on the procedures performed above we considered whether there is a risk of material misstatement specific to
climate relative to the going concern assumption and valuation of long lived assets. Considering the risk assessment work
performed, we did not identify a risk of material misstatement specific to climate and thus no further audit response was
considered necessary.
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 283
Furthermore, we have read the other information with respect to climate-related risks as included in the Integrated Annual
Report and considered whether such information contains material inconsistencies compared to the financial statements
or our knowledge obtained through the audit.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are
not a comprehensive reflection of all matters discussed.
Compared to last year the key audit matter with respect to the accounting for acquisitions is not included, as there were
no significant acquisitions in 2022. Furthermore, compared to last year the key audit matter with respect to the
transformation of the DSM businesses was included because the transformation was effective as of 1 January 2022.
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 284
Transformation of the DSM businesses
Description
As disclosed in Note 4 and 8 to the financial statements, the new Health, Nutrition & Bioscience (HNB) structure,
including the creation of the three new Business Groups (Animal Nutrition & Health, Health, Nutrition & Care and Food
& Beverage), became effective as of 1 January 2022.
DSM assessed and concluded that as a result of above developments the identified three new Business Groups
represent the reportable operating segments, and also form the basis for goodwill impairment testing as they represent
the relevant (groups of) cash generating units (‘CGUs’).
Upon a change in the reporting structure in a way that changes the composition of one or more cash-generating units
to which goodwill has been allocated, a reallocation of goodwill is required. As a consequence, as of 1 January 2022 the
goodwill was reallocated to the three new Business Groups, based on a relative value approach.
Subsequently, management allocated the assets, liabilities and results to the respective CGUs for the purpose of
goodwill impairment testing.
As disclosed in Note 4 of the financial statements, in line with IFRS 8, DSM restated the sales information for 2021 based
on the 2022 reportable segment structure. DSM did not restate the other previously reported comparative segment
information in reference to the guidance included in IFRS 8.29-30.
This event is significant to our audit because the aforementioned effects are complex, the accounting is non-routine
and the allocations involve a certain level of management judgment.
Our response
We evaluated management's assessment of the reportable operating segments and relevant (groups of)
CGUs. Furthermore, we assessed management’s reallocation of goodwill to these CGUs, including the approach applied.
In relation to the allocation of assets, liabilities and results to the respective CGUs for the purposes of goodwill
impairment testing, we inspected and evaluated the underlying calculations to support the allocations made. Further
we performed sensitivity analyses to evaluate the impact of changes in allocations on the overall outcome.
Finally, we assessed the adequacy of the disclosures (Note 4 and 8) to the financial statements.
Our observation
We consider that the outcome of management’s assessments of the reportable operating segments and relevant
(groups of) CGUs is appropriate and adequately disclosed in respectively Note 4 and 8 to the financial statements.
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 285
Announced divestment of Engineering Materials business
Description
As disclosed in Note 3 to the financial statements, on 31 May 2022, DSM announced their agreement to sell the
Engineering Materials business to Advent International and LANXESS, subject to certain conditions and approvals.
Management concluded that the Engineering Materials business classifies as held for sale and should be presented as
discontinued operations (for the full Materials cluster together with the Protective Materials business).
This event is significant to our audit because the assessment of the classification as asset held for sale and
discontinued operations is complex, the transaction and its accounting is non-routine and involves a certain level of
management judgement. These include, amongst others, determining the date of classification of the Engineering
Materials business as held for sale and the presentation of its results separately as discontinued operations (together
with the Protective Materials business as elaborated in the next key audit matter). This further involves determining
whether charges from other DSM group companies to the Engineering Materials business should be presented as part of
continuing or discontinued operations. Furthermore, upon classification of the Engineering Materials business as
discontinued operations, management had to measure this business at the lower of the carrying amount and its fair
value less cost to sell.
Our response
We inspected the contractual agreements and other relevant documents underlying the announced divestment in order
to understand key terms and conditions and to assess the accounting impact. Our audit procedures included, among
others, an assessment of the appropriateness of the classification of the Engineering Materials business as held for sale
and the presentation of its results as discontinued operations.
This involved evaluating management’s judgements over the identification of the disposal group, assessing the date as
of which the Engineering Materials business is classified as held for sale, assessing the measurement of the Engineering
Materials business at the lower of the carrying amount and fair value less cost of disposal, and testing the presentation
of the Engineering Materials business in the financial statements (together with the Protective Materials business). Our
evaluation of the recognition and presentation of the results of the Engineering Materials business as discontinued
operations in the financial statements included an assessment of management’s assumptions in allocating charges
from other group companies to the Engineering Materials business.
Finally, we assessed the adequacy of both the presentation as assets held for sale and discontinued operations and the
disclosure (Note 3) of the announced divestment in the financial statements.
Our observation
We consider that the measurement of the Engineering Materials business, as well as the presentation of its assets and
liabilities as held for sale and its results as those from discontinued operations (together with the Protective Materials
business), is adequately reflected and disclosed in Note 3 to the financial statements.
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 286
Divestment of Protective Materials business
Description
As disclosed in Note 3 to the financial statements, on 1 September 2022, Royal DSM completed the sale of its Protective
Materials business to Avient Corporation for a consideration of EUR 1.4 billion. The net book result on the transaction
amounts to EUR 1.0 billion.
The divestment is significant to our audit due to the non-routine nature of the transaction, amounts involved and its
impact on the financial statements.
Our response
We inspected the contractual agreements and other relevant documents underlying the divestment in order to
understand key terms and conditions and to assess the accounting impact. We verified that the deconsolidation of the
Protective Materials business has been recorded at the date of disposal. As part of our audit procedures we assessed
the book result by vouching the sales price to the contractual agreement, the cash receipts to bank statements, the net
asset values that have been de-consolidated to underlying accounting records and allocated transaction costs to
underlying supporting documentation such as invoices and contractual agreements.
Finally, we assessed the adequacy of the presentation as discontinued operations and the disclosure (Note 3) of the
divestment in the financial statements.
Our observation
We consider that the net book result, as well as the presentation of the results as those from discontinued operations,
are adequately reflected and disclosed in Note 3 to the financial statements.
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the Integrated Annual Report contains other
information.
Based on the following procedures performed, we conclude that the other information:
- is consistent with the financial statements and does not contain material misstatements; and
- contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the report by the Managing
Board and other information
We have read the other information. Based on our knowledge and understanding obtained through our audit of the
financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the
Dutch Standard 720. The scope of the procedures performed is less than the scope of those performed in our audit of the
financial statements.
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 287
The Managing Board is responsible for the preparation of the other information, including the information as required by
Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by the Annual General Meeting of Shareholders as auditor of Royal DSM on 7 May 2014, as of the audit
for the year 2015 and have operated as statutory auditor ever since that financial year.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific
requirements regarding statutory audits of public-interest entities.
European Single Electronic Format (ESEF)
Royal DSM has prepared its Integrated Annual Report in ESEF. The requirements for this are set out in the Delegated
Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting
format (hereinafter: the RTS on ESEF).
In our opinion the Integrated Annual Report prepared in XHTML format, including the (partly) marked-up consolidated
financial statements as included in the reporting package by Royal DSM, complies in all material respects with the RTS on
ESEF.
The Managing Board is responsible for preparing the Integrated Annual Report including the financial statements in
accordance with the RTS on ESEF, whereby the Managing Board combines the various components into one single
reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the Integrated Annual Report in this
reporting package complies with the RTS on ESEF. We performed our examination in accordance with Dutch law, including
Dutch Standard 3950N ’Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van een digitaal
verantwoordingsdocument’ (assurance engagements relating to compliance with criteria for digital reporting). Our
examination included among others:
- Obtaining an understanding of Royal DSM's financial reporting process, including the preparation of the reporting
package;
- Identifying and assessing the risks that the Integrated Annual Report does not comply in all material respects
with the RTS on ESEF and designing and performing further assurance procedures responsive to those risks to
provide a basis for our opinion, including:
- Obtaining the reporting package and performing validations to determine whether the reporting package
containing the Inline XBRL instance document and the XBRL extension taxonomy files have been prepared in
accordance with the technical specifications as included in the RTS on ESEF;
- Examining the information related to the consolidated financial statements in the reporting package to determine
whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 288
Description of responsibilities regarding the financial statements
Responsibilities of the Managing Board and the Supervisory Board for the
financial statements
The Managing Board is responsible for the preparation and fair presentation of the financial statements in accordance
with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Managing Board is responsible for such
internal control as management determines is necessary to enable the preparation of the financial statements that are
free from material misstatement, whether due to fraud or error. In that respect the Managing Board, under supervision of
the Supervisory Board, is responsible for the prevention and detection of fraud and non-compliance with laws and
regulations, including determining measures to resolve the consequences of it and to prevent recurrence.
As part of the preparation of the financial statements, the Managing Board is responsible for assessing Royal DSM’s ability
to continue as a going concern. Based on the financial reporting frameworks mentioned, the Managing Board should
prepare the financial statements using the going concern basis of accounting unless the Managing Board either intends to
liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Managing Board should
disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern
in the financial statements.
The Supervisory Board is responsible for overseeing Royal DSM’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate
audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all
material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The
materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
A further description of our responsibilities for the audit of the financial statements is included in the appendix of this
auditor's report. This description forms part of our auditor’s report.
Amstelveen, 1 March 2023
KPMG Accountants N.V.
P.J. Groenland – van der Linden RA
Appendix:
Description of our responsibilities for the audit of the financial statements
Other information – Independent auditor’s report
Royal DSM Integrated Annual Report 2022 289
Appendix
Description of our responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout the audit, in
accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included
among others:
- identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or
error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than the risk resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;
- obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Royal
DSM’s internal control;
- evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the Managing Board;
- concluding on the appropriateness of the Managing Board’s use of the going concern basis of accounting, and
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on Royal DSM’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause a company to cease to continue as a going concern;
- evaluating the overall presentation, structure and content of the financial statements, including the disclosures;
and
- evaluating whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation
We are solely responsible for the opinion and therefore responsible to obtain sufficient appropriate audit evidence
regarding the financial information of the entities or business activities within the group to express an opinion on the
financial statements. In this respect we are also responsible for directing, supervising and performing the group audit.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant findings in internal control that we identify during our audit. In this
respect we also submit an additional report to the Supervisory Board in accordance with Article 11 of the EU Regulation on
specific requirements regarding statutory audits of public-interest entities. The information included in this additional
report is consistent with our audit opinion in this auditor’s report.
We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were
of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating
the matter is in the public interest.
Royal DSM Integrated Annual Report 2022 290
Assurance report of the independent auditor
To: the Annual General Meeting of Shareholders and the Supervisory Board of Koninklijke DSM N.V.
Report on the audit of the sustainability information 2022 included in the
Integrated Annual Report
Our opinion
We have audited the non-financial information in the sections ‘Key data’, ’Co-CEO letter, ‘Our approach to the Sustainable
Development Goals’, ‘Sustainable Portfolio Steering’, ‘Food System Commitments’, ‘Report by the Managing Board,
consisting of the chapters Purpose, Strategy, Case studies, Stakeholders, People and Planet’, the ‘Non-financial reporting
policy’, the 'Sustainability Statements' (excluding section ‘2. EU Taxonomy’ of the ‘Notes to the Sustainability statements’)
and the ‘Sustainability tables’, as included in the Integrated Annual Report for 2022 (hereafter: the ‘sustainability
information’) of Koninklijke DSM N.V. (hereafter 'Royal DSM'), based in Heerlen, the Netherlands. An audit is aimed at
obtaining a reasonable level of assurance.
In our opinion, the sustainability information presents, in all material respects, a reliable and adequate view of:
- the policy and business operations with regard to sustainability; and
- the thereto related events and achievements in 2022;
in accordance with the GRI Standards and Royal DSM's internally developed supplemental reporting criteria as disclosed in
the section Non-financial reporting policy included in the chapter ‘Reporting policies’ of the Integrated Annual Report.
Basis for our opinion
We have performed our audit on the sustainability information in accordance with Dutch law, including Dutch Standard
3810N 'Assurance-opdrachten inzake maatschappelijke verslagen' (Assurance engagements relating to sustainability
reports), which is a specified Dutch standard that is based on the International Standard on Assurance Engagements (ISAE)
3000 'Assurance Engagements Other than Audits or Reviews of Historical Financial Information'. Our responsibilities under
this standard are further described in the ‘Our responsibilities for the audit of the sustainability information’ section of
our report.
We are independent of Royal DSM 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).
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Reporting Criteria
The sustainability information is prepared in accordance with the Sustainability Reporting Standards of the Global
Reporting Initiative (GRI Standards) and Royal DSM's internally developed supplemental reporting criteria as disclosed in
the section Non-financial reporting policy included in the chapter ‘Reporting policies’ of the Integrated Annual Report. The
GRI Standards used are listed in the GRI Content Index included in the chapter ‘Other Information’.
Other information – Assurance report of the independent auditor
Royal DSM Integrated Annual Report 2022 291
The absence of an established practice on which to draw, to evaluate and measure non-financial information allows for
different, but acceptable, measurement techniques and can affect comparability between entities and over time.
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 have taken into
account quantitative and qualitative considerations as well as the relevance of information for both stakeholders and
Royal DSM.
Scope of the group audit
Royal DSM 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 group audit procedures consisted of audit procedures at corporate and component level. Our selection of
components in scope of our audit 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 audit procedures at corporate and component level, we have been able to obtain sufficient and
appropriate audit evidence about Royal DSM's reported sustainability information to provide an opinion about the
sustainability information.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
sustainability information. We have communicated the key audit matter to the Managing Board and the Supervisory Board.
The key audit matters are not a comprehensive reflection of all matters discussed.
These key audit matters were addressed in the context of our audit of the sustainability information as a whole and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
The sustainability indicator on Royal DSM's solutions labeled as Brighter Living Solutions+ and performance on DSM’s Food
System Commitments were determined to be key audit 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.
Other information – Assurance report of the independent auditor
Royal DSM Integrated Annual Report 2022 292
Brighter Living Solutions+
Description
Royal DSM reports on Brighter Living Solutions+ ("BLS+”), which is a categorization of products and services that have
specific environmental or social benefits, whilst not having any urgent, significant and measurable negative impacts,
assessed based on DSM’s sustainable portfolio steering (SPS) methodology.
The indicator is defined as net sales from BLS+ as a percentage of total net sales of Royal DSM. BLS+ was significant to
our audit since we identified that it serves as a material indicator for Royal DSM to report on the environmental and
social impact of its solutions and because the assessment of solutions to qualify as BLS+ is inherently subject to
uncertainties as a result of estimates, assumptions and judgement.
Our response
We obtained an understanding of the reporting process, the applicable definitions and applied reporting criteria
(based on the SPS methodology), performed walkthrough procedures and evaluated the design and implementation of
relevant internal controls. We inquired Royal DSM’s staff members involved in the BLS+ assessment process and
inspected internal documentation to understand the application of these definitions and applied reporting criteria. We
challenged underlying evidence, such as product sustainability assessment questionnaires, life cycle assessments and
expert opinions for solutions classified as BLS+ and assessed the calculation of the BLS+ percentage. Finally, 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 BLS+ as described in Royal DSM's internally developed supplemental
reporting criteria as disclosed in the section Non-financial reporting policy included in the chapter ‘Reporting policies’
of the Integrated Annual Report have been appropriately applied and that the estimates and assumptions are
adequately explained. We also consider the disclosure on BLS+ in the Integrated Annual Report as being adequate.
Other information – Assurance report of the independent auditor
Royal DSM Integrated Annual Report 2022 293
Food System Commitments
Description
Royal DSM reports for the first time on a set of new performance indicators related to Food System Commitments
(“FSCs”). The FSCs are seven quantifiable commitments on the environmental or societal impact in global food systems
of Royal DSM 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 are defined as listed below:
1. Help close the micronutrient gap of 800 million vulnerable people by 2030
2. Support the immunity of half a billion people by 2030
3. Enable double-digit on-farm livestock emission reduction by 2030
4. Reach 150 million people with nutritious, sustainable plant-based protein foods by 2030
5. Support the livelihoods of 500,000 smallholder farmers across the value chain together with our partners by
2030
6. Deforestation-free in our primary supply chains by 2030
7. Good workforce nutrition by 2030
The performance indicators related to the FSCs are significant to our audit since we identified that they serve as
material indicators for Royal DSM to report on their societal reach and impact on global food systems. Also, this is the
first year that Royal DSM is reporting on these commitments and 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 Royal DSM’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 volume and spend data, 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, and we made use of external confirmations where
considered appropriate. Finally, 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 Royal
DSM's internally developed methodology documents and reporting criteria as disclosed in the section 'Non-financial
reporting policy' included in the chapter ‘Reporting policies’ 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.
Other information – Assurance report of the independent auditor
Royal DSM Integrated Annual Report 2022 294
Limitations to the scope of our audit
The sustainability information includes prospective information such as ambitions, strategy, plans, expectations and
estimates.
Inherent to this prospective information, the actual future results are uncertain. We do not provide any assurance on the
assumptions and achievability of prospective information included in the sustainability information.
References to external sources or websites in the Integrated Annual Report are not part of the sustainability information
as audited by us. 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 Managing Board of Royal DSM is responsible for the preparation of reliable and adequate sustainability information in
accordance with the reporting criteria as included in the section ‘reporting criteria’, including the identification of
stakeholders and the definition of material matters.
The Management Board 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, taking into account applicable law and
regulations related to reporting.
The choices made by the Managing Board regarding the scope of the sustainability information and the reporting policy
are summarized in the section Non-financial reporting policy of the Integrated Annual Report.
Furthermore, the Managing Board 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 Supervisory Board is, amongst other things, responsible for overseeing Royal DSM's sustainability reporting process.
Our responsibilities for the audit of the sustainability information
Our responsibility is to plan and perform our audit engagement in a manner that allows us to obtain sufficient and
appropriate audit evidence for our opinion.
Our audit 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 audit.
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 audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
We apply the ‘Nadere Voorschriften Kwaliteitssystemen’ (Regulations for Quality management systems) and accordingly
maintain a comprehensive system of quality control 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 audit, in
accordance with the Dutch Standard 3810N, ethical requirements and independence requirements.
Other information – Assurance report of the independent auditor
Royal DSM Integrated Annual Report 2022 295
Our audit included among others:
- Performing an analysis of the external environment and obtaining an understanding of relevant sustainability
themes and issues, and the characteristics of Royal DSM;
- 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 Royal DSM;
- 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 audit, but not
for the purpose of expressing an opinion on the effectiveness of Royal DSM's internal control;
- Evaluating the procedures performed by Royal DSM’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 audit procedures
responsive to those risks, and obtaining audit 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:
o Inquiry with management and relevant staff of Royal DSM at corporate and component level responsible
for the sustainability strategy, policies and results;
o Inquiry with relevant staff of Royal DSM responsible for providing the information for, carrying out
internal control procedures on, and consolidating the data in the sustainability information;
o Determining the nature and extent of the audit 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 (remote) visits to production sites in the China, USA, Brazil and the Netherlands
were aimed at, on a component level, validating source data and evaluating the design, implementation
and operation of controls and validation procedures. In view of restrictions on the movement of people
across borders, for affected countries in the Covid-19 pandemic where travelling to affected countries
was not practicable, we conducted our visits remotely for those components;
o Obtaining audit evidence that the sustainability information reconciles with underlying records of Royal
DSM;
o Evaluating relevant internal and external documentation, on a test basis, to determine the reliability of
the information in the sustainability information; and
o 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 audit;
- 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 Supervisory Board regarding, among other matters, the planned scope and timing of the audit
and significant findings, including any significant findings in internal control that we identify during our audit.
Amstelveen, 1 March 2023
KPMG Accountants N.V.
P.J. Groenland – van der Linden RA
Royal DSM Integrated Annual Report 2022 296
Special statutory rights
DSM Preference Shares Foundation
The DSM Preference Shares Foundation was established in 1989.
By virtue of DSM’s Articles of Association, 375,000,000 Cumulative Preference Shares B can be issued. The listing prospectus
of 1989 stated that if, without the approval of the Managing Board and Supervisory Board, either a bid is made for the
ordinary shares or a significant participation in ordinary shares is built up, or such an event is likely to occur, then these
Preference Shares B may be issued, which shall have the same voting rights as the ordinary shares.
Under an agreement entered into in 1999, and subsequently amended, between the DSM Preference Shares Foundation
and DSM, the Foundation has the right to acquire such Preference Shares (call option) to a maximum corresponding to
100% of the capital issued in any form other than Preference Shares B, less one.
The objective of the Foundation is to promote the interest of DSM, and the enterprise maintained by DSM and all parties
connected therewith, whereby influences that would threaten the continuity, independence or identity, contrary to the
aforementioned interests, are resisted to the maximum extent possible.
The purpose of the agreement with the Foundation is, among other things, for the Foundation to allow DSM the
opportunity to determine its position, for example with regard to a possible bidder for DSM shares or a party or parties
tempting to obtain (de facto) control, to examine any plans in detail and, to the extent applicable, to look for (better)
alternatives. Preference Shares B will not be outstanding longer than necessary. As soon as there are no longer any
reasons for the Preference Shares B to remain outstanding, the Managing Board will convene a General Meeting of
Shareholders and recommend the cancellation of the Preference Shares B that are still outstanding.
The Foundation acquired no Preference Shares B in 2022.
The DSM Preference Shares Foundation is an independent legal entity within the meaning of article 5:71, first paragraph,
under c of the Dutch Act on Financial Supervision (Wet op het financieel toezicht).
On 31 December 2022, the Board of the Foundation was composed as follows:
Gerard Kleisterlee, Chair
Cees Maas, Deputy Chair
Bas Kortmann
Royal DSM Integrated Annual Report 2022 297
DSM figures: five-year summary
All figures are including discontinued operations unless stated otherwise, see also Note 3 Change in the scope of the
consolidation.
Balance sheet
x € million
2022
2021
2020
2019
2018
Assets
Intangible assets
5,147
5,309
4,440
3,515
3,090
Property, plant and equipment
3,576
3,964
3,775
4,040
3,511
Deferred tax assets
95
203
240
217
248
Share in associates and joint ventures
61
64
93
155
205
Derivatives
82
48
61
27
14
Other financial assets
314
302
317
265
263
Non-current assets
9,275
9,890
8,926
8,219
7,331
Inventories
2,339
2,297
1,879
2,019
1,993
Current receivables
1,622
1,697
1,483
1,698
1,738
Derivatives
42
30
48
19
21
Current investments
125
489
43
688
1,277
Cash and cash equivalents
2,755
1,561
871
800
1,281
Assets held for sale
1,245
56
1,096
-
-
Current assets
8,128
6,130
5,420
5,224
6,310
Total assets
17,403
16,020
14,346
13,443
13,641
.
Equity and liabilities
Shareholders' equity
10,743
9,318
7,399
7,731
7,782
Non-controlling interests
102
79
88
104
33
Equity
10,845
9,397
7,487
7,835
7,815
Deferred tax liabilities
476
490
431
296
254
Employee benefit liabilities
241
323
414
413
413
Provisions
74
96
123
120
116
Borrowings
2,978
2,995
3,484
2,464
2,272
Derivatives
4
9
1
7
3
Other non-current liabilities
205
280
163
145
197
Non-current liabilities
3,978
4,193
4,616
3,445
3,255
Employee benefits liabilities
22
21
42
43
46
Provisions
50
68
61
48
37
Borrowings
86
103
102
189
380
Derivatives
23
40
13
18
51
Current liabilities
1,969
2,188
1,771
1,865
2,057
Liabilities held for sale
430
10
254
-
-
Current liabilities
2,580
2,430
2,243
2,163
2,571
Total equity and liabilities
17,403
16,020
14,346
13,443
13,641
DSM figures: 5-year summary
Royal DSM Integrated Annual Report 2022 298
Income statement
x € million
2022
2021
2020
2019
2018
Net sales
10,480
9,468
9,038
9,010
8,852¹
Net sales from continuing operations
8,390
7,269
-
-
-
Adjusted EBITDA²
1,725
1,842
1,650
1,684
1,532¹
EBITDA
2,646
2,370
1,476
1,586
1,754
Adjusted operating profit (EBIT)²
1,071
1,167
1,011
1,075
1,055¹
Operating profit (EBIT)
1,994
1,689
736
954
1,245
Operating profit (EBIT) from continuing operations
682
711
-
-
-
Financial income and expense
(94)
(106)
(67)
(92)
(101)
Income tax expense
(190)
(245)
(129)
(152)
(194)
Share of the profit of associates and joint ventures
5
342
(32)
54
129
Net profit for the year
1,715
1,680
508
764
1,079
Net profit attributable to non-controlling interests
15
4
2
6
2
Net profit available to equity holders of Koninklijke DSM N.V.
1,700
1,676
506
758
1,077
Dividend on Cumulative Preference Shares
(6)
(6)
(7)
(8)
(8)
Net profit available to holders of ordinary shares
1,694
1,670
499
750
1,069
.
Key figures and financial ratios
Capital employed
11,473
11,019
10,557
9,311
8,181
Capital expenditure:
- Intangible assets and Property, plant and equipment
636
614
622
623
653
- Acquisitions
77
754
1,579
585
50
Disposals
1,413
1,941
46
44
335
Depreciation, amortization and impairments
652
681
740
632
509
Net debt
(87)
(1,019)
(2,577)
(1,144)
(113)
Dividend
167
438
420
425
412
.
Workforce at 31 December, headcount
20,682
21,358
23,127
22,174
20,977
Employee benefit costs (x € million)
1,910
1,853
1,848
1,811
1,753
.
Financial ratios²
ROCE in %
9.3
11.1
10.3
12.0
13.3¹
Net sales / average capital employed
0.91
0.93
0.92
1.01
1.11¹
Current assets / current liabilities
3.15
2.52
2.42
2.42
2.45
Equity / total assets
0.62
0.59
0.52
0.58
0.57
Gearing (net debt / equity plus net debt)
0.01
0.10
0.26
0.13
0.01
Adjusted EBIT / net sales in %
10.2
12.4
11.2
11.9
11.9¹
Net profit / average Shareholders' equity available to
holders of ordinary shares in %
17.3
20.5
6.8
10.0
24.7
Adjusted EBITDA / financial income and expense
20.1
17.4
24.6
18.3
15.2¹
1 2018 adjusted for the temporary vitamin effect for comparison reasons of €415 million in sales, €290 million in adjusted EBITDA and €290 million in
adjusted operating profit, including associated ratios.
2 In presenting and discussing DSM’s financial position, operating results and cash flows, DSM uses certain Alternative performance measures (APMs) not
defined by IFRS. These APMs are used because they are an important measure of DSM’s business development and DSM’s management performance. A full
reconciliation of IFRS performance measures to the APMs is given in Note 2 Alternative performance measures.
DSM figures: 5-year summary
Royal DSM Integrated Annual Report 2022 299
Information about ordinary DSM shares
per ordinary share in €
2022
2021
2020
2019
2018
Adjusted net profit
4.49
5.03
4.43
4.64
5.84
Net profit
9.80
9.67
2.91
4.27
6.10
Operating cash flow
5.58
8.23
8.67
7.84
7.89
.
Dividend:
0.93
2.50
2.40
2.40
2.30
- Interim dividend
0.93
0.80
0.80
0.77
0.77
- Final dividend
-
1.70
1.60
1.63
1.53
.
Pay-out including dividend on Cumulative Preference Shares
as % of Adjusted net profit
21
50
55
52
40
Dividend yield (dividend as % of average price of an ordinary
DSM share)
1.2
2.7
1.9
2.3
2.7
.
Share prices on Euronext Amsterdam (closing price):
- Highest price
198.70
199.40
148.55
117.90
92.98
- Lowest price
111.80
136.55
87.52
69.54
68.98
- At 31 December
114.30
198.00
140.80
116.10
71.44
.
Number of ordinary shares outstanding (x 1,000):
- At 31 December
173,075
172,969
172,219
172,449
175,651
- Average
172,827
172,648
171,536
175,731
175,323
.
Daily trading volumes on Euronext Amsterdam:
- Average
435
331
518
635
732
- Lowest
177
31
64
75
130
- Highest
1,799
914
1,900
2,242
2,617
DSM figures: 5-year summary
Royal DSM Integrated Annual Report 2022 300
Sustainability tables
All figures are including discontinued operations unless stated otherwise, see also the Non-financial reporting policy.
People
2022
2021
2020
2019
2018
Workforce¹ ²
20,682
21,358
23,127
22,174
20,977
Female:male ratio
31:69
30:70
29:71
28:72
28:72
.
% by age category
<26 years³
5
5
5
5
5
26–35 years
27
27
26
26
25
36–45 years
30
29
29
29
30
46–55 years
24
24
25
25
26
>55
14
15
15
15
14
% under-represented nationalities
Executives
29
31
30
31
31
Management
42
43
42
44
43
Other
51
57
58
59
59
% female
Executives
26
23
21
20
19
Management
33
32
30
29
28
Other
38
30
29
28
28
1 All data presented in the Sustainability Statements are subject to the Non-financial reporting policy.
2 For the indexes based on age, nationalities, gender, inflow and outflow, the companies that are not integrated into the HR systems (approximately 5% of
the total workforce) are not taken into account.
3 We do not employ people younger than 15 under DSM contract. We require our suppliers to not use forced labor or child labor according to our Supplier
Code of Conduct.
2022
2021
2020
2019
2018
Inflow / Outflow
Total number new hires (excluding acquisitions)
2,840
2,489
1,729
2,372
3,005
Acquisitions
108
93
1,539
1,161
80
% executive hires
Under-represented nationalities
33
43
65
55
61
Female
53
57
26
32
61
% new hires by region
Netherlands
11
10
11
11
13
Rest of Europe
28
27
25
24
22
North America
21
21
19
22
25
China
12
14
15
18
16
Rest of Asia–Pacific
14
12
11
12
9
Rest of the world
14
16
19
13
15
.
Outflow of employees
Voluntary resignations
1,492
1,362
1,052
1,118
1,098
Total outflow (excluding divestments)
2,540
2,439
2,336
2,352
2,868
Divestments
1,084
1,912
-
-
357
Voluntary resignations (% total workforce)
7.6
6.7
4.8
5.4
5.3
Total turnover (% total workforce)
13.0
11.9
10.6
11.2
13.9
DSM figures: 5-year summary
Royal DSM Integrated Annual Report 2022 301
2022
2021
2020
2019
2018
Employee Engagement Survey
Employee Engagement (%)
77
76
76
74
76
Inclusion Index (%)
79
77
75
72
72
Participation rate (%)
89
92
92
92
87
2022
2021
2020
2019
2018
Safety (per 100 DSM employees and contractor employees)
Frequency Index of Recordable Injuries
0.28
0.22
0.24
0.28
0.33
Frequency Index of Lost Working day Cases
0.11
0.12
0.09
0.09
0.11
Process Safety Incident Rate
0.18
0.23
0.20
0.23
0.22
Occupational Health Incident Rate
0.09¹
-
-
-
-
1 2022 was the first year of reporting the Occupational Health Incident Rate.
2022
2021
2020
2019
2018
Other People indicators
Development training in hours per employee
8
8
6
8
6
Net sales per employee (x €1,000)¹
495
445
414
421
429²
1 Net sales per employee is for total DSM (= continuing and discontinued operations).
2 Excluding the temporary vitamin effect in 2018, see Profit in Integrated Annual Report 2019.
Brighter Living Solutions Plus
2022
2021
2020
2019
2018
Brighter Living Solutions Plus sales as % of net sales¹ ²
67
-
-
-
-
Brighter Living Solutions sales as % of net sales
-
64
63
63
62³
1 All data presented in the Sustainability Statements are subject to the Non-financial reporting policy.
2 BLS+ is a new methodology introduced in 2022 to replace BLS.
3 Excluding the temporary vitamin effect in 2018, see Profit in Integrated Annual Report 2019.
DSM figures: 5-year summary
Royal DSM Integrated Annual Report 2022 302
Planet
2022
2021
2020
2019
2018
Energy and greenhouse gas¹
Primary energy use (in PJ)
19.5
21.4
21.5
21.2
20.8
Energy efficiency improvement (%, year-on-year)
-0.4
6.0
5.7
2.3
1.4
Greenhouse gas emissions scope 1 + 2, market-based
(in CO₂ equivalents x million tons)
1.05
1.21
1.24
1.17
1.23
Greenhouse gas emissions scope 1 + 2, location-based
(in CO₂ equivalents x million tons)
1.31
1.46
1.43
1.38
1.38
Total biogenic CO₂ emissions from combustion of biofuels
(x million tons)
0.031
0.063
0.046²
-
-
Electricity purchased from renewable resources (%)
78
72
60
50
41
Total purchased renewable electricity (GWh)
992
961
748
632
446
.
Emissions to air
Volatile Organic Compounds (x 1,000 tons)
4.6
4.1
3.2
3
2.7
4.9
Nitrogen oxide (NOₓ (x 1,000 tons)
0.4
0.4
0.3
0.4
0.5
Sulfur dioxide (SO₂) (x 1,000 tons)
0.01
0.01
0.02
0.06
0.09
.
Discharges to water and landfill
Chemical Oxygen Demand discharges to surface waters (x 1,000 tons)
1.9
2.0
2.0
2.1
2.2
Waste recycled (in %)
91
86
85
86
83
(Landfilling) Non-hazardous waste (x 1,000 tons)
10
17
17
15
18
Total process-related waste (x 1,000 tons)
183
195
190³
192
177
.
Water
Water withdrawal for non-once-through cooling (x million m³)
26
26
24
23
22
Total water withdrawal, including once-through cooling (x million m³)
111
106
108
111
114
.
Raw materials
Renewable raw materials (in %)
15
15
15
15
14
.
Biodiversity
Sites in or adjacent to protected areas (in %)
34
28
27
25⁴
-
.
Fines (in €)
4,300
141,000⁵
26,000
115,100
23,500
Non-monetary sanctions
4
5
18
2
6
Environmental incidents
48
73
79
60
71
Environmental complaints
14
39
51
58
53
1 All data presented in the Sustainability Statements are subject to the Non-financial reporting policy.
2 The total biogenic CO
2
emissions from combustion of biofuels is available as of 2020.
3 The 2020 figure has been restated. See Planet section (Other emissions to air and Waste) for details.
4 In 2019, Sites in or adjacent to protected areas was measured against a stricter definition. The figures of previous years could not be recalculated against
the stricter definition, which means there are no relevant figures available for previous years.
5 The increase in environmental fines in 2021 is due to under-performance on energy reductions at one site in the Netherlands with an addendum to the
Dutch energy efficiency covenant (addendum Meerjarenafspraak Energie-efficiëntie ETS ondernemingen, MEE-convenant).
Royal DSM Integrated Annual Report 2022 303
Explanation of some concepts and
ratios
General
Better-for-you (BFY) products
Products that have added beneficial ingredients, or else have had undesirable ingredients removed. BFY products are
generally low in fat, salt, and/or sugar, and high in fiber and/or vitamins.
Biosciences
1
Biosciences are any of the sciences that deal with living organisms.
Brighter Living Solutions Plus
Brighter Living Solutions Plus (BLS+) is DSM’s program for the development of sustainable, innovative solutions with
environmental and/or social benefits, creating shared value for our stakeholders. BLS+ are products, services and
technologies that, considered over their life cycle, offer a benefit recognized by key stakeholders, underpinned with
substantiating evidence, whilst having no urgent negative signals. Three performance levels are defined, where the product
is:
- ‘Outperforming’ its peers within the market
- ‘Performing’ within the market
- ‘In Transition’, to identify products that either do not meet the DSM minimum requirements, or where an urgent
negative signal has been identified
More information and definitions can be found on the company website.
Eubiotics
The general term ‘Eubiotics’, is derived from the Greek term ‘Eubiosis’ (meaning microbial balance within the body) and
describes feed ingredients that support an optimal balance of microbiota in the gastrointestinal tract of livestock animals.
Eubiotics promote efficient gut performance so as to produce well-nourished animals that get the most from their feed,
while at the same time sustaining their health and welfare and protecting the environment.
Integrated Reporting <IR> Framework – Value Creation model
The Value Creation diagram is based on the International Integrated Reporting Council's Integrated Reporting <IR>
framework and gives an overview of how we create value for our stakeholders based on six capital inputs.
Human capital (People)
We employ skilled and talented people from diverse backgrounds. We strive to provide employees with a safe and
inspiring workplace as well as with the tools and training they need to be effective and to develop their abilities. We
reward employees with competitive benefit packages.
Societal & relationship capital (People)
We engage with various stakeholders to ensure close alignment between our aims and societal needs. We generate value
for stakeholders outside our direct value chains of employees, suppliers, customers and end-users; these include
employees’ families, governments, local communities and civil society.
1 Source: The Free Dictionary.
Explanation of some concepts and ratios
Royal DSM Integrated Annual Report 2022 304
Natural capital (Planet)
We recognize that the world is an interconnected system of resources. This represents a responsibility and a business
opportunity. We aim to improve the environmental impact of our supply chain, operations and products and services,
while developing innovative solutions that deliver sustainability benefits to customers and beyond.
Financial capital (Profit)
Providers of capital – shareholders and bondholders, banks and the financial markets – supply funds that we use in our
business to create value, driving growth and delivering sustainable returns.
Intellectual capital (Profit)
We manufacture and distribute high-quality products and services safely, efficiently and responsibly, and strive to develop
valuable, collaborative and long-term relationships with customers and suppliers. We pursue open innovation, connecting
and collaborating with partners and investing in start-ups.
Manufactured capital (Profit)
We have unique competences in Health, Nutrition & Bioscience and connect these to deliver innovative solutions that
nourish, protect and improve performance.
Omics
Any of several areas of biological study defined by the investigation of the entire complement of a specific type of
biomolecule or the totality of a molecular process within an organism. In biology the word omics refers to the sum of
constituents within a cell. The omics sciences share the overarching aim of identifying, describing, and quantifying the
biomolecules and molecular processes that contribute to the form and function of cells and tissues.
Plant-forward
A trend descriptor coined by Innova Market Insights in 2021 to signal the plant-based foods category’s push towards
broader consumer appeal and expansion into more market categories and regions of the world.
People
Equal pay and gender pay gap
Equal pay is a legal requirement for men and women to be paid the same for performing the same or similar work or work
that has been rated as being of equal value (by job evaluation). The gender pay gap zooms in on the difference between
what men typically earn overall in an organization compared to women, irrespective of their role or seniority.
Frequency Index (FI)
The Frequency Index is a way to measure safety performance. The number of accidents of a particular category per 100
employees per year. DSM reports frequency indexes in the areas of Lost Workday Cases, Process Safety Incidents and
Recordable injuries.
Recordable injuries occupational safety
The REC rate occupational safety DSM-all is the number of recordable injuries per 100 DSM employees and contractor
employees in the past 12 months: REC rate = 100 * (number of RECs (past 12 months) / average effective manpower
including contractor employees (past 12 months)).
Lost Workday Cases occupational safety
The Lost Workday Case (LWC) rate DSM-own is the number of lost workday cases per 100 DSM employees in the past 12
months: LWC rate = 100 * (number of LWCs (past 12 months) / average effective manpower (past 12 months)).
Process Safety Incidents
The PSI rate is the number of Process Safety Incidents per 100 DSM employees and contractor employees in the past 12
months: PSI rate = 100 * (number of PSIs (past 12 months) / average effective manpower including contractor employees
(past 12 months)).
Explanation of some concepts and ratios
Royal DSM Integrated Annual Report 2022 305
Recordable injuries occupational health
The REC rate occupational health DSM-all is the number of occupational health cases per 100 DSM employees and
contractor employees in the past 12 months: REC rate = 100 * (number of RECs (past 12 months) / average effective
manpower including contractor employees (past 12 months))
Global South
The term Global South is used to describe countries whose economies are not yet fully developed and which face
challenges such as low per capita income, excessive unemployment, and a lack of valuable capital. These countries are
located largely in the southern hemisphere.
Inclusion Index
The Inclusion Index is a subset of items in the Employee Engagement (Pulse) Survey to specifically measure Inclusion.
Inclusion is: “A working environment where all employees are a full and equal member of a team; where diverse
perspectives are valued, and investment is made in their development; where people are respected and able to contribute
as they are and not having to conform; where they can reach their potential, and where they can speak up without fear of
retribution.”
Living wage
The remuneration received for a standard working time by an employee in a particular place sufficient to afford a decent
standard of living for the employee and his/her family. Elements of a decent standard of living include food, water,
housing, education, healthcare, transport, clothing, and other essential needs, including provision for unexpected events.
Safety, Health and Environment (SHE)
DSM’s policy is to maintain business activities and produce products that do not adversely affect safety or health, and that
fit with the concept of sustainable development. The company does this by setting the following objectives: to provide an
injury-free and incident-free workplace; to prevent all work-related disabilities or health problems; to control and
minimize the risks associated with DSM’s products for their whole life cycle and to choose production processes and
products such that the use of raw materials and energy is minimized; to evaluate and improve DSM’s practices, processes
and products continuously in order to make them safe and acceptable to its employees, the customers, the public and the
environment.
United Nations’ Universal Declaration of Human Rights
On 10 December 1948, the General Assembly of the United Nations adopted and proclaimed the Universal Declaration of
Human Rights. Following this historic act, the Assembly called upon all Member countries to publicize the text of the
Declaration and “to cause it to be disseminated, displayed, read and expounded principally in schools and other
educational institutions, without distinction based on the political status of countries or territories.”
Planet
Biofuel
A fuel which is derived from renewable organic resources, as distinct from one which is derived from non-renewable
resources such as crude oil and natural gas.
Carbon footprint
The total set of direct and indirect greenhouse gas emissions expressed as CO
2
eq.
Carbon price
The price that is paid to emit one ton CO
2
eq into the atmosphere. DSM implements an internal carbon price of
€100/t CO
2
eq.
Circular economy
Circular economy refers to an economy that is restorative and in which materials flows are of two types: biological
nutrients, designed to re-enter the biosphere safely, and technical nutrients, which are designed to circulate at high
quality without entering the biosphere throughout their entire lifecycle.
Explanation of some concepts and ratios
Royal DSM Integrated Annual Report 2022 306
CO
2
Carbon dioxide, a gas that naturally occurs in the atmosphere. It is part of the natural carbon cycle through photosynthesis
and respiration. It is also generated as a by-product of combustion. Carbon dioxide is a greenhouse gas.
Chemical Oxygen Demand (COD)
COD is an indicator of the degree of pollution of wastewater by organic substances.
Eco-efficiency
Eco-efficiency is a concept (created in 1992 by the WBCSD) that refers to the creation of more goods and services while
using less resources and creating less waste and pollution throughout their entire life cycle. In the context of DSM’s SHE
targets, eco-efficiency relates specifically to the reduction of emissions and energy and water consumption, relative to the
production volumes of DSM’s plants.
Energy
Primary energy is energy that has not yet been subjected to a human engineered conversion process. It is the energy
contained in unprocessed fuels.
Final (consumed) energy is the energy that is consumed by end-users. The difference between primary energy and final
consumed energy is caused by the conversion process between the two as well as any transmission losses.
Essential for life
Essential for life refers to substances that have a proven beneficial nutritional or pharmaceutical effect when used at the
officially recommended dose.
Greenhouse gas emissions (GHG)
DSM applies the Greenhouse Gas Protocol, which defines GHG as “atmospheric gases that absorb and emit radiation within
the thermal infrared range and that contribute to the greenhouse effect and global climate change.” We report GHGs
based on their global warming potential over 100 years in carbon dioxide equivalent (CO
2
eq).
Scope 1 + 2
Scope 1: Direct GHG emissions occur from sources that are owned or controlled by the company (i.e., emissions from
combustion in owned or controlled boilers, furnaces, vehicles, etc.).
Scope 2: Indirect GHG emissions relate to the generation of purchased energy (i.e., electricity, heat or cooling) consumed
by the company. Purchased energy is defined as energy that is purchased or otherwise brought into the organizational
boundary of the company. Scope 2 emissions physically occur at the facility where the energy is generated.
Scope 3
Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting
company, including both upstream and downstream emissions.
Net-zero emissions
The Intergovernmental Panel on Climate Change states: “Net-zero emissions are achieved when anthropogenic emissions
of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period. Where multiple
greenhouse gases are involved, the quantification of net-zero emissions depends on the climate metric chosen to
compare emissions of different gases (such as global warming potential, global temperature change potential, and others,
as well as the chosen time horizon)”.
Market-based emissions
Reflects GHG emissions from electricity supplies (scope 2) that companies have purposely chosen (or their lack of choice)
and contracted. Corresponding emission factors:
- Supplier specific emission factor (provided by the supplier)
- Residual emission factor (country-based grid factor, corrected for allocated purchased electricity from renewable
resources)
Explanation of some concepts and ratios
Royal DSM Integrated Annual Report 2022 307
Location-based emissions
Reflects the average GHG emissions intensity of grids on which electricity consumption (scope 2) occurs (using mostly
national grid-average emission factor data). Corresponding emission factor: in most cases, the country emission factor.
Greenhouse gas emissions (GHG) efficiency improvement
The GHGE efficiency improvement is the amount of GHG emissions per unit of output (specific emissions) in a given year
compared to the specific emissions in the prior year.
GRI
The Global Reporting Initiative (GRI) has developed Sustainability Reporting Guidelines that strive to increase the
transparency and accountability of economic, environmental, and social performance. The GRI was established in 1997 in
partnership with the UN Environment Programme. It is an international, multi-stakeholder and independent institution
whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines. These Guidelines are
for voluntary use by organizations for reporting on the economic, environmental, and social dimensions of their activities,
products and services.
Guarantee of origin (GO)
A guarantee of origin is defined in EU Directive 2009/28/EC as “an electronic document which has the sole function of
providing proof to a final customer that a given share or quantity of energy was produced from renewable sources as
required by Article 3(6) of Directive 2003/54/EC.” The requirements of a GO are explained in Article 15 of the same
Directive.
Loss of Primary Containment (LOPC)
Loss of Primary Containment is an unplanned or uncontrolled release of material from the container that is in direct
contact with the material.
Mass-balance
Mass-balance accounting is a well-known approach that has been designed to trace the flow of materials through a
complex value chain. The mass-balance approach provides a set of rules for how to allocate the bio-based and/or
recycled content to different products to be able to claim and market the content as ‘bio’-based or ‘recycled’-based.
Mass spectrometry
Mass spectrometry is an analytical tool useful for measuring the mass-to-charge ratio (m/z) of one or more molecules
present in a sample. These measurements can often be used to calculate the exact molecular weight of the sample
components as well. Typically, mass spectrometers can be used to identify unknown compounds via molecular weight
determination, to quantify known compounds, and to determine structure and chemical properties of molecules.
Mycotoxins
Mycotoxins are toxic compounds that are naturally produced by certain types of molds (fungi). Molds that can produce
mycotoxins grow on numerous foodstuffs such as cereals, dried fruits, nuts and spices.
NO
x
Nitrogen oxides. These gases are released mainly during combustion.
Renewable resource
A natural resource which is replenished by natural processes at a rate comparable to, or faster than, its rate of
consumption by humans or other users. The term covers perpetual resources such as solar radiation, tides, winds and
hydroelectricity as well as fuels derived from organic matter (bio-based fuels).
SO
2
Sulfur dioxide. This gas is formed during the combustion of fossil fuels.
VOC
Volatile organic compounds. The term covers a wide range of chemical compounds, such as organic solvents, some of
which can be harmful.
Explanation of some concepts and ratios
Royal DSM Integrated Annual Report 2022 308
Water use and water consumption
Water use includes water used for ‘once-through cooling’ that is returned to the original water source after use. Water
consumption is the portion of water used that is not returned to the original water source after being withdrawn.
Profit
General
In calculating financial profitability ratios, use is made of the average of the opening and closing values of balance sheet
items in the year under review.
The financial indicators per ordinary share are calculated on the basis of the average number of ordinary shares
outstanding (average daily number). In calculating Shareholders’ equity per ordinary share, however, the number of shares
outstanding at year-end is used.
In calculating the figures per ordinary share and the ‘net profit as a percentage of average Shareholders’ equity available
to holders of ordinary shares’, the amounts available to the holders of Cumulative Preference Shares are deducted from
the profits and from Shareholders’ equity.
Adjusted net operating free cash flow
The cash flow from operating activities, corrected for the cash flow of the APM adjustments (see Note 2 to the
Consolidated financial statements on Alternative performance measures), minus the cash flow of capital expenditures and
drawing rights.
Capital employed
The total of the carrying amount of intangible assets and property, plant and equipment, inventories, trade receivables
and other receivables, less trade payables, other current liabilities, investment grants and customer funding.
Capital expenditure
This includes all investments in intangible assets and property, plant and equipment.
Disposals
This includes the disposal of intangible assets and property, plant and equipment as well as the disposal of participating
interests and other securities.
Earnings before interest, tax, depreciation and amortization (EBITDA)
EBITDA is the sum of operating profit plus depreciation and amortization. Adjusted EBITDA is the EBITDA adjusted for
material items of profit or loss coming from acquisitions/divestments, restructuring and other circumstances that
management deem it necessary to adjust in order to provide clear reporting on the development of the business.
Earnings per ordinary share
Net profit attributable to equity holders of Koninklijke DSM N.V. minus dividend on Cumulative Preference Shares, divided
by the average number of ordinary shares outstanding.
Net debt
Net debt is the total of current and non-current borrowings less cash and cash equivalents, current investments and the
net position of derivatives.
Operating working capital
The total of inventories and trade receivables, less trade payables. See also Working capital.
Organic sales growth
Organic sales growth is the total impact of volume and price/mix. Impact of acquisitions and divestments as well as
currency impact are excluded.
Explanation of some concepts and ratios
Royal DSM Integrated Annual Report 2022 309
R&D expenditure
R&D expenditure relates to all efforts done across the company to develop new products or improve existing products and
processes. As such, R&D expenditure includes all costs and capitalized expenditures that relate to Research &
Development, as well as costs incurred by other departments to support R&D activities.
Return on capital employed (ROCE)
Adjusted operating profit from continuing operations as a percentage of average capital employed.
Total shareholder return (TSR)
Total shareholder return is capital gain plus dividend paid.
Working capital
The total of inventories and current receivables, less current payables. See also Operating working capital.
Royal DSM Integrated Annual Report 2022 310
List of abbreviations
A4S
Accounting for Sustainability
ABC
Anti-Bribery & Corruption
AC
Audit Committee
ACE
Assets, CSR and Employees engagement
ADR
American Depositary Receipts
AFM
The Dutch Authority for the Financial Markets
AGM
Annual General Meeting of Shareholders
AI
Artificial Intelligence
AI4b.io
AI for Biosciences
AIF
Africa Improved Foods
ANH
Animal Nutrition & Health
API
Active pharmaceutical ingredient
APM
Alternative performance measures
ASF
African swine fever
BCTI
Business Commission to Tackle Inequality
BFY
Better-for-you
BLS
Brighter Living Solutions
BLS+
Brighter Living Solutions Plus
CBD
Cannabidiol
CDC
Centers for Disease Control and Prevention
CDP
Carbon Disclosure Project
Cefic
Conseil Européen des Fédérations de l'Industrie Chimique (European Chemical Industry Council)
CFO
Chief Financial Officer
CGU
Cash Generating Unit
CO
2
eq
Carbon dioxide equivalent
COA
Corporate Operational Audit department
CoC
Chain of Custody
COD
Chemical Oxygen Demand
CODM
Chief Operating Decision Maker
COs
World Food Programme Country Offices
COSO
The Committee of Sponsoring Organizations of the Treadway Commission
CPLC
Carbon Pricing Leadership Coalition
CRA
Corporate Risk Assessment
CRP
Corporate Research Program
CSIRO
The Commonwealth Scientific and Industrial Research Organisation
CSR
Corporate Social Responsibility
Cumprefs A
Cumulative Preference Shares A
DCC
Dutch Civil Code
DE&I
Diversity, Equity & Inclusion
DEM
DSM Engineering Materials
DES
Drug-eluting stent
DHA
Docosahexaenoic Acid
DNP
DSM Nutritional Products
DPM
DSM Protective Materials
DRCP
DSM Responsible Care Plan
DRF
DSM Resins & Functional Materials
DSGC
Dutch Sustainable Growth Coalition
DSP
DSM Sinochem Pharmaceuticals
EAC
East African Community
List of abbreviations
Royal DSM Integrated Annual Report 2022 311
EBIT
Earnings Before Interest and Taxes (Operating Profit)
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortization
ECL
Expected credit loss
EEI
Energy Efficiency Improvement
EES
Employee Engagement Survey
EFRAG
European Financial Reporting Advisory Group
EPA
Eicosapentaenoic Acid
EPS
Earnings per share
ERG
Employee Resource Group
ESEF
European Single Electronic Format
ESG
Environmental, Social, Governance
ESMA
European Securities and Markets Authority
ESRS
European Sustainability Reporting Standards
EVP
Executive Vice President
F&B
Food & Beverage
FAO
UN Food and Agriculture Organization
FCLT
Focusing Capital on the Long Term
FCR
Feed conversion ratio
FDA
United States Food and Drug Administration
FI
Frequency index
FIFO
First in, first out
FReSH
Food Reform for Sustainability and Health
FRK
Fortified rice kernels
FTE
Full-time equivalent
FVOCI
Fair value other comprehensive income
FVTPL
Fair value through profit and loss
GAIN
Global Alliance for Improved Nutrition
GCA
Global Center and Commission on Adaptation
GDPR
General Data Protection Regulation
GdS
Group digital Services
GHG
Greenhouse gas
GHGE
Greenhouse gas emissions
GMO
Genetically modified organism
GO
Guarantee of origin
GRI
Global Reporting Initiative
GRM
Group Risk Management
GWP
Global warming potential
HMO
Human milk oligosaccharides
HNC
Health, Nutrition & Care
HRIA
Human Rights Impact Assessment
I&D
Inclusion & Diversity
I4N
ImpAct4Nutrition
IAS
International Accounting Standards
IBC
International Business Council
ICF
Internal Control Framework
ICP
Internal carbon price
IEC
International Egg Commission
IFAC
International Federation of Accountants
IFC
International Finance Corporation
IFRIC
International Financial Reporting Interpretation Committee
IFRS
International Financial Reporting Standards
IMMFA
Institutional Money Market Funds Association
IP
Intellectual property
List of abbreviations
Royal DSM Integrated Annual Report 2022 312
IPCC
Intergovernmental Panel on Climate Change
IR
Integrated Reporting
ISAE
International Standard on Assurance Engagements
ISDA
International Swaps and Derivatives Association
ISO
International Organization for Standardization
ISSB
International Sustainability Standards Board
KPI
Key performance indicator
LCA
Life Cycle Assessment
LGBTQ+
Lesbian, Gay, Bisexual, Transgender, Intersex and Queer
LOPC
Loss of Primary Containment
LoR
Letter of Representation
Lototo
Lock-Out, Try-Out, Tag-Out
LTI
Long-Term Incentive
LWC
Lost Workday Case
M&A
Mergers & Acquisitions
MANDI
Making a Nutritional Difference to India
MEEM
Multi-period excess earnings method
MMS
Multiple micronutrient supplement
MNP
Micronutrient powder
MRS
Market-ready solutions; also Mainstream Reference Solution
MSC
Marine Stewardship Council
NAHS
The National Animal Husbandry Service
NBA
Koninklijke Nederlandse Beroepsorganisatie van Accountants (Netherlands Institute of Chartered
Accountants)
NCI
Non-controlling interests
NGO
Non-Governmental Organization
NICE
Nutrition in City Ecosystems
NLP
Natural language processing
Noclar
Non-compliance with laws and regulations
NomCo
Nomination Committee
NO
x
Nitrous oxide
NPS
Net Promoter Score
OCI
Other Comprehensive Income
OON
Optimum Omega Nutrition
OP2B
One Planet Business for Biodiversity
OTC
Once-through cooling
OWC
Operating working capital
OYW
One Young World
P&O
People & Organization
p.p.
Percentage points
PDN
Stichting Pensioenfonds DSM Nederland (DSM Nederland Pension Fund)
PEA
Polyesteramide
PFS
Partners in Food Solutions
PPA
Purchase Price Allocation; also Power Purchase Agreement
PPE
Personal Protective Equipment; also Property, Plant and Equipment
PPP
Public-private partnership
PRI
Principles for Responsible Investment
PRRS
Porcine reproductive and respiratory syndrome
PSA
Portfolio Sustainability Assessment
PSI
Process Safety Incident
PSU
Performance Share Unit
R&D
Research & Development
RCP
Representative Concentration Pathway
List of abbreviations
Royal DSM Integrated Annual Report 2022 313
REACH
Registration, Evaluation, Authorisation and Restriction of Chemicals
REC
Renewable energy certificate
RemCo
Remuneration Committee
REN
Race, Ethnicity & National Identity
RFM
Resins & Functional Materials and associated businesses
ROCE
Return on Capital Employed
RSPO
Roundtable on Sustainable Palm Oil
RSU
Restricted Share Unit
rTG
Re-esterified triglyceride
RTS
Regulatory technical standards
RWE
Real-world evidence
SAL
Sight and Life
SASB
Sustainability Accounting Standards Board
SB
Supervisory Board
SBCC
Social Behavior Change and Communication
SBN
SUN Business Network
SBT
Science Based Targets
SBTi
Science Based Targets initiative
SBTN
Science Based Targets Network
SCoC
Supplier Code of Conduct
SDG
Sustainable Development Goal
SFDR
Sustainable Finance Disclosure Regulation
SHE
Safety, Health and Environment
SHIBOR
Shanghai Interbank Offered Rate
SME
Small and medium-sized enterprise
SO
2
Sulfur dioxide
SoD
Segregation of Duties
SPPI
Solely Payments of Principal & Interest
STI
Short-Term Incentive
SUN
Scaling Up Nutrition Movement
SustCo
Sustainability Committee
TCFD
Taskforce on Climate-related Financial Disclosures
TfS
Together for Sustainability
TG
Triglyceride
TNFD
Taskforce for Nature-Related Financial Disclosures
TSR
Total Shareholder Return
TVP
Textured vegetable proteins
UN
United Nations
UNGPs
United Nations Guiding Principles
VGBA
Verordening gedrags- en beroepsregels accountants (Dutch Code of Ethics)
ViO
Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (Code of Ethics for
Professional Accountants)
VOC
Volatile Organic Compound
WBCSD
World Business Council for Sustainable Development
WEF
World Economic Forum
WFP
United Nations World Food Programme
WRA
Water risk assessment
WWTP
Wastewater treatment plant
https://annualreport.dsm.com/ar2022/
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